Transforming land investments: the Risk-Reward Model

The Risk-Reward Model (RRM), co-created by CIFOR-ICRAF, SNV, Land Equity International, and local multi-stakeholder platforms, equips governments and investors with a GIS-based tool to visualise economic, social, and environmental risks and rewards. By enhancing decision-making and aligning private capital with sustainable development objectives, the RRM fosters transformative policies and investments. Learn how this locally led innovation is reshaping land investment practices in Ghana, Ethiopia, Mozambique, and Laos.

During the early 2000s, improving global food and energy markets attracted significant investments into developing countries' fertile and inexpensive land for large-scale food and biofuel production. While host governments viewed this as an opportunity to modernize agriculture and reduce rural poverty, critics highlighted significant social and environmental risks, mainly due to weak protections for customary land tenure, which increased the risk of forced land expropriation. Efforts to enhance governance have faced challenges, as political and economic constraints and weakened state capacity have prioritized accommodating private investments over enforcing strict social and environmental regulations.

More recently, there has been a transition towards sustainable food systems and agro-ecological production systems. Sustainable private investments can be pivotal in closing financing gaps and improving smallholder access to technologies, agro-inputs, markets and technical support. To align these investments with broader systemic transformations, host countries must strengthen engagement with investors through incentives and supportive policies that align private capital with sustainable development objectives.

The Transformative Land Investment (TLI) programme (https://tli.cifor-icraf.org/) addresses these challenges through a three-pronged strategy. First, TLI aids governments in mitigating harmful social and environmental impacts by enhancing decision-making capabilities. Second, it promotes public-private alignment by providing technical support to help investors adopt inclusive, agroecological practices. Third, TLI supports host countries in creating an enabling policy environment that overcomes persistent social and environmental conflicts and incentivizes investments to transform systemic food systems.

The Risk-Reward Model, or RRM, tackles the first objective. RRM is a spatially explicit GIS tool that helps investors and those who regulate investments to visualize social, economic and environmental risks and rewards related to land investments in an intended location. Often, such information is scattered across different ministries or departments and is difficult for investors or regulators to access when selecting sites and evaluating investment licenses, land titles, and environmental permits.

The process of building this tool is a collaborative effort by CIFOR-ICRAF, SNV in Ghana, Mozambique and Ethiopia, and Land Equity International (LEI) in Laos. In each of these countries, we called upon national experts – many of whom were already part of an existing multi-stakeholder platform within TLI – to provide advice and support.

For example, in Ghana, the co-development process facilitated by SNV has been particularly collaborative, leveraging expertise from various government and research institutions. At the outset, experts helped prioritize and define the risks and rewards under three themes: economic, environmental and social.

Initially, the Ghana Investment Promotion Centre (GIPC) was considered as a potential host for the RRM tool. However, challenges in securing buy-in led the TLI team to pivot towards the Environmental Protection Agency (EPA), which emerged as a suitable alternative. The EPA’s constitutional mandate under the EPA Act 1994 (Act 490) includes regulating Environmental and Social Impact Assessments (ESIAs), making it well positioned to integrate the RRM tool into its pre-screening processes for agri-food investments.

A recent stakeholders’ workshop brought together diverse institutions, including the Tree Crops Development Authority (TCDA), Ghana Meteorological Agency (GMet), Soil Research Centre, Water Resources Commission (WRC), and the Centre for Remote Sensing and Geographic Information Services (CERSGIS), amongst others. The consensus was that the EPA should host the model, provided policy adjustments support its mandatory use in the ESIA process.

The EPA's facilitation role is expected to streamline data collection and ease challenges in sourcing information from various agencies. An intersectoral management board is proposed to enhance shared ownership, ensure consistent data updates and collaboratively use the model. A Memorandum of Understanding (MoU) between TLI and the EPA is anticipated to be finalised by Q1 2025, detailing operations beyond the project's scope, including data transfer and capacity building for host institutions.

This RRM tool shows promise for transforming investment regulations in the agriculture and forestry sectors. The model’s potential application has attracted interest from the TCDA, particularly for managing key tree crops such as oil palm, cashew, mango, coconut, shea and rubber. Looking forward, it could also benefit other land-based investments such as real estate and mining, broadening its utility and impact.

In Ethiopia, the development of the RRM, supported by SNV, followed a similar inclusive approach involving both state and non-state actors from diverse sectors. Key participants included the Ministry of Agriculture, the Ethiopian Environmental Protection Authority (EPA), the Ethiopian Investment Commission (EIC), and regional investment commissions from Amhara, Oromia and Sidama. This broad representation ensured the model’s parameters would reflect the varied perspectives and needs of key stakeholders.

The Ethiopia team initiated the process through an interactive session, leveraging the TLI programme’s existing multi-stakeholder platform. During discussions, the participants formed three working groups focused on social, economic and environmental risks and rewards. The term ‹cost-benefit analysis› was often used to simplify communication, underscoring the model’s core function of balancing the potential rewards (benefits) against the associated risks (costs) of proposed investments.

The RRM is designed to aid investors in making better-informed decisions while also serving as a pre-Environmental and Social Impact Assessment (ESIA) tool. This dual functionality helps investors reduce the costs and time associated with the full ESIA process. For policymakers, the RRM offers a comprehensive overview of emerging investment projects, enabling quicker and more informed decisions on whether to approve or reject them. The SNV Ethiopia team highlighted the model’s adaptability, as it draws on real-time data and complements existing ESIA tools, reducing resistance to its adoption.

The discussions on parameter selection underscored the interconnected nature of social, economic and environmental risks. For example, the issue of human displacement, identified as a social risk, was also considered by the economic group as a significant loss of livelihood. This holistic perspective is particularly crucial in Ethiopia, where large-scale investments are seen as key opportunities for employment and productivity gains. However, a delicate balance is needed to prevent irreversible social, economic and environmental damage.

The RRM is expected to ease regulatory agencies' burdens by providing a balanced assessment of investment risks and benefits, helping reconcile the often-conflicting priorities of investment promotion and environmental protection. The EEPA and EIC have expressed strong interest in the tool, noting its potential to enhance existing assessment processes by covering additional parameters and providing a more in-depth, contextual analysis of social, economic and environmental factors.

As the programme moves forward, securing the ongoing commitment of these institutions and ensuring consistent data availability will be critical to its success and sustainability.

In Mozambique, the establishment of the RRM is a welcome development, addressing the challenge of dispersed decision-making processes across multiple government institutions. The fragmented nature of investment decisions has often posed difficulties for both national and foreign investors seeking clear guidance.

SNV was facilitative in coordinating with local partners and government stakeholders, including the National Directorate of Land and Territorial Development within the Ministry of Land and Environment and Verde Azul, a local consultancy specialising in sustainable land and resource management. Civil society actors, such as the Alliance of Civil Society Against Land Grabbing (ASCUT), and private sector representatives were also actively engaged, ensuring a broad support base for the model’s implementation.

The Investment and Export Promotion Agency (APIEX) under the Ministry of Industry and Trade, and the National Geospatial Development Agency (ANE) under the Ministry of Transport and Communications, have shown strong interest in incorporating the RRM into their existing client-information mechanisms. Initial consultations revealed that while foundational data for the model exists, it is currently scattered across various entities. Although legislation mandates data sharing among government organisations, the practical implementation of this law has faced obstacles, with limited willingness to share information freely.

By fostering collaboration and dialogue, the RRM platform in Mozambique aims to overcome these barriers, consolidating data and creating a more integrated system for investment decision-making. The engagement of multiple stakeholders has highlighted the potential of the RRM to enhance transparency and support sustainable development practices, benefiting both investors and local communities.

In Laos, the process was slightly different. Due to the project governance arrangements and the difficulties with access to data in government agencies, a more formal approach was required on the discovery path of the RRM. An orientation meeting was conducted in November 2023, with many subsequent meetings, introductions and collaborative consultations to pre-identify data points. The discovery process was made with government agencies, including 10 government agencies representing the agriculture, land, forestry, investment promotion and statistics sectors. They discussed and identified different parameters representing social, environmental and economic risks and rewards from land investments, assessed their priorities in Laos, and devised a prioritized list.

This process made it clear that although some information is published through reports in Laos, metadata is not easily shared or accessible, even between government agencies. Some raw data and information systems that were previously developed by other projects, such as the Land Concession Information System (LCIS) and Land Resources Information Management System (LRIMS), are not available to other development projects or agencies.

To develop the trust necessary to share information for a tool such as the RRM, which will eventually be housed in government, it was recently agreed that a shared Memorandum of Understanding between departments is necessary to allow for more open sharing and use of data to populate the RRM. The RRM tool in Laos will initially support an «After Service» department within the Investment Promotion agency to work with investors through site identification, safeguards compliance and monitoring.

"The RRM discovery of data and partnerships in Laos is a long one, but has been building genuine interest and incentive to collaborate." Thiphavong Boupha, October 2024.

In all these countries, we see that the dialogue started during the development of the risk-reward model, opened the door for bilateral discussions, closer relationships, and inter-sectoral personal contacts. For non-governmental organizations such as LEI, CIFOR-ICRAF, SNV and RECOFTC (another partner in our project), such dialogues leverage our technical capacity to fill the gap many state agencies lack. We provide information that helps governments take into account social and environmental issues that they normally overlook, not because they don't want to, but – in the case of RRM – the information available is siloed and difficult to aggregate across actors.

The main lessons from this experience so far are:

• The process is more important than the tool. A technical activity, like building a spatial tool such as the RRM, can be an effective process to include more significant social and environmental objectives. Because of the concrete nature of co-developing a tool, this activity can open opportunities for dialogue that deepens and opens new relationships.

• An adaptive approach is necessary. At first, TLI wanted to build a tool open to the public so anyone could use it, including academics, NGOs, investors, government, etc. But, as we progressed, we faced the reality that much of the land investment decision-making in the countries where we work lies in the hands of the government. So TLI adapted, approaching governments that were interested. Not all governments were interested, as we learned.

• The voyage is as important as the destination. Programmes such as TLI have a long-term vision of transformation and must be intentional in their implementation. The responsible land investment TLI wants needs to be participatory and collaborative. The process symbolises the change we want, and TLI tries to embody this spirit while implementing the project.

• Everything is interconnected. Everything we work on, such as this RRM tool and other TLI activities, must build on each other and create momentum at different levels. This RRM tool won’t work on its own. TLI has other approaches, such as organizing multi-stakeholder forums, supporting business transformation labs, and creating communities of practice. TLI also works at international, national and local levels. A concerted effort by TLI hopes to convince governments and investments that RRM tools make sense.

There is undoubtedly a long road ahead of us, one that is nonlinear and full of uncertainties and challenges, but the destination is within reach: aiding governments in mitigating harmful social and environmental impacts by enhancing their decision-making capabilities.

Authors of this article are: Stibniati Atmadja, George Schoneveld, Alison Rusinow, Divine Appiah, Kate Rickersey, Thiphavong Boupha, Dominique le Roux

This article was first published on SDC Agriculture and Food Systems Network