$300m LDN vehicle makes debut investment after first close

Mirova’s UN-backed Land Degradation Neutrality Fund has made its debut investment after reaching a first close on $100 million at the end of 2018.

The fund, which has a $300 million target, is backing a program to restore 9,000 hectares of degraded land in Peru, with a $12 million investment, and two more projects in Asia and Africa are imminent.

“A final close is expected in December 2019, with a potential extension of six months”, Gautier Quéru, the vehicle’s investment director from French manager Mirova, told Agri Investor. Mirova is Natixis’ sustainable investment division.

Of the $100 million committed to the fund, Quéru said $60 million is available for investment immediately, adding that he hoped to see fundraising accelerate in 2019.

Anchor investors are the European Investment Bank, with $50 million invested [ senior investment of $45 million and junior investment of €5 million], and the Agence Française de Développement, the French Development Agency. They are joined by: institutional investors insurance companies BNP Paribas Cardif and Garance; and Natixis Investment Managers. The initiative is also backed by de-risking partners including the government of Luxembourg, IDB Invest and the Global Environment Facility, the United Nations said.

“The fund’s 15-year tenure will blend senior debt, junior debt and equity, the latter capped at 30 percent of the fund, to provide long-term financing and technical assistance to sustainable land management project developers”, Quéru added. Dutch firm IDH will manage the fund’s , which will help maximize the positive impact of funded projects, balance the project portfolio, and implement a framework to measure the projects contribution to reducing land degradation, Mirova said in a statement. This became fully operational on 15 January, when the Agence Française de Développement signed off on a first €3 million contribution.

The investment announced this week in the Urapi Sustainable Land Use program, developed by Canadian project developer ECOTIERRA, aims to reforest degraded land in Peru into productive agroforestry systems, cut carbon dioxide emissions by 1.3 million metric tons and improve the livelihoods of 2,400 coffee producers, the European Investment Bank said.

Quéru said a mixture of coffee trees and standard trees will be replanted, funded by long-term loans to local co-operatives who suffer limited access to finance.

Of the 150 potential projects examined, he plans to invest in at least another two projects this year. “Promising projects include the restoration of degraded orchards in South Asia and agro forestry projects in East Africa, with the aim of having a total of 10 to 15 projects,” Quéru said.

“Investor regions targeted by the fund include Europe, Canada, Asia and Latin America. As of now, the fund is not distributed in the US”, he added.

The LDN fund aims to support the sustainable management of 500,000 hectares of land, cut carbon dioxide emissions by 35 million tons and create jobs for over 100,000 people, focusing on Africa and Asia, the EIB said. It is deemed to be the first investment vehicle of its kind leveraging public money to raise private capital for sustainable land projects, while meeting Sustainable Development Goal targets.

Quéru said he believes similar funds are being replicated in this space, which was a key objective.