Ask the Expert: Renee Cheung on Land Degradation and What Can Be Done About It

In June 2016, Bonterra Partners, in cooperation with Mirova, the Responsible Investment subsidiary of Natixis Asset Management, and with the support of the United Nations Convention to Combat Desertification (UNCCD), published a landmark study titled “Unlocking the Market for Land Degradation Neutrality.” The study examines the current state of land worldwide and analyzes the market landscape in relation to sustainable land use and land degradation avoidance investments. Furthermore, it explores the market opportunity for private investors. The full report can be downloaded here.


In today’s blog we have the opportunity to speak with Renee Cheung, Managing Partner and Founder of Bonterra Partners, about the study and her outlook on the solutions for stopping land degradation across the globe.


Quarterra: Renee, thank you for taking the time to speak with us today. To start, could you explain to us what is meant by land degradation neutrality (LDN)?

Cheung: It’s easiest to understand the concept of LDN with the following backdrop: two billion hectares of productive land are degraded worldwide, and we continue to degrade another 12 million hectares of land every year.[1] Without being too technical, LDN is a state whereby the amount and quality of land resources necessary for the world to support ecosystem functions and services and enhance food security remains stable or increases going forward.[2] LDN has been added as one of the targets for the UN Sustainable Development Goals (SDGs) in 2015. The UN’s goal is to achieve LDN globally by 2030.


Quarterra: With LDN now fully integrated into the SDGs, it seems that this market study couldn’t be more timely. Tell us a bit more about the study and the overall takeaways.

Cheung: Our market study attempts to illustrate the severity of land degradation worldwide and build the case for why achieving LDN is critical from a social, environmental and financial perspective. Since we are also interested in learning how investments from the private sector can be part of the solution to combat land degradation, we interviewed 31 investment managers and project developers worldwide who have been leading and operating profit-seeking LDN-related projects, looking at how they have been investing to date and their competitive advantages and challenges. A majority of their investments are in the sustainable agriculture and forestry sectors. Most of them promote sustainable land use to avoid land degradation. There are fewer projects that focus on rehabilitating degraded land, which is comparatively a harder strategy to execute. Finally, we identify ways in which investors can take advantage of the existing investment opportunities and gaps in the market.


Based on our findings, the market actors we interviewed have been operating for a median of just 10 years, illustrating the immaturity of the LDN market. These actors have successfully raised a cumulative US$7 billion to date and target to double the amount to $15 billion over the next five years – these small numbers reflect a nascent but growing LDN market. Another important takeaway is that fundraising is a big challenge for these actors due to a lack of track record and investors’ perception of a shortage of deals with attractive risk-adjusted returns.


Quarterra: Here at Quarterra we work extensively in Latin America. What are the key land degradation issues facing this region?

Cheung: According to the GLASOD assessment carried out by UNEP (United Nations Environment Programme) that assessed global land degradation during the period 1945-1990, drivers of land degradation in South America include: 41% deforestation (DF), 28% overgrazing (OG), 26% unsustainable agricultural practices (AG), and 5% overexploitation for fuelwood (FW). This is quite different from Central America, where the respective breakdown over the same time period was: 22% DF, 15% OG, 45% AG and 18% FW. Within each country or region, the causes of land degradation would also vary. The overall world reflects a different reality still: 30% DF, 35% OG, 27% AG, 7% FW, and 1% industrialization.


From a climate perspective, it is also important to remember that land, or soil, is the second largest source of carbon storage after the ocean. In Central and South America, areas at high risk of soil carbon (and associated biodiversity) losses include the Amazon and the Atlantic Forest of Brazil, the Pampas of Argentina, the west coast of Colombia, and the core of the Sierra Madre del Sur and Sierra Madre Oriental areas in Mexico. Satellite images show that more than 50 million hectares of Amazon rainforest were destroyed between 1984 and 2005, replaced by agriculture and the introduction of more than 240 million head of cattle.[3]


Quarterra: This is clearly a serious problem. Given the various drivers of land degradation that you have told us about, what are some of the key identified investment opportunities in Latin America in relation to LDN?

Cheung: Latin America has rich biodiversity, plentiful freshwater and diverse bioregions that are favorable for many kinds of food and fiber production, yet deforestation and unsustainable agricultural practices are rampant. The opportunity for investors lies in channeling capital to profit-generating projects or activities that rehabilitate degraded land and/or promote sustainable agricultural and forestry management. Examples include sustainable coffee and cacao production in countries such as Colombia and Guatemala (especially collaborating with existing smallholder farmers), regenerating degraded farmland through sustainable livestock production in Chile and Argentina, reforesting on degraded land in Brazil and Nicaragua, and sustainable timber harvesting in Peru and Panama. There are many interesting investment opportunities in the region that can generate financial return in addition to creating the social and environmental impact required to move the region towards LDN. The challenge, as it probably would not surprise you to learn, is often finding the group with the right skills and experience to implement such investments.


Quarterra: So it certainly sounds like the opportunities are out there. Can you comment on the respective role of the public and private sector in obtaining sustainable solutions to the world’s land degradation issues?

Cheung: There is no doubt that the public and private sector need to work hand-in-hand to lead the world towards achieving LDN. From the public side, the UNCCD (United Nations Convention to Combat Desertification) in particular is leading efforts to bring governments together to combat land degradation. To date, more than 100 countries have established concrete plans to address land degradation in their national action programs submitted to the UNCCD. Since LDN was formally incorporated into the SDGs in 2015, more than 70 countries have also expressed interest in participating in the UNCCD’s global LDN target-setting program and adopting voluntary LDN targets.[4] These government commitments are expected to be translated into policies at the country and regional level that would enable or incentivize landowners, industries, food and fiber producers, and people living on the land to work together to make the right decisions in regards to land management. Public finance sources, coming from the governments directly or from development finance institutions like European Investment Bank or the Inter-American Development Bank, will also play a huge role in funding and investing in projects that would benefit the land and the people whose livelihood is dependent on it.


But public and philanthropic funding alone is not sufficient to tackle land degradation. The world absolutely needs to attract more private capital into the LDN market. There is no shortage of private capital per se: there is a huge amount of institutional investors’ money looking for investments and a growing portion of that is interested in ESG or impact investments. The challenge and opportunity is to gradually convert more of that into profit-generating investments in the LDN market. The advantage of the private sector is its ability to innovate and adapt according to market conditions, and that’s why we are seeing an increasing number of new entrants, whether they are investment managers, project developers or industry entrepreneurs, coming into the nascent LDN market, offering different solutions for investors to invest profitably and with impact. Projects on the ground that are implemented by the private sector are much more likely to succeed if they receive support and cooperation from the government, which we are starting to see with governments committing themselves to LDN targets at the national and regional level. So we see LDN as an emerging investment opportunity for long-term private investors.


Between the two layers is also the non-profit sector. They serve as an important bridge between the public and private sectors and the local communities, particularly in developing countries. In trying to find sustainable solutions that combat land degradation, the invaluable knowledge and experience of non-governmental bodies working with the local communities and wildlife cannot be ignored.


Quarterra: Regarding the private sector, what does industry think of land degradation?

Cheung: Land degradation is especially relevant to industries that directly source land-based raw materials or rely on them in any part of their supply chain. Examples would be industries in the food and beverage, textile, and timber sectors. If you are a company that is dependent on inputs like cacao, cotton or pulp, you should be concerned about the impact of land degradation on your supply chain.


Industries need to change the way they source raw materials from farms and forests, to switch from the current, purely depletive model to one that is sustainable if not regenerative for our planet’s natural capital in the long term. Corporations are increasingly pressured by the public to improve their supply chain’s sustainability. They are facing risks from all angles: reputational, regulatory, and operational. Many have experienced huge fluctuations in commodity price and availability in recent years. To minimize these risks, some large corporations such as Starbucks and Barry Callebaut are now exploring ways to collaborate with project developers and/or microfinance institutions to invest in smallholder farmers, supporting them transition to more sustainable land management and efficient production in return for long-term offtake arrangements. If big companies have success with these corporate investments, their competitors will find ways to follow, and the whole industry will move towards adopting a more sustainable sourcing and supply chain model. Currently there is still just a small but growing number of companies that are taking concrete actions to deal with land degradation.


Quarterra: With all the background you have now given us, can you tell us more about the Land Degradation Neutrality (LDN) Fund that is currently being set up?

Cheung: Despite the severity of land degradation, there is currently no fund in the world that specifically addresses or invests in this theme. The LDN Fund is a project jointly promoted by Paris-based responsible investment manager, Mirova, and the UNCCD. It is designed to be a public-private investment vehicle that utilizes both sources of capital to invest in profit-generating LDN projects in developed and developing countries. With a particular sector focus on sustainable agriculture and forestry, the fund would select investments using four main criteria: land rehabilitation or degradation avoidance potential, bankability (i.e. profit-generating) potential, scalability/replicability to maximize impact, and investment readiness.


As a first-of-its-kind fund to specifically address land degradation, the LDN Fund would strive to demonstrate the long-term investment case of LDN projects by investing in those that generate returns on par with market rate. The fund would adopt a blended finance structure to better protect private investors’ capital: public investors would provide concessionary first-loss capital in order to lower the investment risk for private capital, which is expected to come from foundations and other private impact investors. There will also be a separate donor-backed technical assistance facility which would provide grants to promising pre-feasibility stage projects, so that only after proof-of-concept or investment readiness is proven would the LDN Fund decide whether to invest. These are all ways in which the LDN Fund can help the LDN market tackle its two key challenges: to demonstrate more investments with attractive risk-reward profile and establish a track record over time.


Quarterra: As a new fund, how would the LDN Fund define success? What particular goals does it want to achieve?

Cheung: The LDN Fund has several objectives it wants to satisfy. Firstly, it is looking to make a significant contribution to LDN by providing long-term finance to land-based projects worldwide that can transform land use. Doing this successfully implies that the fund is able to identify and invest in a large pipeline of projects that achieve the triple bottom line returns it aims to achieve. This would, in turn, allow the LDN market to develop track record over time and attract further private capital into the field, which is another fund objective. Ultimately, the big goal is to enable the LDN market to grow from being niche to mainstream by channeling large amounts of institutional investors’ capital into these investments. That is the only way the world would find sufficient capital required to combat land degradation.


Renee Cheung is Managing Partner and Founder of Bonterra Partners, a consultancy that works with investors to identify and invest in sustainable, profit-generating environmental and real asset strategies. A pioneer in investment research, strategy, analysis, and deal negotiations for natural capital investments, Bonterra helps catalyze capital into sectors such as sustainable agriculture, fisheries, forestry and water. Renee can be reached at


[1] Global Mechanism of the UNCCD (United Nations Convention to Combat Desertification) and Mirova, “Land Degradation Neutrality Fund, An Innovative Investment Fund Project” 2015.

[2] UNCCD Intergovernmental Working Group (IWG)

[3] FAO “Status of the World’s Soil Resources” 2015.

[4] UNCC