The UK government and its delivery partner Dutch development bank FMO is lining up its second investment as part of its Mobilising Finance for Forests (MFF) initiative to ramp up investment in the protection and preservation of tropical forests.
The MFF’s first investment of $33.25m (€32.5m) was awarded to Andgreen Fund (&Green). It comprised a $31.5m (€30.8m) investment facility and a $1.75m (€1.71m) development capital facility. The Norwegian government was an anchor investor.
The MFF was set up in 2021 with a £150m (€178m) investment from the UK government. Its aim is to help protect rainforests equivalent to an area the size of Wales, cut millions of tonnes of carbon emissions and improve the lives of more than 600,000 people in tropical forest communities across Africa, Asia and Latin America that are vulnerable to climate change.
The MFF is structured as a fund of funds and aims to leverage up to £850m (€1bn) of private sector investment for the initiative.
MFF is working to finalise a second investment in US-based Timberland Investment Group (TIG) by the end of 2022. The fund invests in the entire value chain. It is targeting a fundraising of $1bn over five years to deliver climate, social and environmental benefits from large scale forest protection, restoration and commercial tree planting projects with a view to delivering financial returns.
TIG’s collaboration with MFF will focus on Brazil and Columbia to restore degraded cattle grazing land to forestry and to help build a sustainable timber industry.
FMO’s fund manager and MFF portfolio manager Floor van Oppen said: “We think we can be most effective by supporting a limited amount of funds with sufficient resources on a long-term basis.
“It is essential that [the funds we support] have the capital to support the transition of companies working in sectors like palm oil, soy, livestock, rubber and plantation forestry. Here, the MFF money can play an important role.”
She added that for the project to be a success, it was “vital to prove that financing inclusive, sustainable and deforestation-free commodity production can be commercially viable and replicable”.