Verde Ventures. Finance Conference

Transcription

1 Verde Ventures Triple Bottom Line Investing Biodiversity and Ecosystem Finance Conference March 27-28, 2008

2 Mission of Conservation International Conservation International s mission is to conserve the Earth s Conservation living natural International heritage, our s global biodiversity, and to mission demonstrate is to conserve that human the societies are able to live harmoniously with nature Earth s living natural heritage our global biodiversity and to demonstrate that human societies are able to live harmoniously with nature Conservation International s mission is to conserve the Earth s living natural heritage, our global biodiversity, and to demonstrate that human societies are able to live harmoniously with nature

3 Our Purpose Verde Ventures invests in small businesses that contribute to conservation and communities in Conservation International's global priority areas.

4 Why Verde Ventures? Conservation-based employment is essential to provide economic incentives for conservation The small business sector is a key partner in the intersection between human welfare and conservation Lack of available, affordable capital to ensure the sustainability of the sector

5 Fund Investors Verde Ventures is an open-ended, Loan Financed, Biodiversity Fund: Primary Investors: 1. International Finance Corporation (IFC) 2. Overseas Private Investment Corporation (OPIC) 3. Starbucks Coffee Company (coffee and cocoa investments only) Public Sector Incentives: Environmental and social returns but OPIC funding also seeking commercial financial returns. Private Sector Incentives: Alignment with business and CSR benefit.

6 Core Products Equity approach, but loan instruments: $30K to $500K (average YTD: $125K) Use of Funds: Infrastructure, working capital, trade finance Typical Deal Structure: Senior or subordinated secured debt for 3-5 years. Increasingly debt + quasi-equity. Securitization: Trade Finance: Buyers contracts Non-Trade: Local collateral (mortgage, plant/equipment, receivables etc.) Strategic grants for technical assistance and environmental and socio-economic monitoring

7 Fund Overview Sectors Invested Regions Invested 5% 26% Coffee Cocoa 51% NTFPs 14% Tourism 4% Other 63% 16% 21% Africa Asia Americas

8 Investment Map Mexico El Salvador Guatemala Indonesia Peru Chile Ghana Kenya Bolivia Belize Ecuador Mozambique

9 Summary Statistics Percent Committed of Available Funds 91% Total Invested Capital Currently Outstanding Amount Repaid to Investors $12 million $3.8 million $1.3 million Number of Entities Supported 34 Number of Countries Invested 12 Number of Total Loans 64 Repayment Rate 97%

10 Triple Bottom Line Results Environmental Direct Hectares Impacted (within project area) 307,402 Indirect Hectares Impacted* 3,031,587 IUCN Red-listed Species Impacted 189 Financial Fund Costs Covered with Non Grant Revenue for FY08 85% Sales Generated by Businesses Supported Leveraged Funding Social $32 million $3 million Total Direct Beneficiaries 14,877 Total Indirect Beneficiaries** 42,367 Percentage of Female Direct Beneficiaries (of total) 30% *Indirect includes area under the projects influence, but not direct ownership control **Immediate family members of direct beneficiaries (direct beneficiaries are project employees)

11 Monitoring Financial: Business Performance Measurements Environmental: Baseline survey + annual site-relevant indicators for measuring environmental change during the investment period Social/Economic: Baseline survey + annual indicators measuring change in socio-economic conditions of project beneficiaries Monitoring provides opportunity to directly tie financial incentives to biodiversity gains.

12 Invested Project Summaries

13 Ibo Island Mozambique Amount: $495,000 Sector: Tourism Use of funds: To renovate and expand its existing lodge in northern Mozambique Deal Structure: Invested offshore and secured with offshore collateral for 5 years at 8% interest plus % of sales. Impacts: Improved management of National Park (750,000 hectares) through ecotourism led job creation for 40 community members

14 Koyam Limitada, Chile Amount: $150,000 Use of funds: To finance the reforestation of degraded lands in the central region of Chile using native trees Deal Structure: Loan secured against government- issued reforestation contracts and local collateral Impacts: Benefit 250 local Mapuche community members and implement a reforestation of Vulnerable Araucaria tree species in 150 hectares of threatened land.

15 Key Lessons Learned There are often (not always) trade-offs between financial risks/rewards and biodiversity benefits. Transaction costs for triple-bottom line investing are higher than traditional investing. All TBLN monitoring costs should not be charged to the borrower. There is a downside to scaling up- mission drift and loss of focus on helping build businesses as opposed to just providing capital. It is possible to be an equity-type investor using loan finance, but grant funds for building emerging SMEs is essential.

16 Future Horizons Capital Raising Phase: $10 million over next 2-3 years. 50% of this already committed from new and existing investors. Increase Investments in Africa and Asia Increase funding for grant-based Technical Assistance and Monitoring Diversify Sectors including Ecosystem Service Diversify Sectors including Ecosystem Service Investments

17 VV s Ecosystem Service Investments? Challenges: Securitization Term Returns Opportunities: Trade Finance model replication (e.g. reforestation in Chile) Climate Change Mitigation = Renewable Energy Sector Opportunities

18 Mainstreaming Biodiversity Financing Recognition that scalability must occur with commercial banking and private equity sectors. Supply: Financing incentives needed to encourage banks to lend to sustainable SMEs. Demand: Maturation of specific sectors to become bankable/ equity returnable - partially through help of boutique, blended (loan/grant) capital and grant-funded technical assistance.

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