Terra Global Capital raising $100m anti-deforestation fund – exclusive

The fund has a dual stream revenue strategy consisting of investments in forest-linked agri crops and carbon credits from deforestation.

Terra Global Capital is raising $100 million for its Terra Bella Fund, the firm’s first private equity fund that provides early-stage capital to smallholders to reduce deforestation in developing countries, according to Leslie Durschinger, the fund’s chief investment officer.

Terra Bella is expecting an initial close by the end of the year at $50 million and expects to double that amount at final close, which is likely to happen within the next two years, Durschinger told Agri Investor. Durschinger said the fund has raised a bit over $25 million to date and it will take three years from final close to fully invest the capital.

The targeted investor base is “a combination of institutional investors who have a track record in and desire to invest in private equity and are eager or will be able to be out on the risk curve in developing countries’ agriculture and climate change mitigation, where the fund will make its investments,” Durschinger said.

Besides pension funds and endowments the fund is also targeting impact investors: “There is not only a huge environmental component of the investment, but there are also social benefits generated through fund investments.” The fund’s investment range is $1 million to $10 million per project.

It will derive revenue from the equity and debt investments it makes in forest-linked agricultural crops but also from the carbon credits it will get from reducing deforestation and sustainable cultivation. The fund’s main income stream will come from its crops investments, with the income from emission reductions functioning as an add-on.

“The investments we make in smallholder agriculture will provide communities with income streams and reduce greenhouse gas emission reductions. The greenhouse benefits are quantified and audited by a certified third party. The emission reductions can then be sold into the emerging carbon markets,” Durschinger explained.

Terra plans to invest in five to 10 projects with the funding from the first closing, then up to 30 projects throughout the fund’s life. Terra Bella Fund has a traditional PE fund structure, with a term of 12 years and re-investment taking place up to year eight.

Some of the high value crops in which the fund will invest in include coffee, cocoa, tree nuts, shea, “super foods”, non-timber forest products and natural rubber.

The fund’s “mission” to reduce emissions resulting from deforestation comes from Terra spotting it as an under-represented sector. According to the fund manager, forest and agriculture emission reduction account for only 1 percent of market, compared to the 19 percent contribution that deforestation and agricultural emission make to global climate change.

Investments will be made in a wide range of geographies include Africa, South East Asia, Latin and South America.

Founded in 2006, San Francisco-based Terra Global focuses on forest and agriculture greenhouse gas emissions analytics, advice and finance.