TROPICAL REGIONS WITH HIGH RISK OF DEFORESTATION
Important commodity production – palm oil, soy, cattle, coffee, rubber for example – in tropical forest regions is often extractive. Extractive production often leads to deforestation, and tropical deforestation is responsible for 20-25% of global emissions and major biodiversity loss. Regenerative production , on the other hand, prioritizes soil health, biodiversity, carbon sequestration, and reduced pesticide use which aligns with combating climate change.
&Green seeks investment opportunities in jurisdictions where deforestation is acute, but where conservation regulatory frameworks exist. Frameworks can include deforestation reduction targets, and strategies and systems that credibly and transparently track deforestation trends. &Green selects its investment universe through its unique “Jurisdictional Eligibility Criteria” (JEC) process.
We invest in Indonesia, for example, where deforestation has been reduced through strong regulation and implementation action, as well as coordinated market pressure in key sectors, palm oil specifically.
COMMODITY SUPPLY CHAINS
Ecosystem change is complex and driven by a combination of factors dependent on both regional and commodity specifics. Factors could include environmental, regulatory, economic and/or social issues.
&Green analyses which factors lead to deforestation within an identified commodity supply chain (sector). We define pathways where smartly structured financing can help transition the identified sector towards sustainability. We identify where investment is best aligned with national development and forest protection plans, and which business models allow for sustainable expansion.
We invest in Colombia, for example, where consistent economic growth is driving increasing consumption of beef and incentivizing further cattle ranching.
PRIVATE SECTOR ACTORS
Deforestation happens at the beginning of supply chains, often through actors’ unable to directly access international lenders and local banks.
&Green identifies actors who provide access to actual landowners and users. Actors could include local banks financing agribusinesses, traders or larger landowners with a lighthouse role or aggregating commodity volumes with their own production, and third-party suppliers.
We invest in Brazil, for example, in local grains buyer FS based in Mato Grosso. This is an example of how No Deforestation commitments can be implemented in the upstream supply chain.
Not all private sector actors are willing to change, nor are they accessible and suitable for international lenders.
&Green identifies suitable regional actors based on reputation, bankability, financial solidity, and willingness to adapt and often disrupt their own supply chains. Actors could include local landowners such as plantation companies or commercial farms, supply chain actors like grain traders or local banks financing businesses.
We invest in Brazil, for example, in Roncador, a large, financially solid farming business with a strong track record on innovation. The Roncador owner has a strong intrinsic motivation to farm sustainably.
The sustainability transition of tropical commodity production requires scale to be impactful.
Transformational impact in combination with financial opportunity is the heart of the &Green investment rationale. &Green designs in collaboration with clients, supply chain blueprints that can be replicated and scaled to reach a tipping point in the sector and jurisdiction.
We invest, for example, in the traceability of Marfrig, a Brazilian meatpacker, so that the company’s upstream cattle supply chain, which will cover 1/3 of the beef production of Mato Grosso, can be fully traced as a prerequisite to becoming deforestation-free. The tools and procedures developed with &Green funding will be used by Marfrig in other jurisdictions and can be replicated by other companies.
Transactions in emerging and frontier markets – and furthermore in agriculture – carry significant risks. The envisaged impact must be nurtured through careful transition plan implementation, working with companies who display operational excellence and who are fiscally sound and responsible.
&Green includes clear impact and risk mitigation deliverables in the covenants of its loan agreements. &Green enters into a “Landscape Protection Plan” (LPP) with each company which defines impact milestones and targets as well as prescribes an “Environmental and Social Action Plan” (ESAP) to drive the company’s transition to sustainability in line with best practice standards. Impact delivery is monitored through independent ground-level assessments as well as satellite-based observations.
SECTOR IMPACT IN THE COUNTRY
&Green invests in local or regional market leading companies, promoting commercially sustainable models that also have substantial impact on key sustainability areas like climate benefits and forest protection. &Green enables sector-wide learning and showcases long-term outperformance through transparency and sectoral tracking.
SCALABLE IMPACT, BLUEPRINT PROOF OF CONCEPT
Green’s transactions are designed to be blueprints for the market. Demonstrating business performance and impact by &Green investees drives replication and scale. Transformation is expected through broader scalability with support from &Green and eventual adoption within mainstream financial markets as transactions attract increased capital.