Project detail - AFRICA FORESTRY FUND II LIMITED

AFRICA FORESTRY FUND II LIMITED

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Who is our client

The Africa Sustainable Forestry Fund II (ASFF II) is a private equity fund that seeks to continue the strategy as implemented by ASFF I i.e. acquiring/developing attractive assets across the forestry value chain in Africa, from plantations to industrial operations. Key objectives of ASFF II are to produce high-value building materials that are currently imported and to implement tailor-made biomass energy solutions. ASFF II will capitalise on the investment team’s experience, network and platform to acquire and improve the management of FSC certified plantation assets and develop downstream manufacturing operations to produce forest products needed to meet demand driven by increased urbanisation and accelerating economic growth in Africa.

Funding objective

FMO intends to fund this investment as part of this strategic effort to reach its own GHG goals while realising an acceptable risk-return level. It has been well documented that investing in (commercial) forestry and forestry related activities contributes significantly - and most efficiently - to the GHG targets. Also, forestry generates more than average (rural) employment than other productive industries.

Why we fund this project

The projected investment cost relative to the projected average annual carbon sequestration/offset is lower for forestry and biomass steam investments than for the majority of CDM project types. FMO in its recently launched Strategy 2025 has prioritised (amongst others) to further develop the knowledge in forestry and selectively invest in this sector in view of the SDG’s selected to which forestry contributes significantly (8 and 13: job creation and CO2 sequestration).

Environmental and social rationale

ASFF II is scored Cat. A under the assumption that 1/3 of the portfolio (may) consist of large scale agriculture (forestry) projects alongside the two other focus area’s wood product manufacturing and biomass-to-energy. The Category A or “high risk” profile of the Fund is related to projects of potential expansion of plantations the Fund might invest in. In those cases risks related to land rights are sensitive and should be thoroughly investigated and mitigated. For forestry projects in general, topics like Occupational Health and Safety, Stakeholder Engagement and Community Development should have high priority. ASFF II’s Environmental and Social Management System (ESMS) has proven strong and effective in managing these and other topics in past investments. An ESMS can never be static and should develop continuously: FMO will play a supporting role in doing so. The fact that all investments will be FSC certified and will be compliant with IFC PS, provides FMO with additional comfort that environmental and social risks will be well managed.

More investments

Date Total FMO financing
12/21/2017 USD 10.00 MLN
Region
Africa
Country
Africa
Sector
Agribusiness, Food & Water
Signing date
12/21/2017
Total FMO financing
USD 10.00 MLN
Fund
FMO
Risk categorization on environmental and social impacts, A = high risk, B+ = medium high risk, B = medium risk, C = low risk Environmental & Social Category
(A, B+, B or C)
A