Althelia Biodiversity Fund Brazil awarded impact investment fund of the year
Leanne Zeppenfeldt(Wageningen University & Research)
The CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS) together with the Center for Tropical Agriculture (CIAT), are proud to have supported Mirova Natural Capital and USAID in establishing the ABF Brazil in 2019. The fund aims to deploy USD 100 million of blended finance into sustainable activities that protect, restore or otherwise improve biodiversity and community livelihoods in the Amazon basin.
The fund is structured as a layered fund, with junior and senior share classes. The junior, a USD 15 million commitment from CIAT, provides first-loss protection to senior shareholders. This feature, together with a credit guarantee from the Development Credit Authority, backed by USAID, provides an attractive risk proposition for private capital investors. The fund's innovative character has resulted in the IMPACT award for "impact investment fund of the year" in the multi-asset category.
Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.
The current impact investing market size is estimated at USD 715 billion. It serves as a promising mechanism to mobilize private capital for sustainable development.
The first sustainable impact investment fund for the Amazon
The Amazon is the largest rainforest and river basin on the planet. It accounts for about 25% of the carbon dioxide absorbed by land each year. Hence, stopping the current trend of deforestation in the Amazon region is crucial in the face of climate change.
Despite the urgency of the protection of the Amazon, impact investment in the region has been very limited. Many investors have been reluctant to invest private capital in Brazil, let alone the Amazon, due to the associated political and financial risks. In addition, high transaction costs and a perception of low profitability have been limiting investments in the region.
The ABF Brazil, however, includes risk mitigation features that are designed to overcome these challenges. A credit guarantee feature and a layered fund structure result in risk-reduction, increasing the fund's attractiveness for private capital. As a result, the fund lifts the barriers to impact investment that have previously precluded most impact investors from expanding into the hard-to-reach region.
Impact investment for sustainable development
The ABF Brazil aims to support sustainably managed agroforestry, farming, protected areas, and biodiversity-friendly service providers. Hence, aside from CIAT's USD 15 million cornerstone investment, CIAT and CCAFS' research experience in the Amazon and their technical capacity and knowledge to develop and evaluate sustainable practices and businesses are key contributions to the fund.
The first ABF Brazil deals have already been structured, and more are in development. In the face of declining development assistance budgets and a USD 2.5 trillion annual financing gap to meet the Sustainable Development Goals (SDGs), this combination of private sector investment and science-based information presents a promising strategy to secure the funds that are needed for sustainable development in the coming years.
Read more:
- Winner announcement: Fund of the year - Multi-asset/other: Althelia Biodiversity Fund Brazil
- Blog: Scaling sustainable investments to transform food systems
- Press release: First closing of the Althelia Biodiversity Fund Brazil
