Private Sector Engagement (PSE) Action Plan

Businesses that rely on natural resources for their business model have an incentive to work towards sustainable use of those resources. However, fragmented supply chains, unclear policies, lack of enforcement, insufficient data, lack of capacity to interpret environmental/climate data, and often, a lack of awareness of what practices negatively impact the resilience of people and the ecosystems supporting them, can lead to continuing unsustainable "business as usual" practices. The USAID Biodiversity (Jal Jangal) PSE Action Plan seeks to identify opportunities to address these gaps in the market in Nepal, and drive alignment in the common objectives of entrepreneurs/investors and resilient ecosystems for the benefit of the people of Nepal. The purpose of this PSE Action Plan is to orient the activity team towards the highest potential demand-driven opportunities to engage the private sector to achieve commercial goals, which are aligned and contribute to program outcomes. The activity program staff will use the best practice of identifying demand-driven activities that address a business need – a business case must be made for successful PSE. To do so, staff must speak the language of the private sector. For example, a recent USAID study finds that "the private sector infrequently refers to climate adaptation, but rather refers to the implications of climate risk and climate resilience, and that there is no widely accepted definition for resilience". Companies and investors strive to manage risk and stay resilient to market shifts and changes in supply chains, business realities that will be reflected in USAID Biodiversity (Jal Jangal) PSE communications and activity design. The activity's collaboration with the private sector will support them to anticipate and manage the risks posed by unsustainable resource use and climate change to their operations and supply chains. This could include physical risks that damage company assets, sourcing and logistics disruptions, compliance with international standards, as well as transition risks that can impact a company's market and reputation. The private sector will spend money to 'buy down' this risk, such as buying an insurance product, so aligning business risk reduction with positive biodiversity and climate outcomes is a key PSE best practice. The USAID Biodiversity (Jal Jangal) PSE Action Plan identifies opportunities to address the gaps in the market in Nepal, and drive alignment in the common objectives of entrepreneurs/investors and resilient ecosystems for the benefit of the people of Nepal. The plan incorporates a strong set of ongoing activities with additional insights from international best practice for the annual workplan. The activity team will pursue demand-driven activities and evolve program targets to ensure the activity is flexible to the market to make the biggest impact during the life of the activity and beyond. The PSE Action Plan outlines partnership pathways and potential activities using tested approaches to spread risk across emerging opportunities in adaptation finance, such as with new index insurance products being piloted in the country balanced with support for the national accredited entities, such as the National Trust for Nature Conservation (NTNC), to access large international adaptation funds. The program will avoid playing the role of a market system actor – for example, the activity will not directly provide Business Development Services (BDS), but rather facilitate the system by engaging local BDS actors in the marketplace to work with promising nature-based enterprises. The proposed activities are a mix of currently planned and on-going MSME firm-level support and broader conservation and climate finance which will require leveraging work through commercial banks, impact funds, the Development Finance Corporation (DFC) and other Development Finance Institutions (DFI), and nationally accredited entities. The activity team will pursue demand-driven activities and evolve program targets to ensure the activity is flexible to the market to make the biggest impact during the life of the activity and beyond. The USAID Biodiversity (Jal Jangal) PSE Action Plan is intended to serve as a guide that should be reviewed and revised annually as appropriate. The proposed activities are a mix of currently planned and on-going MSME firm-level support and broader conservation and climate finance which will require leveraging work through commercial banks, impact funds, the DFC and other Development Finance Institutions (DFI), and nationally accredited entities. The activity team will pursue demand-driven activities and evolve program targets to ensure the activity is flexible to the market to make the biggest impact during the life of the activity and beyond. The activity team will push forward a 'moonshot' for big impact in advancing coordination around a potential Debt for Adaptation Swap – from initial discussions with the Development Finance Corporation (DFC) and experts familiar with the mechanism, there is potential this mechanism is feasible for Nepal and requires further analysis. The program will avoid playing the role of a market system actor – for example, the activity will not directly provide Business Development Services (BDS), but rather facilitate the system by engaging local BDS actors in the marketplace to work with promising nature-based enterprises.