Results-based payment is an evolving approach to sustainable development that aims to incentivize climate action, create and expand carbon markets, and stimulate innovation. Through this approach, investors pay an entity – which might be a sovereign nation, a private firm, or a local community – to achieve, report on, and independently verify a set of pre-agreed performance targets. These targets may be tied to the results of climate change mitigation or adaptation activities, such as reducing greenhouse gas emissions, implementing nature-based solutions, or sustainably managing natural resources.
The Emission Reduction program entities that work on the ground design their own methodology to achieve pre-defined results. This decentralized model allows results-based Emission Reduction programs to spur creativity and innovation since these stakeholders possess embedded knowledge of the area and the communities therein. Not only are these programs better tailored to the local context, but they are also more agile and better equipped for adaptive management; adaptive management is the process of adjusting program design and implementation according to evolving circumstances or based on lessons learned. Furthermore, these programs also improve accountability and funding effectiveness, because payments are only disbursed after results have been verified. As such, investors can be more certain that their contributions are creating a real impact on the earth.