HACIENDA SAN JOSE
About HSJ
Hacienda San Jose (HSJ) is an innovative cattle business focused on the cultivation and dissemination of superior genetics and beef production in the Vichada region of the Colombian Eastern plains. On 31 December 2021, &Green and HSJ concluded a COP 30 billion (approx. USD 7,7 million at the time of execution) 12-year long-term senior secured loan to support HSJ’s ambition to disrupt the cattle sector in Colombia and become the market leader in sustainable deforestation-free beef production. This transaction marks &Green’s first investment in Colombia and in a sector which is associated with poor land management, deforestation , and inefficient farming practices across the country, including in and around the Amazon biome.
Transaction Summary
INVESTMENT RATIONALE
&Green’s investment in HSJ will help transform the Colombian cattle sector, which is currently of low quality, inefficient, and associated with deforestation and ecosystem degradation. HSJ is currently operating on approximately 8,800 hectares of land and during the period of &Green’s loan, the business intends to expand to have influence over up to 180,000 hectares of productive land. HSJ will expand its area of influence by acquiring land, implementing its sustainable development model, and selling the productive land in blocks of roughly 1,000 units to private buyers that will agree to a long-term continuation of HSJ’s operational and sustainability management. HSJ is committing to the protection and restoration of up to 27,000 hectares of tropical forest within this expansion area, conserving all forest areas under its (future) management. In addition, HSJ will set aside an equal number of hectares of savannah as natural restoration areas, buffering the conservation forest.
HSJ will catalyze the development of the cattle sector in Colombia by expanding its sustainable intensification model, protecting and restoring forest, and fostering social inclusion and knowledge sharing.
REGENERATIVE AGRICULTURE
&Green invests in projects that approach land management from a regenerative agriculture perspective. Regenerative agriculture broadly refers to the adoption of production practices that understand the availability of the land’s natural resources, increase biodiversity, prioritize soil health and fertility, sequester carbon, and reduce or eliminate the use of pesticides. The principle behind regenerative agriculture is to protect and restore ecosystems’ health, instead of depleting it, therefore contributing to combating climate change, which aligns well with &Green’s vision to transform tropical commodity supply chains.
HSJ’s production blueprint is a great example of how regenerative agriculture practices can be adopted in &Green’s investments:
Extensive cattle ranching is a major driver of deforestation in Colombia, and is characterized by unsustainable land management practices, including seasonal burning of grasslands to remove unpalatable dry season forage and to “green up” pastures with the onset of the monsoons. Operations on HSJ’s farm used to be conducted on savannas that had been subject to many decades of human-induced changes; evidence from satellite images indicated that the majority of the farm showed degradation of the landscape and biodiversity loss.
HSJ’s Landscape Protection Plan, targets, developed together with &Green, include:
Low-impact grazing regime: Livestock is regularly moved from one plot to another to avoid overgrazing and provide adequate resting time for regeneration of the pastures. The high-productivity pastures therefore require no artificial inputs (e.g. fertilizers, pesticides);
Zero-Fire Policy: HSJ adopts an active zero-fire policy on its farms to restore the severely degraded soils in the region and prevent loss of nutrients and (microbial) soil life. Outside HSJ’s direct management areas, the fire risk will be mitigated through awareness raising, training, and support of fire-free production models;
Forest and savannah conservation: all natural forest areas are protected from livestock and wildfires through long-term conservation management plans. Buffer zones are set up around the forests where forest can re-grow, soil can restore, and savannah can develop naturally without being stunted by wildfires;
Emissions removal and avoidance: achieved through enhanced fire suppression, increased soil sequestration through soil restoration, sustainable intensification, and no-deforestation.
See how regenerative agriculture practices were adopted on Roncador’s farm:
HOW &GREEN’S TECHNICAL ASSISTANCE WAS USED IN THE HSJ TRANSACTION
To improve the prospects of achieving the Facility’s objectives, &Green has established a dedicated Technical Assistance (TA) budget to support its (prospective) clients in reaching the ESMS ‘s standards of &Green, which are required to qualify for financing.
Using the TA budget, &Green supported HSJ with the design of its Land Acquisition Tool (LAT), which was developed in a collaboration with Climate Focus, GANSO, and AMPLO. GANSO is a partnership between Climate Focus and the International Center for Tropical Agriculture (CIAT), created to transform areas with degraded pastures and soils into green, productive, and sustainable landscapes. Amongst other initiatives, they also developed the Aval GANSO standard for sustainable cattle management. AMPLO is a Colombian ESG consultancy, which developed the social component of the LAT and carried out a social risk assessment and stakeholder mapping exercise.
The LAT is designed to guide HSJ in its land acquisition processes. The tool merges the IFC PS , Aval GANSO requirements, and additional social safeguards, such as a screening for links to armed groups, in a comprehensive checklist. The checks are divided in an initial GO/NO GO quick screen, which is desktop-based and requires minimal resources, and a more thorough investment evaluation process. The latter requires site visits, including stakeholder consultations, and results in a cost/benefit analysis that helps inform HSJ’s acquisition decision. HSJ will integrate the tool in its existing systems, covering operational, financial, and legal checks.
LOOKING FORWARD TO 2022
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