Project detail - MGM SUSTAINABLE ENERGY ONTARIO PARA

Who is our client

MSEF II is managed by MGM Innova and is established for the purpose of investing in a diversified portfolio of Energy Efficiency and Renewable Energy projects in Latin America. MSEFII (“the Fund”) will follow-up on the work of its predecessor fund, MSEF I, and build on its experience, infrastructure and network in the region. The anticipated Fund size will be USD 150mln; FMO will invest ca. USD 15mln in the Fund.

Funding objective

The Fund’s investment strategy is twofold. Firstly, it will invest ca. 65% of its capital in Energy Efficiency projects: the returns of these investments are driven by energy savings. These projects are mainly focussed on the commercial & industrial sector: energy saving at hotels, industries, large buildings (warehouses, supermarkets etc.). Second, it will invest ca. 35% of its capital in Renewable Energy projects, like solar PV, wind and small-scale hydro projects. Just like the Energy Efficiency projects, the Renewable Energy projects are located in Latin America, in amongst others, Columbia, Costa Rica, Panama, Mexico etc.

Why we fund this project

There is a scarcity of equity funding for the relatively small-scale Energy Efficiency projects that MSEF II aims for. FMO’s commitment will help MSEF II building out its unique approach to investing in Energy Efficiency in the commercial & industrial sector. The Fund’s investments are expected to reduce energy consumption and greenhouse gas (GHG) emissions, improve energy security, and create jobs and business opportunities for small and medium-sized enterprises (SMEs).

Environmental and social rationale

The Environmental and Social (E&S) risk categorization is Category A, mainly because the Fund intends to invest in one or a limited number of greenfield, small scale hydro projects. PS 1-4 are likely to be triggered, potentially PS 6 and 8, while no resettlement (PS 5) is inflicted by any of these projects. We are of the opinion these projects have an above average environmental and social impact. The E&S management system of the fund, which is considered adequate at this point, will be further improved and amended while the E&S management capacity will be expanded. To this end, FMO will support this process with technical assistance and capacity building, together with its co-investors. This will involve the engagement of qualified experts to coach the team and to enhance environmental studies, community engagement and environmental, health & safety and labor conditions management.