mobilizing finance for integrated landscape initiatives
TRANSCRIPT
Mobilizing finance for integrated landscape initiatives
Global Landscapes Forum, Paris, 6 December 2015
What are the issues?Main reservations from investors: 1. UNDERSTANDING of Scattered intelligence on these
“landscape initiatives”2. SCALE: Existing initiatives rather small and/or pilot and
involving very few impact investors and DFIs; 3. INDICATORS: Lack of “simple” performance indicators
allowing investors to be comfortable with such projects; 4. NO TRACK-RECORD of bankable projects.
Unlocking Forest FinanceDeveloping innovative financial mechanisms
at a landscape scaleto reduce deforestation
for capital marketsin Public – Private – People Partnerships
The regions we work in….
An International ClimateInitiative project
CDSA Acre
Government and non-governmental partners
Finance partners and advisors
Current market trends and termsLatest environmental standardsIncludes major bond issuers and investors
Unlocking Forest Finance
PART ONE: The Portfolio
“How the money would be
used”
Portfolio of investments
Upfront investments in:
1. Supply chains (land management systems)
2. Government sustainable livelihood programmes
3. Government conservation programmes
Complementarity with other initiatives
Portfolio of investments- framework
Preservation of culture and traditions
Improved technical capacity
Enhanced land rights and food security
Social criteria
Reduction of GHGs
Use of degraded land
Benefits for biodiversity
Environmental criteria
Risks are negligible or manageable
Positive NPVs and attractive IRRs
Transaction costs are acceptable
Financial criteria
Complementarity with other initiatives
Cross-cutting criteria
Beef Cattle Milk Cattle Native Forests
Soy
Planted Forests
Rubber Brazil Nuts Aquaculture
State ConservationUnits
IndigenousCommunities
Portfolio of investments (Mato Grosso)
Milk cattle (Mato Grosso)Problem• UFF is targeting 5,000 small-scale milk cattle farmers in Mato Grosso
• Low production technology leads to low milk quality and low income for producers
• Do not comply with Forest Code, leads to environmental problems
• State subsidised credit is available (e.g. (ABC, FCO, Pronaf) but:• Difficult to access (land title, financial education)• Limits on amounts, so resort to expensive private loans
Solution• New, subsidised credit lines from private banks for Forest Code compliance
and intensification• Training on how to access to finance• Upscale existing intensification training program with Municipalities
Financial analysis - milk cattle (Mato Grosso)
- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
-100,000,000
-50,000,000
0
50,000,000
100,000,000
150,000,000
200,000,000
Revenues
Costs
Cash flows
Cumulative cash flows
Year
R$ m
illio
nNPV: $17.5mIRR: 26.3%
7 year payback period
4 year return period
Unlocking Forest Finance
PART TWO: The Finance“How the money would be raised”
Risk mitigators
Technical assistance
Guarantees
Producers
Subsidised loans Insurance Technical assistance
Financial Mechanism
Financial intermediaries
Private banks Credit unions
Guarantee providers
Insurance providers
GrantsLoans
Grants
Non-financial intermediaries
Gov’t agencies Cooperatives
Note: For example purposes only, subject to revision
Bond issue
Bond Issuer
Financial intermediaries
Loans
Technical Assistance Fund
Grants
Climate Finance
Risk mitigators
Guarantees
International, national and local advisersGrants
Bond Markets
Investors
Note: For example purposes only, subject to revision
Non-financial intermediaries
Grants
Timeline
• December 2015 - Review cash-flows and loan/grant requirements for each supply chain in the preliminary portfolio
• March 2016 - Select final portfolio of supply chains, draft Investment Proposition
• June 2016 - Produce final Investment Proposition, market to investors
• Early 2017 - Launch of the bond
