The Gran Chaco Pathways Towards a Sustainable Future 2025

4.2 Leveraging innovative financial mechanisms to incentivize sustainability Enhancing sustainability in the Gran Chaco requires a range of financial mechanisms to support the transition to sustainable practices. Payment for ecosystem services (PES) schemes, private investments, national government programmes, international cooperation and financial sector initiatives are all critical tools for enabling change. Recognizing this need, financial institutions and government authorities in the Gran Chaco are increasingly advancing initiatives to finance sustainable efforts and strengthen value chains. Scalable initiatives that can accelerate this transition are explored further below. Carbon markets represent effective mechanisms for incentivizing sustainability Carbon markets and carbon bonds allow companies and other entities to offset their GHG emissions by financing conservation and environmental restoration activities. However, for these markets to function effectively, a regulatory framework is essential to ensure transparency and efficacy. International organizations and standards, such as those set by the Paris Agreement or voluntary carbon markets, require rigorous verification mechanisms, transparency in emission reduction measurements and adherence to environmental and social criteria.87 Paraguay is leading the way in carbon market projects under its carbon market law (see Box 16), which is attracting increasing investment from foreign companies into the Chaco region. Carbon market projects in Argentina and Bolivia remain less developed, highlighting significant potential for growth in these countries. Paraguay’s REDD+ and carbon market initiatives in the Gran Chaco BOX 16 Quadriz – Green Heart of the Chaco One of the most notable carbon market initiatives is the Quadriz project, known as the “Green Heart of the Chaco”, implemented in the Presidente Hayes Department in Paraguay. This project preserves 32,000 hectares of native forest and adheres to international standards, such as the Verified Carbon Standard (VCS) and Climate, Community and Biodiversity (CCB), enabling it to operate in international markets. In addition to conserving endangered species, the project provides economic opportunities for local Indigenous communities (e.g. María Auxiliadora, San Isidro), by integrating them into a local development plan. It also aims to mitigate approximately 5.6 million tonnes of carbon dioxide emissions over its first 10 years.88 In June 2023, the project issued its first carbon credits (VCUs) after verification for 2020 and 2021, showcasing its positive impact on the conservation of the Gran Chaco. Chaco Vivo The Chaco Vivo project89 is one of Paraguay’s largest REDD+ avoided planned deforestation (APD) initiatives, covering over 187,000 hectares (1,800 km²) in the Gran Chaco. Developed under the VCS–CCB standards framework, Chaco Vivo seeks to protect high-value conservation areas (HVCAs) containing critical biodiversity and Indigenous lands. A key aspect of Chaco Vivo is its social impact strategy, particularly through the L.I.F.E. Program™ (Land-use Initiatives & Forest Enterprises Program). This programme promotes socio-economic enrichment, aiming to improve the livelihoods of Indigenous and marginalized communities, including the Maskoi people – an ethnolinguistic group of the Lengua-Maskoi. The project aligns with multiple UN Sustainable Development Goals (SDGs), fostering community engagement, self- sustaining enterprises and long-term generational impact. Through carbon finance, conservation and inclusive development, Chaco Vivo demonstrates how climate action and economic empowerment can go hand in hand in the Gran Chaco. The financial sector can provide incentives to industry to promote sustainability Financial institutions, including banks and investment firms, can contribute to sustainable development by managing environmental and social risks (e.g. deforestation, Indigenous land claims, inadequate labour practices) and by providing incentives to industry leaders and best practice. In both Paraguay and Argentina, financial institutions are taking steps in this regard. The Gran Chaco: Pathways Towards a Sustainable Future 39