FMO launches forestry investment program to fight climate change

The ambitious project by the Dutch development bank will operate in West Africa and South East Asia.

An ambitious forestry investment program has been launched in Ghana, Sierra Leone and Laos by Dutch development bank FMO to tackle climate change, with further ambition to extend it to Latin America.

“Investing in forestry creates a high-level impact, mainly in the mitigation of global climate change through carbon sequestration,” said Steven Duyverman, agri business, food and water manager at impact investor FMO. It makes a significant contribution to local development by creating employment where no other job opportunities exist, he added.

As part of the high-risk venture, FMO will provide $10 million in mezzanine debt to forestry plantation company Miro Forestry Developments – increasing the area in Ghana and Sierra Leone from 10,000 hectares to 19,000ha. The impact investor will also extend a $10 million loan in Laos to Swedish-owned agroforestry plantation and processing company Burapha to increase the plantation base from 3,500ha to 7,000ha and build a plywood mill.

The investment, which will be expanded annually, is aimed at strengthening the global response to climate change outlined in the Paris agreement and supporting the UN’s sustainable development goals.

The Dutch company expects a return of between 8 and 12 percent on its investments, which it plans to increase to €60 million over three years. Long-term capital is vital to the scheme as it takes seven to 10 years for trees to grow, FMO explained. Very high-risk areas have been chosen for the program, which could be extended to include Argentina and Colombia next year. Other investors include development financier Finnfund, French financial development institution Proparco and UK financial institution CDC Group.