On May 28, 2014, the United States Agency for International Development (USAID) announced their financial support for the Althelia Climate Fund.
The Althelia Climate Fund is an organization that works to curb deforestation and unsustainable land use because they believe that “natural capital—our ecosystems, biodiversity and natural resources—is fundamental to the well-being and sustainable development of our societies.”
USAID has agreed to lend $133.8 million to the Althelia Climate Fund that will provide commercial loans to thousands of forest-based businesses whose livelihoods depend on the sustainable management of land use. This large sum is the first private sector fund of this scale allocated to forest conservation.
Deforestation and forest degradation accounts for nearly one fifth of all global greenhouse gas emissions and has an immense impact on all of the world’s citizens.
“Over 1.5 billion people rely on forests to meet their day-to-day needs, and the majority of these are poor rural communities, including some 60 million indigenous people,” USAID Administrator Rajiv Shah stated. “By creating incentives to better manage these forests, we provide a pathway out of extreme poverty for families who depend on forests while helping preserve critical ecosystems.”
The deterioration of ecosystems hurts everyone, in both developing and developed countries. Althelia estimates that the “annual value of services provided by nature is in the trillions of dollars.”
The financial support from USAID will make it possible to give commercial loans to ecotourism and agroforestry businesses that will enable them to expand their operations. The funds will also protect 20 rainforests and help reduce an estimate of 100 million tons of carbon dioxide from entering the atmosphere, or the equivalent of taking 18.5 million cars off the road for one full year.
“This guarantee provided by USAID allows private capital to flow at scale toward financing sustainable land use models that drive livelihood improvements, ecosystem conservation and climate change mitigation,” said the Managing Partner from Althelia Climate Fund, Christian del Valle.
USAID’s Development Credit Authority (DCA) works to mobilize financing locally in developing countries. Through the DCA, credit guarantees reduce risk for private lenders and provide incentive for them to include underserved borrowers in new sectors and regions.
DCA covers up to 50 percent of the risk in lending toward programs that work to achieve USAID’s development objectives. The USAID guarantees cumulative default rate is only 1.85 percent, which means entrepreneurs and businesses in developing countries are being funded at little cost and risk to U.S. taxpayers. Already $3.1 billion dollars has been mobilized to finance private local finds.
As businesses around the world increase their profits, not only is the standard of living increased, but an added bonus is the expansion of the world’s middle class. This expansion in turn results in an increase of U.S exports, of which already 45 percent go to developing countries.
In a video message to the Carbon Expo in Germany from Washington DC on May 28, 2014 when USAID announced its financial support, Secretary of State John Kerry stated that, “If we act now, we can not only save our forests, we can create jobs and economic growth, we can clean up our air, we can improve our health, we can create greater security… and we can live up to a fundamental responsibility that we all share: leaving future generations with a planet that is clean, healthy and sustainable.”
– Kim Tierney