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About this report

This Annual Report covers the activities of &Green that took place during the period 1 January to 31 December 2021. That said, it also covers more general themes such as the &Green investment approach and why we do what we do. The report is thus accessible for all readers, whether you have a detailed knowledge of &Green or this report is the first thing you are reading about us.

This 2021 Annual Report provides a comprehensive overview of the &Green universe, from our focused investment strategy, through our increasing portfolio of investments, up to our growing set of contributors and partners.

Compared to previous Annual Reports published since &Green’s establishment (2018, 2019, 2020), this year we wished to give a more visual and interactive experience to our readers. The digitalized Annual Report allows one to easily jump to different sections and the content has been layered to provide more detailed information if needed. A menu has been added on the left side to help navigate through the Report.

&Green’s financial and impact performance have been quantitively summarized in the 2021 Annual Impact Report and the 2021 Annual Financial Report, which can be found on chapter 12 and 13, respectively. These two documents can be downloaded as separate PDFs and provide the ‘hard figures’ behind which the narrative of the Report should always stand.

Lastly, we have defined those words that we feel are key to understanding the nature and scope of &Green’s activities; They look like this . All the defined words have been gathered in the ‘&Green Vocabulary’ chapter at the end of this Report (chapter 14).

With this Annual Report, we hope to demonstrate how &Green is bringing its purpose to life, while remaining committed to the highest levels of transparency in reporting and communicating on our progress.

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&Green's Purpose

In order to create and then maintain a truly sustainable planet that allows its people to thrive, the world needs to reach its global climate change mitigation and biodiversity conservation goals, while still being able to deliver on the growing demand for commodities.

Within that context, &Green supports the transformation of global supply chains by de-linking them from deforestation and producing a positive climate impact. &Green provides the financing to commodity businesses that are inclusive, sustainable and deforestation-free, and are commercially viable and replicable.

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2021 Highlights

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Letter from the Board

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NANNO KLEITERP

Chairperson of the &Green Board of Directors

We will look back on 2021 as a year of achievements which had fundamental long-term impact on &Green’s success.

We closed an investment from a leading global impact investor, FMO, the Dutch development bank. Through FMO we received additional funding from a leading climate change donor, the UK government. We expanded our geographic reach to Colombia and, early in the year, we made a strategic investment by financing the second-largest meatpacker globally in Brazil to set highly ambitious and impactful targets on becoming a fully traceable and a deforestation -free actor.

Here below you will read about the investment strategy of &Green, that is, how we expand our portfolio of investments. If you wish to skip this part, you can directly jump to The Portfolio section by clicking on the button below.

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The &Green Approach

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SCOPE

The amount and quality of forest and/or peatland potential of the jurisdiction is significant and highly relevant from global perspective.

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AMBITION & STRATEGY

There is a clear strategy with the targets tracking the reduction of deforestation against historic trends in the jurisdiction.

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PROGRESS

Timely progress towards milestones indicated in the strategy of the jurisdiction, on a trajectory towards the targets for reducing deforestation.

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MRV

A transparent system is operational to monitor, measure, report and verify reductions in deforestation, and where relevant forest and peat degradation, in the jurisdiction.

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SOCIAL & ENVIRONMENTAL SAFEGUARDS

The jurisdiction shows progress towards implementation of the Cancun Agreement.

Peru Liberia Gabon Colombia Para, Brazil , Ecuador Mato Grosso, Brazil Vietnam Paraguay Cameroon Ghana Lao PDR Malaysia DR of the Congo Ivory Coast Zambia Indonesia

Our financing solutions follow an innovative approach. Innovative financing refers to the ability of &Green to blend public and private funding – allowing &Green to structure its investments in a flexible way that accommodates the projects and generates the maximum positive impact. We provide long-term debt capital to business to help them make the transformational changes necessary to achieve sustainable production. This would not otherwise be possible given the lack of long-term structured financing of our clients in their everyday relations with commercial banks. With the purpose-built capital provided by &Green, clients are able to implement a landscape protection approach to their business practices and operations.

The &Green team supports the client to build a credible plan to drive economic, environmental and social value in these landscapes, which are critically important for local communities, food security, biodiversity and the global climate.

PREVIOUS KPI FRAMEWORK

HECTARES OF FOREST CONSERVED

HECTARES OF AGRICULTURAL INTENSIFICATION

HECTARES OF FOREST RESTORED

NUMBER OF SMALL SCALE PRODUCERS

NUMBER OF HOUSEHOLDS BENEFITTING

ADDITIONAL DEVELOPMENTS OF THE ESMS’ REVISION

Beyond the updated KPI framework, the key developments of the ESMS’s revision in 2021 focused on:

DIGITALIZING

Digitalizing our investment management workflow to bring our portfolio to scale and provide consistent excellence in its application.

BIODIVERSITY

Embedding biodiversity impact management practices to address nature-related risks and assure nature-positive outcomes of our investments.

POLICIES

Clearly positioning our “no deforestation” and ``landscape protection`` approaches against international standards by detailing out specific policies for both, which will also be helpful to our clients.

MONITORING

Automatizing our GIS screening and satellite monitoring platform to check on our clients' landscapes in real time, using high resolution daily satellite images.

STANDARD-RELATED ELEMENTS OF &GREEN’S ESMS

Click on the respective underlined circles to view more information:

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The Investment Manager

Multidisciplinary Team

Diverse, experienced, and passionate team

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The Portfolio

With two new investments made in 2021, the &Green portfolio now comprises five transactions:

The ‘hard numbers’ of &Green’s impact journey are in the Annual Impact Report. We have purposely placed all the numbers in one place just before the financial numbers so that there is one dedicated place where you can always find them.

This Portfolio section provides the stories behind those numbers. The &Green portfolio reflects our Contributors’ wish to focus on the major sectors and jurisdictions that are linked to deforestation . In this regard, cattle and soy in Brazil and Colombia and palm oil and large agricultural concessions in Indonesia provide excellent opportunities to prove &Green’s concept. Brazil and Indonesia will remain central pillars of the &Green portfolio; however, the portfolio will extend into other jurisdictions in the coming years.

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Subsequent Events

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Fund Management

EXPECTED CREDIT LOSS (ECL) METHOD

During 2021 &Green adopted the more prudent Expected Credit Loss (ECL) method to estimate allowances for expected credit losses and impairments of &Green portfolio investments. The ECL method categorizes investments as either:

Stage 1

Performing Investments with no significant increase in credit risk since investment, and for whom the provision for impairment is equal to the 12-month ECL.

Stage 2

Investments for which the credit risk has significantly increased and the provision for impairment is increased to the Lifetime ECL for the investment.

Stage 3

Credit Impaired Investments for which the Lifetime ECL has been written off.

The 2020 annual financial statements were restated to implement the ECL for the &Green portfolio as at 31 December 2020, and all investments were assessed to be Stage 1 at that time. During 2021 the RLU investment moved from Stage 1 to Stage 2 and this constituted the majority of the Movement in provision for impairment in the Profit and loss account.

Finally, the adoption of the ECL Method also meant that the valuations of the portfolio investments was reported net of the provisions as at 31 December 2021 (and for the restated 31 December 2020 valuations).

2021 ECL APPLICATION

CAPITAL

During 2021 &Green received firm commitments amounting to USD 58,4 million from the Dutch development bank, FMO; the British government’s Mobilising Finance for Forests fund (MFF); and the Ford Foundation. All these amounts are expected to be drawn down in 2022. The Norwegian government also confirmed that the conditions for the second tranche of its investment in the Facility had been fulfilled and the NOK 300 million (ca. USD 35.3 million) was drawn down in March 2021. Finally, the second USD 5 million was drawn down from Unilever in February 2021.

The FMO finance attracted certain front-end, monitoring and commitment fees which increased the cost base of &Green but were covered by the increased investment income from &Green’s portfolio.

General expenses were well managed to remain in line with the budget set by the &Green Board of Directors.

THE EU TAXONOMY HAS SIX GOALS

&Green’s investments are anticipated to make substantial contributions to the goals highlighted in green

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Climate change adaptation

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Sustainable use and protection of water and marine resources

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Pollution prevention and control

The parties regulated by the EU Taxonomy are required to contribute to at least one goal and to Do No Significant Harm (DNSH) with respect to the other five goals, while maintaining minimum safeguards on the social requirements of the regulations.

The EU Taxonomy provides an important information platform to communicate the degree of &Green’s alignment with the spirit and intent of the regulations. &Green’s investment locations do not have the same strong regulatory context of the EU. Some differences in documentation mean that &Green investments do not yet meet all of the EU taxonomy technical screens, but do clearly make substantial contributions to the EU Taxonomy goals of:

&Green activities contribute to adaptation by pursuing nature-based solutions, in line with the second goal of the EU Taxonomy. However, more structured and location specific climate risk and vulnerability assessment are needed for these activities to be recognized under the Taxonomy requirements. &Green estimates that its current EU Taxonomy alignment is approximately 50%, which is comparable to investments in Europe, and high for developing economy investments. With modest changes, &Green will reach greater than 70% in the short-term. To approach 100% alignment, more detailed, localized and down-scaled climate hazard assessments (linked to climate resilience) are required. The ability to achieve this is limited by data availability. As part of the revision of the ESMS Policy, &Green will address the identified shortcomings and draft an EU Taxonomy statement.

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Funding

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Governance

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Investment Outlook

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Annual Impact Report

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ANNUAL IMPACT REPORT

Click on the icon to read and download our 2021 Annual Impact Report.

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&Green Vocabulary

Blueprints

Blueprints are sustainable practices that our clients adopt to create impact and which are Replicable by other participants in the same market, thereby leading to Transformational Change. Replicable means that the Blueprints can be implemented by other participants in the same market/sector as our clients (and possibly other similar sectors), i.e. once our clients have shown it can be done, others will replicate. To be Replicable, projects must also be commercially viable.

CPO

Crude Palm Oil

Deforestation

Deforestation means the clearance of natural forests, including through fires, typically for the purpose of taking commercial advantage of the cleared land. Although Deforestation is often illegal, it can, in some cases, be legal (i.e. in compliance with local law).

E&S

E&S is a term used often in the development finance space referring to Environmental & Social

E&S risk category

&Green categorizes its investments into one of three categories: A (high potential for adverse social or environmental impacts); B (adverse social or environmental able to be mitigated); or C (minimal or no adverse social or environmental impacts). It uses a categorization process that identifies and scores potential environmental and social risks and is aligned with the categorization of projects under the IFC Performance Standards. The Facility’s full categorization process for projects is set out in the &Green Environmental and Social Guidelines available on the &Green website.

ESAP

An Environmental and Social Action Plan (ESAP) is a detailed plan implemented by our clients to address gaps in their practices which, when closed, will mean they comply with international standards, specifically the IFC PS. This ensures that the project’s E&S risks are identified and well managed

ESMS

Environmental and Social Management System (ESMS) is an internal system which we require from our clients to manage their E&S risks and to develop approaches to mitigate these risks.

Eligible jurisdictions

Eligible jurisdictions are those jurisdictions in which &Green may invest because they have met the Fund’s Jurisdiction Eligibility Criteria (JEC) and have been approved by the Advisory Board.

HCV/HCS

High Conservation Value (HCV) / High Carbon Stock (HCS) means areas that are important for conservation (environmental values) and livelihoods (social values) and for which it is important that no-deforestation commitments apply in order to protect biodiversity.

IFC PS

The International Finance Corporation Performance Standards (IFC PS) set out international standards for managing environmental and social risks and are recognized as the gold standard by many international investors and development banks.

IP

Indigenous People (IP) means the communities that are considered indigenous to a Landscape in which a client operates.

Jurisdiction

Jurisdiction means a country, region or province which &Green would consider investing in.

LPP

A Landscape Protection Plan Is a roadmap to Transformational Change contractually agreed with our clients to achieve Environmental & Social compliance and create impact.

Land acquisition

Land Acquisition means the expansion of the land area on which a client operates through the purchase of new land from others.

Landscape

Landscape is the Project Area from which &Green’s Environmental and Social Return are to be derived and includes areas with direct and indirect influence from the client.

MRV

Monitoring, Reporting and Verification

NDPE

A No Deforestation, No Peat and No Exploitation (NDPE) commitment is a public commitment by our clients in order to make their operations sustainable. The commitment should pledge to have zero deforestation, peatland destruction or exploitation of indigenous people in the operations and supply chain of their business.

Peatlands

Peatlands are wetland ecosystems in which waterlogged conditions prevent plant material from fully decomposing. They have the highest store of global soil carbon.

RSPO

The Roundtable on Sustainable Palm Oil (RSPO) aims to transform markets to make sustainable palm oil the norm. It is the leading global palm oil certification.

TA

Technical Assistance (TA) is financial assistance provided to a client in the form of grant funding for an expert assessment which the (prospective) client can use to improve its processes and practices.

Transformational Change

&Green’s Transformational Change entails a shift from a current system to a fundamentally new system that thereafter forms the mainstream. Transformational Change can be achieved by accelerating change, and/or inducing change which catalyzes further changes. It enables &Green to realize its vision of sustainable deforestation-free and socially inclusive agricultural commodity supply chains in the Tropics.

Blueprints

Blueprints are sustainable practices that our clients adopt to create impact and which are Replicable by other participants in the same market, thereby leading to Transformational Change. Replicable means that the Blueprints can be implemented by other participants in the same market/sector as our clients (and possibly other similar sectors), i.e. once our clients have shown it can be done, others will replicate. To be Replicable, projects must also be commercially viable.

CPO

Crude Palm Oil

Deforestation

Deforestation means the clearance of natural forests, including through fires, typically for the purpose of taking commercial advantage of the cleared land. Although Deforestation is often illegal, it can, in some cases, be legal (i.e. in compliance with local law).

E&S

E&S is a term used often in the development finance space referring to Environmental & Social

E&S risk category

&Green categorizes its investments into one of three categories: A (high potential for adverse social or environmental impacts); B (adverse social or environmental able to be mitigated); or C (minimal or no adverse social or environmental impacts). It uses a categorization process that identifies and scores potential environmental and social risks and is aligned with the categorization of projects under the IFC Performance Standards. The Facility’s full categorization process for projects is set out in the &Green Environmental and Social Guidelines available on the &Green website.

ESAP

An Environmental and Social Action Plan (ESAP) is a detailed plan implemented by our clients to address gaps in their practices which, when closed, will mean they comply with international standards, specifically the IFC PS. This ensures that the project’s E&S risks are identified and well managed

ESMS

Environmental and Social Management System (ESMS) is an internal system which we require from our clients to manage their E&S risks and to develop approaches to mitigate these risks.

Eligible jurisdictions

Eligible jurisdictions are those jurisdictions in which &Green may invest because they have met the Fund’s Jurisdiction Eligibility Criteria (JEC) and have been approved by the Advisory Board.

HCV/HCS

High Conservation Value (HCV) / High Carbon Stock (HCS) means areas that are important for conservation (environmental values) and livelihoods (social values) and for which it is important that no-deforestation commitments apply in order to protect biodiversity.

IFC PS

The International Finance Corporation Performance Standards (IFC PS) set out international standards for managing environmental and social risks and are recognized as the gold standard by many international investors and development banks.

IP

Indigenous People (IP) means the communities that are considered indigenous to a Landscape in which a client operates.

Jurisdiction

Jurisdiction means a country, region or province which &Green would consider investing in.

LPP

A Landscape Protection Plan Is a roadmap to Transformational Change contractually agreed with our clients to achieve Environmental & Social compliance and create impact.

Land acquisition

Land Acquisition means the expansion of the land area on which a client operates through the purchase of new land from others.

Landscape

Landscape is the Project Area from which &Green’s Environmental and Social Return are to be derived and includes areas with direct and indirect influence from the client.

MRV

Monitoring, Reporting and Verification

NDPE

A No Deforestation, No Peat and No Exploitation (NDPE) commitment is a public commitment by our clients in order to make their operations sustainable. The commitment should pledge to have zero deforestation, peatland destruction or exploitation of indigenous people in the operations and supply chain of their business.

Peatlands

Peatlands are wetland ecosystems in which waterlogged conditions prevent plant material from fully decomposing. They have the highest store of global soil carbon.

RSPO

The Roundtable on Sustainable Palm Oil (RSPO) aims to transform markets to make sustainable palm oil the norm. It is the leading global palm oil certification.

TA

Technical Assistance (TA) is financial assistance provided to a client in the form of grant funding for an expert assessment which the (prospective) client can use to improve its processes and practices.

Transformational Change

&Green’s Transformational Change entails a shift from a current system to a fundamentally new system that thereafter forms the mainstream. Transformational Change can be achieved by accelerating change, and/or inducing change which catalyzes further changes. It enables &Green to realize its vision of sustainable deforestation-free and socially inclusive agricultural commodity supply chains in the Tropics.

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Annex: 2021 Audited Annual Financial Report

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ANNUAL FINANCIAL REPORT

Click on the icon to read and download our audited 2021 Annual Financial Report.

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