mobilizing finance for integrated landscape initiatives

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

Thank you, any questions?

uffmanagement@globalcanopy.org