Letter from the Program Manager

Dear Reader,

FMO is excited to present the third half year report of Mobilising Finance for Forests (MFF). The  programme was officially launched in February of 2021 with a £150 million commitment from the UK Government. In 2023, the programme was expanded to £152 million. The additional £2 million commitment from the UK will finance the programme’s Evaluation Framework, which consists of Programme Evaluations as well as Scoping and Thematic Studies.

Much of the first half of 2024 has been spent on executing the pipeline developed in 2024. Out of the pipeline, in the first quarter of 2024 two Repayable Development Contributions (DC) have been contracted, and in August a Fund Investment has been committed, for a total of USD 41.4 mln. One DC was provided to Amazonia Nativa (USD 0.9 mln), a newly established agroforestry Colombian company that will be afforesting degraded land with a mix of native timber species and acai palms. The DC will be used to demonstrate that Amazonia Nativa’s pilot project can be scaled. FMO was able to bring another DFI, IFU – the Danish Development Bank, into this deal as a co-financier of the pilot phase alongside MFF. The project would be the first time FMO finances planting (a mix of) native tree species for timber, which is seen as an important trend in the forestry industry for the protection and enhancement of biodiversity. By financing this type of project with a DC, MFF aims to pave the way for further investment at scale in native species plantations by FMO and others in the near future. The second DC is provided to Terrasos, through EcoEnterprises Fund (USD 0.5 mln). The DC serves as bridge financing, allowing EcoEnterprises to warehouse Terrasos ahead of the first close of Fund IV. Terrasos is a Colombian company that creates Habitat Banks to supply biodiversity credits to the Colombian compliance market. The DC will be used to create new streams of revenues next to Habitat Banks (i.e. non timber forest product and eco-tourism), and to explore potential expansion to the voluntary biodiversity credit market and of their consulting operations. Most recently, MFF committed USD 40 mln equity into The Reforestation Fund (TRF). This is one of MFF’s largest and most catalytic investments to date. TRF is active in Brazil and combines commercial plantation in degraded land with reforestation and conservation.

These are exciting developments that put MFF well on track with its annual output targets and impact ambitions. All three projects have high impact potential, and aim to protect and restore valuable threatened ecosystems, including forested areas. They also contribute to diversifying the MFF portfolio in line with the new FMO Forestry strategy.

The first half of 2024 has also been marked by successful knowledge building activities. Highlights in the first half of the year for the TA Facility include development and publication of the ‘ESG Guide for Forestry Investments’ knowledge product. This comprehensive reference guide is designed to build the capacity of investors in the tropical forestry sector on ESG matters. The guide equips investors with what they need to understand and investigate to help them to accurately assess and support forestry investments, with the ultimate aim of scaling up the deployment of capital to this sector. The TA facility is also close to finalizing a detailed report on the Natural Forest Management sector, which outlines how the sector can operate in alignment with the IFC Performance Standards (IFC PS) for environmental and social (E&S) risk management. IFC PS alignment is seen as a key pre-requisite for DFIs and other impact investors to be able to invest in a sector, so the report hope to help open up this high impact sector for a broader group of investors, whilst also driving the highest E&S standards across the industry. Last but not least, in April FMO organized a knowledge building trip on plantation forestry in Ghana and South Africa. The trip allowed FMO experts to engage with local stakeholders as well as companies with long-term experience in the sector. A presentation is being organized to share learnings with different teams within the UK government in the coming months.

 

We look forward to further developing the programme throughout the rest of 2024.

 

In the next section we present the following unaudited financials:

  • Statement of Financial Position

  • Statement of Comprehensive Income

  • Statement of Cash Flows