Mobilising Finance for Forests (MFF)

© Panos Photography / FOLU

© Panos Photography / FOLU

£150 million UK Government blended finance programme to mobilise private sector investment and protect tropical rainforests across Africa, Asia and Latin America

Mobilising Finance for Forests (MFF), is a blended finance programme launched by the UK Government in March 2021 which aims to combat deforestation and support sustainable land use practices by creating a new mechanism to mobilise private capital into the Forest and Land Use sector.

MFF is structured as a fund of funds and will allocate up to £150 million, and leverage up to £850 million of private sector investment, into Forest and Sustainable Land Use projects with high mitigation benefits in selected tropical forests in the Amazon Basin, Africa and Asia over five years (2021-2025).

It will support projects that create value from existing forest stocks and incentivise their protection (eg. harvesting non-timber forest products such as nuts and native forest coffee, carbon offsetting schemes, eco-tourism and conservation projects), and projects that incorporate forest protection into agricultural production of sustainable commodities (eg. cattle, soy, palm oil, timber, agroforestry and cocoa).

In doing so, the programme expects to protect 2.1 million hectares of tropical rainforests from deforestation and to reduce CO2 emissions by 28 million tonnes over the next 15 years, equivalent to the offsetting London’s entire CO2 emissions annually. It also aims to create thousands of green jobs and improve the lives of over 600,000 small-scale farmers and food producers.

The programme will be delivered in partnership with FMO, the Dutch entrepreneurial development bank, which will aim to co-invest up to £36 million of its own capital into the project.

Energy Minister Anne-Marie Trevelyan said: “The impact of deforestation is devastating – on those vulnerable rainforest communities, and on global efforts to combat climate change. And the health of the earth’s tropical forests is critical to the health of our planet – we need to do all we can to protect and preserve this vital ecosystem. Today’s new fund will ramp up investment in projects on the frontline of this effort, while also giving financial institutions the confidence they need to invest, which could attract and secure as much as £850 million from the private sector.”

STAKEHOLDERS:

UK Government; FMO

&Green Fund

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The &Green Fund aims to de-risk investments in sustainable agricultural production with a focus on forest restoration, as well as tropical forest, peatland and biodiversity protection. &Green targets to mobilize $2 billion to protect 5 million ha of tropic forests and peatlands and improve the lives of half a million smallholder farmers.20

Managed by Sail Ventures, the fund provides long-term loans and guarantees to supply chain companies that directly source from farmers or cooperatives, medium-to-large-scale farming businesses, financial institutions, and service and input providers. &Green targets an average investment size between $5 million to $15 million (max 25percent of overall ticket). Partners in the Fund include IDH (landscape convening, technical assistance), UNEP (implementing agency of GEF contribution and assistance with communication, reporting and verification efforts), Good Growth Partnership (mutual support due to shared vision), 20x20 Initiative (member) and AFR 100 (partner of initiative) to channel private capital into forestry projects. 21,22

To date, the fund has received contributions from NICFI ($100 million), Unilever ($25 million) and GEF ($2 million), with an ultimate target of $400 million. At the project level, the fund aims to organise an additional $1.6 billion of private capital to achieve an overall mobilisation ratio of around 5:1.

As of July 2020, &Green has screened over 80 projects, and made investments into three companies: a $23.75 million investment through 7- and 15-year notes from RLU (PT Royal Lestarti Utama bond; see case study on the Tropical Landscape Financing Facility)23, to finance a sustainable rubber plantation in Indonesia24; a $30 million, 10-year loan to DSNG (PT Dharma Satya Nusantara Tbk), helping the sustainable palm oil company to implement “No-deforestation, No-peat and No-exploitation” (NDPE)25 throughout its supply chain and achieve full “Roundtable on Sustainable Palm Oil” (RSPO)26 certification; and a $10 million, 8-year loan to sustainable agriculture company Roncador (Agropecuária Roncador LTDA) to expand its livestock operations, recuperate degraded lands and conserve over 70,000 hectares of forest.27

20 ‘The &Green Fund’. n.d. &Green. https://www.andgreen.fund/.

21 ‘The &Green Fund’. n.d. &Green. https://www.andgreen.fund/.

22 ‘Stakeholders’. n.d. &Green. Accessed 29 September 2020. https://www.andgreen.fund/stakeholders/.

23 &Green, PT ROYAL LESTARI UTAMA (RLU), https://www.andgreen.fund/royal-lestari-utama/

24 Information from &Green website, available: http://www.andgreen.fund/portfolio/#portfolio

25 No-deforestation, No-peat and No-exploitation

26 Roundtable on Sustainable Palm Oil

27 ‘Portfolio - Roncador’. n.d. &Green. https://www.andgreen.fund/portfolio-roncador/

STAKEHOLDERS:

Norwegian International Climate and Forest Initiative, GEF, Unilever. UNEP, IDH Sustainable Trade Initiative, Good Growth Partnership, Sail Ventures

Aceli Africa

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Aceli Africa is a market incentive facility aimed at catalysing lending to agriculture in sub-Saharan Africa. Through its work, its hopes to address the region’s $65 billion annual financing gap for agricultural SMEs.

Aceli Africa’s goal is to improve the financial attractiveness of lending to agricultural SMEs by increasing the capital supply, providing technical assistance and generate data and learnings for policy changes benefitting agricultural SMEs. Research led by Aceli Africa found that lending to the agriculture sector is limited because of low margins and high opportunity costs.28 To de-risk investments, Aceli Africa assists local agricultural SME lenders by providing 2-8 percent of the qualifying loan amount ($25,000 to $1.5 million; aligned with gender inclusion, food security, nutrition, and/or climate resilience goals) into a reserve account, which can be drawn on to cover first losses of any qualifying loans across the local lender’s portfolio.29 Aceli Africa’s second intervention is to reduce the cost of originating and serving - especially rural - agricultural SME loans, through its “origination incentives” for loans ranging from $25,000 to $500,000. Additionally, Aceli Africa has $10 million reserved for technical assistance in form of business and finance training to agricultural SMEs, through which it hopes to increase the investable pipeline for lenders.

The design funding for Aceli Africa was provided by UK Aid and several foundations from around the globe, while the implementation donors (2020 onwards) are USAID, Feed the Future, Good Energies and Mulago. Its institutional partners are the Council on Smallholder Agricultural Finance (CSAF), Global Development Incubator (GDI) and Ropes&Grey, while its data and learning partners are Dalberg, the International Growth Centre and MIX.

28 ‘Bridging the Financing Gap: Unlocking the Impact Potential of Agricultural SMEs in Africa’. 2020. ACELI Africa. https://ams3.digitaloceanspaces.com/aceliafrica/wp-content/uploads/2020/09/08173725/Aceli-Africa_Full-Benchmarking-Report.pdf.

29 ‘Approach’. n.d. Aceli Africa. Accessed 21 September 2020. https://aceliafrica.org/what-we-do/approach/.

STAKEHOLDERS:

USAID; Feed the Future; Good Energies; Mulago; Council on Smallholder Agricultural Finance (CSAF); Global Development Incubator (GDI); Ropes&Gray; Dalberg

Africa Agriculture and Trade Investment Fund

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The Africa Agriculture and Trade Investment Fund (AATIF) is a blended finance vehicle that invests in agricultural production and businesses along the agricultural supply chain in sub-Saharan Africa. Through its investments, AATIF aims to increase food security, strengthen income among people employed in the agricultural sector, and strengthen the competitiveness of local agriculture businesses.30

The fund, managed by DWS, provides direct financing to commercial farms, processing companies and cooperatives, and indirect investments to local financial institutions and large agricultural intermediaries on-lending to small and medium companies. The fund provides financing in the form of debt, mezzanine or equity to companies or financial institutions. A $6 million technical assistance facility, provides technical support to beneficiaries, including for due diligence impact assessment and accounting. Founding partners include BMZ,31 who provides a first loss guarantee; KfW, who together with the Deutsche Bank capitalizes the fund’s mezzanine transactions; DWS as an equity investor; and the European Commission who invests in the fund’s junior equity tranche. Its compliance advisors are ILO32 and UNEP.33

Since its inception in 2011, the fund has disbursed $300 million to 19 investees and indirectly supported over 250 agri-businesses in 16 countries.34 The portfolio includes financial institutions like a $25 million, 5-year loan to BancABC to support the growth of its agriculture funding; to intermediaries like a $20 million, 3-year loan to Wienco – a Ghanaian distributor of inputs and off-taker of cocoa, maize and cotton; or direct investment in the form of an $11 million, 5-year (plus an extension for up to 10-year) loan to Agrivision Africa for its seed farm and vertical integration into wheat and maize processing.35

30 ‘Home’. n.d. AATIF – Africa Agriculture and Trade Investment Fund. https://www.aatif.lu/home.html.

31 Federal Ministry of Economic Cooperation and Development (Germany)

32 International Labour Organization

33 United Nations Environmental Programme

34 ‘Increasing Income. Improving Food Security: AATIF Annual Report 2019/20’. n.d. Annual Report. Bourmicht: AATIF – Africa Agriculture and Trade Investment Fund. Accessed 2 November 2020. https://www.aatif.lu/annual-reports.html.

35 ‘Investment Portfolio’. n.d. AATIF – Africa Agriculture and Trade Investment Fund. Accessed 2 November 2020. https://www.aatif.lu/investment-portfolio.html.

STAKEHOLDERS:

Deutsche Bank; KfW; BMZ; Common Fund for Commodities; European CommissioN; DWS

AGRI3 Fund

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Launched in 2020, the AGRI3 Fund aims to de-risk finance for sustainable land use. The investments which are financed should either contribute to sustainable agricultural production or prevent deforestation and enhance reforestation, and at the same time improve rural livelihoods. The fund’s main goal is to mobilize over $1 billion of loans by de-risking finance from financial institutions and other key parties in food and agri value chains.

Born from a partnership between UNEP and Rabobank36, IDH and FMO, the evergreen AGRI3 fund aims to become a US$190 million guarantee fund (with Mirova Althelia as the lead-advisor), supported by a $15 million technical assistance facility (managed by IDH). The fund targets guarantees of $2-15 million (smaller sizes possible if they lead to larger investments; max $25 million) to enable projects between $5 and $25 million. Smaller is optional, as long as the structure/project is replicable. The objective to de-risk loans by providing guarantees, is to enable financial institutions to provide loan tenor extensions, larger size loans, and subordinate loans– alongside technical assistance.37

Rabobank and the Dutch government have each committed $40 million to the fund, creating an initial $80 million capital base. Currently, the Fund is operating with Rabobank’s pipeline but it is open to other mission-aligned financial institutions, commercial banks and DFIs.

36 IDH 2018. AGRI3 Fund: IDH partners with Rabobank, UN Environment and Mirova Althelia to support deforestation-free agriculture [online]. Accessed: 20th September 2019. Available: https://www.idhsustainabletrade.com/news/agri3fund-idh-partners-with-rabobank-un-environment-and-mirova-althelia-to-support-deforestation-free-agriculture/

37 Rabobank, Agri3: Key elements and terms & conditions, https://www.rabobank.com/en/images/AGRI3Fund_leaflet.pdf

STAKEHOLDERS:

UN Environment Programme; Rabobank; IDH; FMO; Dutch Ministry of Foreign Affairs; Mirova Althelia; Cardano Development and FOUNT

Althelia Climate Fund 1

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Althelia Climate Fund 1: Launched in 2013, the Fund’s portfolio – now fully committed – comprises of real assets, including certified agroforestry produce and environmental assets such as carbon (sometimes used as collateral).39 By investing in sustainable land-use practices, Althelia aims to mitigate the main drivers of deforestation and reduce carbon emissions for the land-use sector.

The Fund has helped avoid 101,300 hectares of deforestation, 41.8 million tonnes of CO2, and protected 2 million hectares of critical habitat.40 Its fully invested portfolio includes 10 projects, eight of which are still active, with investments ranging from $7-13million. Projects are centred around (i.) conservation and restoration (e.g. $7 million investment into the Tambopata-Bahuaja Biodiversity Reserve project, which focuses on long-term restoration of the reserve’s buffer zone around the park by producing cacao); (ii.) scaling sustainable agriculture (e.g. the Cooperativa Agraria Industrial Naranjillo Ltda., which focuses on the optimization and restructuring of the Cooperative’s cacao and coffee processing capacity); (iii.) improving human livelihoods (e.g. PECSA’s sustainable cattle ranching model in Brazil).

Althelia has sinced been bought by Mirova - an asset manager dedicated to sustainable investing, part of Natixis Investment Managers - and renamed Mirova Natural Capital.

STAKEHOLDERS:

FMO; EIB; Church of Sweden; Finnfund; AXA; BNP; Credit Suisse; Conservation International

Althelia Biodiversity Fund Brazil

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The Althelia Biodiversity Fund Brazil is a blended finance fund aimed at creating sustainable business models in Amazonia Legal, Brazil to conserve biodiversity. The closed-end fund targets a size of $100 million and will invest equity, convertible debt, loans, structured- and profit- participating-debt.

USAID provides a guarantee covering up to 50% of principal for debt allocations. The International Centre for Tropical Agriculture (CIAT) invests in the fund’s junior tranche, providing further derisking for investors in the senior tranche.

The fund is split into two investment windows: a “Venture” window, investing in very early-stage companies, and a “growth” window, targeting more mature companies with positive cash flows.

The Fund is managed by sustainable investment manager Mirova Natural Capital41.

41 ‘First Closing of the Althelia Biodiversity Fund Brazil’. 2019. Althelia Funds. 28 October 2019. https://althelia.com/2019/10/28/first-closing-of-the-althelia-biodiversity-fund-brazil/.

STAKEHOLDERS:

USAID, CIAT, Mirova Natural Capital (former Althelia)

ARCH Cold Chain Solutions

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The ARCH Cold Chain Solutions East Africa Fund focuses on developing, financing, constructing and operating new temperature-controlled storage and distribution facilities in East Africa, to reduce the high rates of food spoilage due to lack of refrigeration.42

The fund will focus on greenfield investments in cold chain solutions across the East African region, supported by active local operations partners involved in the logistics network. Target clients are expected to be active mainly in the agriculture/food (~90%) and vaccines/medicine (~10%) sectors.43

ARCH Emerging Markets Partners, the fund manager, is committed to sustainability and will aim to source energy needs via off-grid renewable power production and minimize waste and biodiversity impacts.

Currently, the European Investment Bank is considering a EUR 15 million (US$20 million) investment into the fund. In July 2020, the Fund has announced a $70 million investment to construct a temperature-controlled warehouse across Kenya, with its flagship warehouse (15,000 square metres) being planned in the Tatu City Special Economic Zone in Nairobi.44

42 African Development Bank. May 2020. Multinational - ARCH Cold Chain Solutions East Africa - Environmental and Social Management System Manual, https://www.afdb.org/en/documents/multinational-arch-cold-chain-solutions-east-africa-environmental-and-social-management-system-manual

43 African Development Bank. May 2020. Multinational - ARCH Cold Chain Solutions East Africa - Environmental and Social Management System Manual, https://www.afdb.org/en/documents/multinational-arch-cold-chain-solutions-east-africa-environmental-and-social-management-system-manual

44 CISION, July 2020, Cold Solutions Chooses Tatu City for Largest Cold Chain Facility in East Africa, https://www.prnewswire.com/ae/news-releases/cold-solutions-chooses-tatu-city-for-largest-cold-chain-facility-in-east-africa-853291723.html

STAKEHOLDERS:

ARCH Emerging Markets Partners

California FreshWorks

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California FreshWorks provides grants and loans to food enterprises aiming to increase access to affordable healthy food, spur economic development and job creation while ensuring racially and socially equitable access to food in underserved and low-income communities in California.45

The fund, managed by Capital Impact Partners (formerly NCB Capital Impact), is organised into three layers: senior debt ($100million), subordinate debt ($25 million) and first loss capital ($7.5 million).46 The programme provides technical assistance and financing (between $50,000 and $3 million, at 5-6 percent) to innovative projects along the food value chain that are not yet investment-ready, but can demonstrate a path to profitability within 12 months. These loans can be used for real estate acquisition, construction and tenant improvements, facility expansion and upgrades, working capital, inventory, or equipment purchase.

Investors in the fund include: five banks and insurance company in the senior tranche, Calvert Foundation, Capital Impact and TCE providing the subordinate debt; JP Morgan Chase Foundation, CDFI fund and TCE providing first-loss cover in the form of grants.47

Investment examples include a $900,000 ($100,000 working capital, $800,000 community facility) loan to Mandela Partners, an Oakland, CA (USA) food co-op to establish their “Ladder Up” fund for supporting suppliers; a $650,000 ($450,000 community facility loan, $200,000 line of credit) investment into Ag Link, a Central Valley, CA (USA) local fresh food supplier to low-income communities; and a $13 million investment into the Vallarta Supermarket in Fresno which provides healthy, local food to an underserved community in Fresno, CA (USA).

45 ‘California FreshWorks - Healthy Food for CA’s Low Income Communities’. n.d. California FreshWorks. http://www.cafreshworks.com/.

46 ‘California FreshWorks Fund Term Debt Facility’. n.d. The GIIN. https://thegiin.org/california-freshworks-fund-term-debt-facility.

47 ‘California FreshWorks Fund Term Debt Facility’. n.d. The GIIN. https://thegiin.org/california-freshworks-fund-term-debt-facility.

STAKEHOLDERS:

Capital Impact Partners; Calvert Foundation; The California Endowment (TCE); JPMorgan Chase Foundation; U.S. Treasury’s Community Development Financial Institutions (CDFI)

Clarmondial Food Securities Fund

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The Food Securities Fund provides season-long working capital loans to agricultural aggregators (cooperatives, processors, traders) in emerging markets, addressing the common gap of timely and affordable credit. Structured and launched by Clarmondial, the fund combines an innovative investment approach with a regulated open-ended fund structure suitable to institutional investors, allowing it to deliver impact at scale.

Credit assessment favours supply chain relationships over the traditional focus on collateral availability. It allows the Fund to support aggregators prior to harvest and throughout the agricultural cycle. In addition to financial criteria, the loans are linked to sustainable management practices and monitoring of social and environmental standards, including deforestation-free supply chains, climate-smart agriculture, smallholder engagement and improved transparency.

Conservation International and WWF are founding members of the Fund’s Impact Advisory Board. Clarmondial also received support from Convergence, Good Energies Foundation and Climate KIC. The risk blending of the fund comes from a USAID commitment of USD 37.5 million in credit guarantees, through the Bureau for Food Securities and the DFC, and from value chain partners e.g. larger corporates. The Global Environment Facility (via Conservation International) has committed $15 million to the initiative.48

On 2nd March 2021, the Food Securities Fund successfully started operations. Its first investment, disbursed on 8th March 2021, supports coffee production in East Africa, reaching almost 4000 smallholder farmers operating in agroforestry systems, utilizing organic and regenerative practices.

48 ‘GEF Council Approves Support to the Food Securities Fund’. 2020. Clarmondial (blog). 13 January 2020. https://www.clarmondial.com/gef_fsf_approval/.

STAKEHOLDERS:

Clarmondial; Citibank; Vistra Fund Management; USAID / US DFC including the Bureau for Food Security (BFS)

Climate-Smart Lending Platform

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Launched in 2017, the Climate-Smart Lending Platform (CSLP) aims to assist agricultural lenders to incorporate climate risk into their loan portfolios, and thus drive the adoption of climate-smart agriculture by smallholders. Today, most agricultural loans fail to price in negative externalities linked to unsustainable farming practices. Additionally, there is often very little data to assess investments into smallholder farmers, making it difficult to invest in them. The CSLP tries to address both of these problems by aiming for mainstream credit scores that are linked to climate-smart agricultural practices. This provides smallholders with a climate credit score, which is expected to drive sustainable land-use practices and increase climate resilience of both farmers and lenders.49

The CSLP platform includes three key tools: climate-smart credit products and process designs; a climate-smart credit scoring tool; and an environmental compliance monitoring tool. Credit scores will be based on sustainable farming practices, incentivising their uptake by farmers. The platform will provide lenders with plug-in credit scoring technology. Furthermore, the platform will use remote sensing to cross-reference the creditworthiness of borrowers located in difficult areas (compliance monitoring). Lastly, the platform will be able to provide early warning systems for credit and climate-related loan defaults to lenders.50

In addition to the original initiators – F3 Life, Financial Access, IUCN, and the Climate Policy Initiative’s Global Innovation Lab for Climate Finance – the platform is supported by Partnerships for Forests to set up a minimum viable product (MVP) that offers a solution which is replicable and scalable, aiming to enable access to climate smart finance for large numbers smallholders at low costs and manageable risk for loan providers. The Sophia Foundation has contributed funding in exchange for equity, alongside its support to incubate the F3 Life component of the platform. With IUCN support, the national Rwandan climate fund intends to assist the project in Rwanda. Furthermore, the Netherlands Foreign Trade and Development Cooperation is also providing support.51

The platform aims to convert and restore 1.5 million hectares of land by 2026 through climate-smart practices. This is predicted to improve the livelihoods of 1 million farmers, by increasing farmers’ yields by two to four times under extreme weather conditions compared to business-as-usual practices.52

49 Poland Katowice. 2018. ‘Climate-Smart Lending Platform: New Partnership Offers Technology and Data-Driven Solutions for Climate-Resilient Agri-Lenders and Farmers in East Africa’. Partnerships for Forests. 12 December 2018. https://partnershipsforforests.com/2018/12/12/climate-smart-lending-platform-new-partnership-offers-technology-and-data-driven-solutions-for-climate-resilient-agri-lenders-and-farmers-in-east-africa/.

50 Poland Katowice. 2018. ‘Climate-Smart Lending Platform: New Partnership Offers Technology and Data-Driven Solutions for Climate-Resilient Agri-Lenders and Farmers in East Africa’. Partnerships for Forests. 12 December 2018. https://partnershipsforforests.com/2018/12/12/climate-smart-lending-platform-new-partnership-offers-technology-and-data-driven-solutions-for-climate-resilient-agri-lenders-and-farmers-in-east-africa/.

51 ‘Climate-Smart Lending Platform in New Partnership with Partnerships for Forests (P4F)’. 2018. The Global Innovation Lab for Climate Finance. 12 December 2018. https://www.climatefinancelab.org/news/climate-smart-lending-platform-in-new-partnership-with-partnerships-for-forests-p4f/

52 Ibid.

STAKEHOLDERS:

F3 Life; Financial Access; IUCN; Climate Policy Initiative; Partnerships for Forests

Global Fund for Coral Reefs

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The Global Fund for Coral Reefs (GFCR) is a blended finance vehicle to protect and restore coral reefs through investing in and incubating solutions that alleviate pressure on the ocean ecosystem. It aims to achieve four outcomes:53

  • Protect priority coral reef sites and climate change resilient refugia

  • Transformation towards sustainable livelihoods of reef-dependent communities

  • Coral reef restoration and adaptation technologies

  • Recovery of coral reef-dependent communities to major shocks (e.g. large storms, health crises, etc.)

GFCR is the first UN Multi-Partner Trust Fund for SDG 14 (Life below Water). The blended fund consists out of a technical assistance facility ($125 million) managed by the UN Grant Administrator and an impact investing window ($375 million) managed by BNP Paribas and Mirova Natural Capital. Through its TA and impact investing window, the fund hopes to mobilize an additional $2-3 billion in public and private capital. Once established, GFCR is planning to invest in projects and companies aimed at improving (directly or indirectly) coral health and regeneration. These include marine protected areas (MPA), eco-tourism, sustainable fisheries, sustainable aquaculture, reef insurance, waste management, and access to clean energy. GFCR is planning to make grant, debt and equity investments in both established businesses and projects, as well as creating novel business solutions that address the target issues.54

53 ‘Global Fund for Coral Reefs’. n.d. Conservation Finance Alliance. Accessed 22 September 2020. https://www.conservationfinancealliance.org/gfcr.

54 ‘Global Fund for Coral Reefs - Terms of Reference 2020-2030’. 2020. Global Fund for Coral Reefs. https://static1.squarespace.com/static/57e1f17b37c58156a98f1ee4/t/5f2c14ff69efb66f5bbc96c8/ 1596724492425/TOR+Global+Fund+for+Coral+Reefs_+May+2020_Final.pdf.

STAKEHOLDERS:

BNP Paribas; Mirova Natural Capital; Blue Finance; United Nations; UNEP; UNDP; Prince Albert II of Monaco Foundation; Paul G. Allen Family Foundation; Conservation Finance Network; International Coral Reef Initiative

IDH Farmfit Fund

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Launched in 2018, IDH Farmfit is a blended finance fund supported by a €30 million IDH Farmfit Business Support Facility. Together, they aim to catalyse investments from commercial capital in the agriculture sector (e.g. SME, traders, financial institutions) by leveraging public financing to de-risk investments in smallholder farming and lift 5 million smallholder farmers out of poverty by 2025.55

IDH Farmfit Business Support Facility provides technical assistance to banks and companies to produce cost-effective inclusive business models for smallholders, as well as providing tools to analyse the viability of businesses. The support facility is supported by the UK Department for International Development and the Bill & Melinda Gates Foundation. The fund is a cooperation between Jacobs DE, Mondelez, Unilever, Rabobank and the Dutch government. It will use a range of instruments including guarantees, subordinated loans, and equity and mezzanine financing to invest in sustainable businesses that provide services, inputs and credit to smallholders. A USAID guarantee of up to $250 million covers senior lenders’ losses by 40 percent in any given transaction.56,57

An example investment of the IDH Farmfit fund is its provision of a guarantee to Neumann Kaffee Gruppe, a green coffee trader. Through the first loss guarantee provided by IDH, they are now able to provide short-, medium- and long-term financing to its coffee farmers, which is delivered through a mobile payment system.58

55 ‘Farmfit Fund’. n.d. IDH - the Sustainable Trade Initiative. https://www.idhsustainabletrade.com/farmfit-fund/.

56 ‘Farmfit Fund’. n.d. IDH - the Sustainable Trade Initiative. https://www.idhsustainabletrade.com/farmfit-fund/.

57 ‘IDH Farm Fit Fund’. 2018. JDE. 15 November 2018. https://www.jacobsdouweegberts.com/company-news/idh-farm-fit-fund/.

58 ‘Investing in Smallholder Coffee Farmers through Innovative Finance’. 2019. IDH - the Sustainable Trade Initiative. 5 April 2019. https://www.idhsustainabletrade.com/news/investing-in-smallholder-farmers-through-innovative-finance/.

STAKEHOLDERS:

Rabobank; IDH; Jacobs DE; Mondelez; Unilever; UK Department for International Development; Bill & Melinda Gates Foundation; USAID

Land Degradation Neutrality Fund

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Land Degradation Neutrality Fund (LDN) is a blended finance vehicle investing in projects that directly or indirectly reduce or reverse land degradation. It invests debt (mezzanine, profit-sharing loans) and equity (minority and majority positions), with investment sizes ranging from $5-20 million and a tenure of 10 to 15 years. The target size of the fund is $300 million, of which 20-30% are reserved for first loss capital.59 Through its investments, the LDN aims to fill the market gap of providing financing with long tenure terms, flexible repayment structures and longer grace periods to land restoration activities.60 The fund is co-sponsored by the United Nations Convention to Combat Desertification, and investors include the EIB ($50 million) and French Agency for Development as anchor investors, private capital providers like Fondaction, BNP Paribas, and the de-risking partners IDB Invest, GEF and the Government of Luxemburg (amongst others). LDN also includes a technical assistance facility, which is managed by IDH, to provide pipeline for the investment fund. LDN’s goal is to transition half a million hectares of land to sustainable land management practices, expected to result in the storage of 35 million tons of CO2 equivalent and create or support 100 thousand jobs. Within its impact framework, the fund is also committed to promoting gender equality and social inclusion.61 An example investment of the LDN is the Urapi programme, which is, in partnership with four Peruvian coffee cooperatives, implementing agroforestry projects on 9,000 hectares of degraded land.62

59 10 September 2019. 2019. ‘PRI Awards 2019 Case Study: Land Degradation Neutrality Fund’. Principles for Responsible Investing. 10 September 2019. https://www.unpri.org/pri-awards-2019-case-study-land-degradation-neutrality-fund/4845.article.

60 ‘Land Degradation Neutrality Technical Assistance Facility (LDN TAF)’. n.d. IDH - the Sustainable Trade Initiative. Accessed 22 October 2020. https://www.idhsustainabletrade.com/landscapes/ldn-taf/.

61 10 September 2019. 2019. ‘PRI Awards 2019 Case Study: Land Degradation Neutrality Fund’. Principles for Responsible Investing. 10 September 2019. https://www.unpri.org/pri-awards-2019-case-study-land-degradation-neutrality-fund/4845.article

62 ‘Land Degradation Neutrality (LDN) Fund Makes First Investment towards Sustainable Land Management’. n.d. IDH - the Sustainable Trade Initiative (blog). Accessed 22 October 2020. https://www.idhsustainabletrade.com/news/land-degradation-neutrality-ldn-fund-makes-first-investment-towards-sustainable-land-management/.

STAKEHOLDERS:

Mirova Natural Capital (former Althelia); United Nations Convention to Combat Desertification (UNCCD); IDH; The Rockefeller Foundation; Government of France; Government of Luxembourg; Government of Norway; GEF; European Investment Bank; Fondaction; BNP Paribas; IDB Invest

Meloy Fund for Sustainable Community Fisheries

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The Meloy Fund for Sustainable Community Fisheries is an impact investment fund that invests debt and equity into enterprises that support (the transition towards) sustainable coastal fisheries. Over its ten-year lifespan, it aims to create a positive impact on 100,000 fishers (including their households), and place over 1.2 million hectares of coastal habitat under improved management.

Meloy Fund GP, a subsidiary owned by Rare, manages the fund. The fund makes debt and equity investments in fisheries-related entities. It aims to invest $1 - $5 million in companies that are too large for microfinance loans but have yet to grow enough for private equity. The investments are made in synchronisation with Rare’s main programme and are targeted to create demand for its Fish Forever Programme.65

Investors into the fund include Conservation International, GEF, the Jeremy and Hannelore Grantham Environmental Trust, J.P. Morgan Chase, the Woodcock Foundation, USAID and FMO in 2018, bringing the fund to a final close of $22 million.

Example investments by the fund include $1 million in Meliomar Inc, a Philippines-based fish aggregator, processor and trading company that has agreed to source sustainable fish from local Filipino communities, expected to create over $2.5 million in additional annual income to 16,000 local fishers and improve 12,000 hectares of marine ecosystems by 2021.66 Another example is an investment (terms undisclosed) into PT. SIG, an Indonesian fish processor exporting fresh and frozen yellowfin, to advance the company’s ESG targets.67

65 ‘About the Fund’. n.d. The Meloy Fund. https://www.meloyfund.com/about.

66 Communications Bullseye. 2016. ‘Fisheries-Focused Impact Investment Fund Announces First Deal’. CISION PR Newswire. 19 December 2016. https://www.prweb.com/releases/2016/12/prweb13928901.htm.

67 Jason Smith. 2020. ‘Impact Fund Invests in Indonesia Processor but COVID-19 Adds Complexity’. Undercurrent News. 13 April 2020. https://www.undercurrentnews.com/2020/04/13/impact-fund-invests-in-indonesia-processor-but-covid-19-adds-complexity/.

STAKEHOLDERS:

Rare; Conservation International; FMO; GEF; JPMorgan Chase; USAID; Woodcock Foundation

Nature+ Accelerator Fund

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The Nature+ blended finance fund aims to address a critical gap in early-stage venture support for regenerative businesses that need to scale. The fund is a collaboration between International Union for Conservation of Nature (IUCN) Mirova Natural Capital and the Coalition of Private Investment in Conservation (CPIC). The Global Environment Facility (GEF) is an anchor investor in the fund, providing $8 million for first loss investor protection.

The fund - planned for launch in early 2021 - will invest in nature-based solutions including:

Marine, coastal resilience and fisheries

Forest protection and sustainable management

Forest landscape restoration (including agroforestry)

Sustainable agriculture

Freshwater and green natural infrastructure projects

Investees will be selected for their impact on biodiversity, improvement to sustainable land use in production systems, equitable socio-economic impact on local communities, innovativeness, additionality, scalability and replicability, contribution to gender equality and management of environmental and social risk.

The Nature+ Accelerator fund will deploy grants, debt and equity through three windows:

Seed: $5 million in repayable grants or convertible notes (approx. $100,000 per 50 projects)

Early Venture: $15 million in debt and equity (approx. $1 million per 15 projects)

Venture: $20 million in debt and equity (approx. $5 million in 4 projects).

The fund expects to screen a minimum of 500 opportunities and source the pipeline through an open application process. By 2030, the fund aims to support 70 investment deals through all fund windows, creating measurable social, climate and land use impacts.68

68 ‘Nature+ Accelerator Fund’. 2020. IUCN. 23 October 2020. https://www.iucn.org/theme/nature-based-solutions/initiatives/nature-accelerator-fund.

STAKEHOLDERS:

IUCN, Mirova, CPIC, GEF

Nutritious Food Financing Facility

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The Nutritious Foods Financing Facility (N3F) is an impact first fund which aims to unlock the potential of local food systems in Sub-Saharan Africa to increase access to nutritious and safe foods in the region, particularly for lower-income populations. The Facility will provide tailored financing and technical assistance to small- and medium-sized enterprises (SMEs) that operate along the food value chain to increase access to nutritious foods through wider distribution and improved affordability, variety, and desirability.

The fund aims to address the financing gaps for SMEs producing nutritious foods consumed domestically by the vulnerable population within Sub-Saharan Africa. It will do so via a blended capital structure, which includes different capital tranches, and will be funded through a combination of public and private capital. The N3F will also mobilise capital from donors and philanthropies as grants for technical assistance to be provided to investees and as catalytic capital to mobilise additional private investment funding. Alongside the Fund, the Facility will also provide technical assistance to investee companies to improve their business models and increase their nutritional impact, with consideration of gender equity and environmental sustainability. In order to track and maximise the N3F’s impact, GAIN and Incofin have developed a set of novel nutrition-focused criteria for the Facility: better measurement of the nutritional impacts of agribusinesses is essential, as such, indicators are rarely included in impact reporting frameworks69. The N3F’s nutrition criteria and its measurement and impact framework will facilitate the selection of SMEs producing foods of high nutritional value, whilst also documenting and measuring the impact of the fund on increasing the supply of nutritious foods in the region.

The fund will be managed by Incofin Investment Management, a leading impact fund manager focused on microfinance and rural and agricultural finance. GAIN will act as the fund’s sponsor and will manage the Facility’s technical assistance component by providing technical assistance to the SMEs. The Facility has been developed with the support of the Netherlands Ministry of Foreign Affairs and has secured commitments from the Rockefeller Foundation and Irish Aid.

STAKEHOLDERS:

The Global Alliance for Improved Nutrition (GAIN) and Incofin Investment Management; with support from Rockefeller Foundation; Irish Aid; Netherlands Ministry of Foreign Affairs

responsAbility Food & Agriculture II, SLP

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responsAbility Investments is an asset manager with $3.5 billion assets under management from private, institutional and public investors. The company supplies debt and equity financing predominantly to non-listed firms in emerging and developing economies in the energy, agriculture and finance sectors.

responsAbility is getting ready to launch its second sustainable food and agriculture private equity fund (responsAbility Food & Agriculture II), focused on providing growth capital to companies across the agricultural value chain in Asia to improve rural livelihoods, promote sustainable agriculture and strengthen value chains.

The fund will invest primarily in mid- and downstream companies, including supply chain and infrastructure-, food and beverage products- and food distribution companies. Through its downstream position, it aims to influence upstream food producers, traders, and aggregators to implement sustainable sourcing and (production) practices.

The fund is planning to take minority stakes in 6-8 companies, with a projected ticket size of $10-35 million (average $20-25 million). In addition to normal due diligence, the investee companies will be screened for ESG alignment. Through this screening the fund plans to create impact through:

  • Increasing productivity and income for smallholder farmers

  • Fostering sustainability in agriculture upstream production

  • Boosting sustainability in processing/production of food

  • Enlarging the supply of sustainable food and agricultural products

The strategy builds on the experience of the responsAbility Agriculture I ($67.4 million). Portfolio companies include: Samunnati, an Indian financial service provider offering credit and market linkages to smallholder farmers and SMEs across the agricultural value chain; and Wingreens Farms, an Indian high-quality ingredient farm to table company.70,71

70 ‘ResponsAbility Food & Agriculture II’. 2020. Zurich: responsAbility Investments AG.

71 ‘Growth in Asia: The Future of Food - ResponsAbility Food & Agriculture II, SLP Investment Opportunity for Discussion Purposes Only’. 2020. Zurich: responsAbility Investments AG.

STAKEHOLDERS:

n/a

Root Capital

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Founded in 1999, Root Capital is a non-profit providing loans to small, growing enterprises in the agricultural sector to improve the livelihoods of smallholder farmers. Root Capital fills the funding gap experienced for small and growing enterprises that are too large for microfinance but too small for conventional banks, which require collateral and a track record to receive credit.72

Root Capital disburses loans ranging from $200,000 to $2 million, with repayments based on harvest and sales cycles. In sub-Saharan Africa, Root Capital focuses on coffee, tree nuts, and local food crops. In Latin America, it mainly engages in coffee and cocoa; while it mostly focuses on coffee and coconut sugar in Indonesia. Root Capital also provides capacity building that strengthens governance, financial management, and agronomic capacity and helps them build lasting relationships with international buyers. Loans are conditional upon passing environmental screens and must comply with sustainable best practices, to receive international certification. Based on a triangulation model, Root Capital pre-finances agricultural enterprises using purchase orders from international buyers, who will pay once the produce is exported. By using the purchase order as a form of collateral, Root Capital disburses the revenues to the enterprises, deducting the loan and interest rates.73

Root Capital uses a blend of private and public capital to structure its operations. USAID provided a guarantee to the non-profit, while the money to disburse grants are provided from philanthropic sources (e.g. Ikea Foundation, Mastercard Foundation amongst others). Root Capital’s subordinate debt is also served by philanthropic capital (e.g. Skoll Foundation, Silicon Valley Community Foundation) while its senior debt is provided by DFIs (e.g. IDB, MIF, OPIC – total: $20 million), philanthropic capital (e.g. family foundations), impact investors and corporates (e.g. Starbucks, General mills and other).74

To date, Root Capital has worked with more than 735 clients who represent 2.3 million farmers. In 2019, Root Capital disbursed $121 million, financed 201 business, and trained 458 businesses.75 Example investments include: more than $5 million in cumulative financing to an Indonesian woman-owned, 2,000 farmers strong coffee cooperative;76 $2.5 million in cumulative financing to a sustainable cocoa cooperative in the Peruvian Amazon, with 60% of its members being indigenous communities;77 and credit summing up to over $1.8 million (in addition to $20k in grants) to a Kenyan grain aggregator that includes a gender equity workstream.78

72 ‘Financing Sustainable Land Use: Unlocking Business Opportunities in Sustainable Land Use with Blended Finance’. 2018. Kois Investment, the Business & Sustainable Development Commission and the Blended Finance Taskforce. https://docs.wixstatic.com/ugd/679693_bc261b1e91914e76b14f0cac70344cb9.pdf.

73 ‘Financing Sustainable Land Use: Unlocking Business Opportunities in Sustainable Land Use with Blended Finance’. 2018. Kois Investment, the Business & Sustainable Development Commission and the Blended Finance Taskforce. https://docs.wixstatic.com/ugd/679693_bc261b1e91914e76b14f0cac70344cb9.pdf.

74 ‘Financing Sustainable Land Use: Unlocking Business Opportunities in Sustainable Land Use with Blended Finance’. 2018. Kois Investment, the Business & Sustainable Development Commission and the Blended Finance Taskforce. https://docs.wixstatic.com/ugd/679693_bc261b1e91914e76b14f0cac70344cb9.pdf.

75 ‘2019 Annual Report: From Growth to Resilience’. 2020. Root Capital. https://rootcapital.org/wp-content/uploads/2020/07/2019-Annual-Report.pdf.

76 ‘Ketiara: Advancing Women’s Inclusion in Indonesia’. n.d. Root Capital. https://rootcapital.org/meet-our-clients/stories/ketiara-advancing-womens-inclusion-in-indonesia/

77 ‘APROCAM: Building Opportunities for Indigenous Cocoa Producers in the Peruvian Amazon’. n.d. Root Capital. https://rootcapital.org/meet-our-clients/stories/aprocam-building-opportunities-indigenous-cocoa-producers-peruvian-amazon/.

78 ‘Shalem Investments: Overcoming Barriers for Women Farmers in Kenya’. n.d. Root Capital. https://rootcapital.org/meet-our-clients/stories/shalem-investments-overcoming-barriers-for-women-farmers-in-kenya/.

STAKEHOLDERS:

USAID; Multiple Philanthropic agencies; DFIs; Impact Investors; Corporates

Sustainable Ocean Fund

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The $132 million Sustainable Ocean Fund provides growth capital to scalable businesses that build resilience in coastal ecosystems and create sustainable economic growth and livelihoods. SOF is building a blended portfolio of sustainable seafood, circular economy and conservation focussed businesses. The fund has a blended structure, having secured a $50 million Development Credit Authority facility with USAID, which will provide a principal protection guarantee covering eligible projects in the portfolio. As of Nov. 2019, the fund has $92 million in commitments from (but not limited to) the European Investment Bank, Axa Investment Managers, IADB, FMO, and Caprock Group. The geographical focus of the fund will be 30% in Asia and Pacific, 40% Latin America and the Caribbean, and 30% Africa. Althelia has also partnered with Conservation International and the Environmental Defense Fund for scientific and technical expertise.80

As of 2020, the Fund has invested more than half of its assets in circular economy initiatives, including fair trade and chemical plastic recycling and port facilities; around 40% in sustainable seafood including marine aquaculture, by-catch reduction technologies and insect protein; and 3% in marine conservation through MPAs81. More than half of the funds have been awarded to start-ups.

79 Althelia, Press release 2018, Mirova Natural Capital Limited Announces The First Close Of The Althelia Sustainable Ocean Fund For Impactful Investment In Our Oceans: https://althelia.com/2018/09/12/first_close_sustainableoceanfund/

80 Althelia, Press release 2018, Mirova Natural Capital Limited Announces The First Close Of The Althelia Sustainable Ocean Fund For Impactful Investment In Our Oceans: https://althelia.com/2018/09/12/first_close_sustainableoceanfund/

81 Althelia, Impact Report, 2020. https://althelia.com/wp-content/uploads/2020/08/SOF-Impact-Report-2020.pdf

STAKEHOLDERS:

Mirova Natural Capital (former Althelia); Environmental Defence Fund; European Investment Bank; Axa Investment Managers; Inter-American Development Banks; FMO; Caproack Group