The Land Degradation Neutrality Fund is now more than one-third of the way towards its target after collecting around $120 million in investor pledges.
The UN-backed vehicle, officially launched in September at the COP13 in China, has a $300 million fundraising target. It is managed by Mirova, the sustainable investment unit of France’s Natixis.
LDN’s LP base at first close includes public-sector and multilateral institutions but also private investors, the fund said. These include the European Investment Bank, Agence Française de Développement, Fondaction, a Quebec pension, Fondation de France, BNP Paribas Cardif and French mutual insurer Garance.
Several “de-risking partners” are also backing the fund, including the Government of Luxembourg, IDB Invest and the Global Environment Facility.
The vehicle is expected to start deploying capital in Q2 of this year. In its pipeline are a shade-grown coffee program in tandem with local cooperatives of smallholders in northern Peru, and a sustainable rubber tree plantation in Indonesia.
Tailored for private backers
The fund has a 15-year tenure, the result of a compromise between a tenure in tune with the biological cycle of underlying assets and the need to reassure potential investors, especially those of the private kind. Last autumn, Gautier Quéru, the fund’s investment director and project manager, said a 20-year tenure could have proved a stumbling block for fundraising.
LDN’s fee structure, resembling that of typical renewable energy and infrastructure vehicles, includes a management fee and performance-linked compensation. It will also follow similar return benchmarks.
The fund will mix senior debt, junior debt and equity, the latter being capped at 30 percent of the fund. LDN will have a global remit; with a minimum 80 percent of its dry powder allocated to developing countries.
“The objective of this fund is to prove the concept, so that other similar initiatives can be launched in the natural capital sector,” Quéru told Agri Investor in September. “Its approach and structure are meant to be replicated,”
We wrote a full profile of the LDN Fund upon its launch last year. You can read it here