Investments for Forests and People Thoughts on Scaling Investments for Sustainable Landscapes

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1 Investments for Forests and People Thoughts on Scaling Investments for Sustainable Landscapes Leslie Durschinger Founder, Managing Director Terra Global Capital

2 Terra Global Promoting Sustainable Landscapes Focused Technical Assistance Designed to support projects in becoming commercially viable and accessing results-based emission reduction programs Investment preparation, capacity training and institutional arrangements GHG emission quantification and monetization Preparation of documents and transactions for Carbon Fund, ISFL and other ER results-based programs Dedicated Private Equity Capital Terra Bella Fund, a private equity fund dedicated to smallholder agricultural and climate change mitigation Provides early-stage project finance capital to finance smallholder agriculture linked to reducing deforestation in developing countries Improves smallholder yield, quality and price capture in coffee, cocoa, shea, rubber, acai, nuts as well as other high value crops and nontimber forest products

3 Investing in Sustainable Landscapes Investing in this context means providing capital to gain both repayment and some financial return (along with co-benefits) How do we attract funding from capital markets (public and private) to produce? Environmentally Low GHG emission landscape management and zero deforestation Biodiversity supported Water systems protected and healthy Socially Rural and forest dependent communities earn viable livelihoods Food security and crop diversification Cultures and traditions may continue Financially Fair return on investment for all levels investors Capital can be attracted to promote conversion to sustainability Investment structures align interests

4 Blending Sources and Financing Structures Risk Guarantors Investors Donors Domestic Finance Donors Smallholders Applies to project or pooled investment level, first loss, debt guarantees, political risk insurance Reduces risk to investors Funds or bonds provide projects/smes, equity, quasi debt, debt, purchase agreements Early to mezzanine stage (>$10 million revenue) for project finance or SMEs Grants, with matching requirements Technical assistance linked to matching investments to reduce risk at project level Loans (typically), may include technical assistance Equipment purchase, working capital, new crops Grants For project planning, pilots and foundation elements Sweat equity Labor, use of land, equipment

5 Investment Readiness Criteria Investment Readiness Criteria Community/Small Holder Engagement Conducted Land Tenure Rights Secured Project Partner Capacity for Management and Investment Entity Exists Agricultural/NTFP/Timber Value Chain Potential Quantified Emission Reduction Potential Quantified Detailed Project Plan Developed Financial Projections Over Project Life Benefits Sharing and Funds Management Defined Indicators of Investment Readiness Participating communities are identified Communities are organized around common project objectives Governance structure being formed to support aggregation Tenure known and supported by legal frameworks Participating smallholders can demonstrate tenure Experience in project implementation within smallholders and technical partners Investable legal entity formed with legal agreements with smallholders Some crops, NTPF and/or timber currently being produced Future production and value chain demonstrate growth potential Project activities are tied to mitigation benefits Demonstrates feasibility of emission reduction potential Multiyear implementation plan identifies, activities, implementers, stakeholders and expected results Tied to implementation plans, detailed financial projections are developed Funding needs, sources/uses of funds, investment returns known Benefits and required commitments explicit in investment entity and smallholder aggregation structure Transparent and auditable funds management is adopted

6 Challenges/Opportunities in Scaling Investments Challenges Not all projects are investable Scaling finance requires institutional investors Institutional investors require risk reduction to make early investments Domestic financing sources need to play larger role Commercially viable investment opportunities in smallholders are limited Emission reductions value limited to unknown Extractives sector mitigation commitments often not explicit Opportunities Use donor funds to finance Offer known instruments - bonds or private equity funds Financial instruments backed by donor/public funds that are directly accessible by private sector investors (first loss, guarantees) Adequately capitalized with properly structured financial instruments Dedicated technical assistance linked to investments Results-based programs fill critical gap, but need to be conducive to private investment Small relative cost, if applied effectively can fund significant landscape programs

7 Ask how many years you have to make a difference? Thank You, Leslie Durschinger Leslie.durschinger@terraglobalcapital.com