Project detail - ARBARO FUND SLP

ARBARO FUND SLP

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Who is our client

Arbaro Fund provides effective climate change mitigation outcomes through investing in sustainable plantation forestry projects in emerging forestry markets of Latin America and Sub Saharan Africa, while also bringing adaptation co-benefits. This investment approach provides developing countries and their rural communities with a solution to increase carbon sinks by producing wood in a sustainable manner and conserving natural forests, whilst contributing to reduction of illegal logging.

Funding objective

The Arbaro Fund will identify and execute projects, focused on sustainable timber production based on the establishment of Greenfield projects and on the expansion, upscaling and technical improvement of Brownfield projects. Arbaro’s average investment size will be between USD 10 to 25 million per project, with a final portfolio of 8 to 12 underlying investments / portfolio companies. In Latin America, initially Arbaro contemplated investments in Ecuador, Paraguay and Peru; in Sub-Saharan Africa in Ethiopia, Ghana, Sierra Leone and Uganda.

Why we fund this project

FMO identified forestry as a key sector to invest in in order to be able to achieve the 2050 mission and align its portfolio with a 1.5˚C pathway. FMO believes that sustainable forestry is a forestry operation that is economically viable, environmentally sound and socially beneficial. Forestry plantations managed in a sustainable way can provide a sustainable supply of wood, alongside positive environmental and social impacts. For FMO, wood plays a vital role in the decarbonisation of the economy, and the fact that there is an increased global demand of wood means that sustainable forestry, including plantation forestry, is essential to achieve a decarbonised economy, and protect existing forests. Arbaro focuses on the sustainable forestry sector in emerging markets while their policies and procedures and their approach towards E&S topics are well aligned with FMO’s requirements and investment strategy. On this basis FMO has the intention to invest in the Arbaro Fund.

Environmental and social rationale

Arbaro potentially invests in higher risk (cat A) forestry projects. The fund manager has good systems and processes in place to address and mitigate environmental and social (E&S) impacts, and experienced staff to execute and monitor these policies and procedures. Additionally, Arbaro makes uses of external independent E&S consultants to advise and support the fund on complex E&S topics.

Region
Latin America & The Caribbean
Country
Latin America & The Caribbean
Sector
Agribusiness, Food & Water
Signing date
10/29/2020
Total FMO financing
USD 8.00 MLN
Fund
Building Prospects
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