Verde Ventures Triple Bottom Line Investing Biodiversity and Ecosystem Finance Conference March 27-28, 2008
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
Our Purpose Verde Ventures invests in small businesses that contribute to conservation and communities in Conservation International's global priority areas.
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
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.
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
Fund Overview Sectors Invested Regions Invested 5% 26% Coffee Cocoa 51% NTFPs 14% Tourism 4% Other 63% 16% 21% Africa Asia Americas
Investment Map Mexico El Salvador Guatemala Indonesia Peru Chile Ghana Kenya Bolivia Belize Ecuador Mozambique
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%
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)
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.
Invested Project Summaries
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
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.
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.
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
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
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.
For more information, please visit: www.conservation.org/verdeventures