FMO nears first investment from £150m forestry fund

The Dutch development bank was entrusted with the capital by the UK government and will be allocated across three to five funds operating in tropical forest regions.

Dutch development bank FMO expects to deploy capital from a £150 million ($209 million; €173 million) Mobilising Finance for Forests program “within the next few months,” a spokesperson told Agri Investor.

The funds were wholly provided by the UK government and will be deployed using a blended finance approach across funds seeking to combat deforestation across tropical landscapes, as well as the associated greenhouse gas emissions and land degradation that results from unsustainable land use.

FMO will “provide blended structures to any fund that is fund raising,” the spokesperson added, with a view to attracting commercial capital through the reduced risk approach.

The development bank has a five-year investment period and will allocate the £150 million sum across three to five funds, as well as direct clients operating in tropical forest regions in Africa, Asia and Latin America.

“The MFF program will invest in two types of projects that are key to reducing deforestation in tropical forest landscapes. On the one hand, we will be investing in business plans that create value from standing forests. On the other hand we will invest in business that integrate forest protection and restoration into agricultural production,” said the spokesperson.

FMO has not identified a range for the return rates that a fund must have realistically targeted before allocating capital “as long as the long-term commercial viability is attainable, given that there is a need to attract commercial capital into the specified sectors.”

The bank hopes to attracted institutional investors, banks, corporates, DFIs and endowments to any vehicles it supports.

“It is exciting for us to partner with the UK government to accelerate the development of the Forestry and Sustainable Land Use sectors in developing countries,” FMO CEO Linda Broekhuizen said in a statement.

“The Mobilising Finance for Forests program will help safeguard our planet’s precious biodiversity whilst creating green jobs and supporting global efforts to build back greener,” Broekhuizen added.