Agri3, a Blended Finance Initiative to Support the Transition to Sustainable Agriculture
On January 23, at the World Economic Forum (WEF) in Davos, the Dutch government and Rabobank announced they would be the first investors in the Agri3 initiative, a blended finance fund intended to channel commercial bank finance towards projects that support the transition to more sustainable agricultural practices and forest protection. Mirova Natural Capital will be the lead Investment Adviser to this innovative initiative aiming at unlocking at least USD 1 billion in finance towards deforestation-free, sustainable agriculture and land use.
Food for thoughts: the challenges of agriculture
Our current agricultural system is severely affecting the environment. Agriculture is the most important driver of biodiversity loss: it accounts for a large part of the 12 million hectares of rainforests disappearing annually1, and is linked to 80% of the threats of mammals and birds extinctions2. Agriculture also plays a significant role in climate change, accounting for a quarter of global greenhouse gas emissions3: more than cars and planes combined.
However, the pressure on land use is only expected to increase, with the global population estimated to grow from 7 to 9.8 billion people between 2010 and 2050, accompanied by an expansion in food demand by more than 50% by 20504.
There is therefore an urgent need to transition to more sustainable ways to feed the world, starting with a large-scale transformation of agricultural practices.
The agriculture transition: mind the financing gap
The transition to a more sustainable and climate-smart agricultural system that can meet future demand without exacerbating environmental degradation and climate change has become an urgent priority. Such a largescale transformation of agricultural production systems however requires significant amounts of financing. Some public financing as well as a small amount of private investment is already dedicated to such a transition, however this remains far below what is needed to achieve a systemic transformation.
There are a number of barriers that currently impede the deployment of private investment at scale into sustainable agricultural production. The transition to new modes of production can involve large investments, long timescales, and significant capacity building, which imply risk levels that are beyond what private capital providers are comfortable with. This leads to the agricultural sector lacking access to finance, leaving farmers, in particular, clearly underserved.
Agri3: an initiative to unlock the power of commercial banks
Because of bank regulations and prudency, commercial banks worldwide are limited in their ability to finance sustainable and innovative agricultural solutions. The AGRI3 initiative was created by UN Environment Programme and Rabobank, together with partners IDH Sustainable Trade Initiative and the Dutch development bank FMO to support the transition to sustainable agriculture and bridge the financing gap.
The initiative will act as a blended finance vehicle aiming at unlocking at least USD 1 billion in finance towards deforestation-free, sustainable agriculture and land use. It will provide additional de-risking financial instruments and grants for technical assistance for food value chain actors and, particularly, farmers. These instruments will be available to financial banking partners and their clients to support de-risking loans and investments they plan to make in the agriculture supply chains. It is intended that these investments will serve as proof of concept to the wider community of banks, other financial institutions and value chain partners, with the aim to ultimately mainstream such sustainable practices across the agricultural and financial value chains.
The AGRI3 initiative will finance projects leading to at least one of the two following main impacts: (i) forest protection and reforestation and (ii) transition to more sustainable land use practices. They will always contribute to the third, (iii) improved rural livelihoods. Ultimate beneficiaries or target group will be the farmers, either large or small. Positive impacts will be measured based on a comprehensive Environmental and Social (‘E&S’) framework developed closely with the UNEP.
Aside from the AGRI3 vehicle, a separate Technical Assistance (TA) Facility will also be set up to enhance transition towards sustainable land use through support of deals and investees of the initiative. The TA facility will also be used to ensure the scaling-up of innovation in sustainable agriculture practices to other farmers.
What is the role of Mirova in Agri3?
Mirova Natural Capital will be the lead investment advisor to the vehicle, in partnership with Investment Advisers FOUNT and Cardano development. A pioneer in natural capital investment, Mirova Natural Capital and its parent company Mirova currently manage 400 million dollars’ worth of investments within this theme and intends to reach one billion euros worth of investments in nature-related projects by 2022. They already manage strategies supporting sustainable land and ocean management projects and has begun to deploy capital to support high-impact projects throughout the world.
Who are the investors of the Agri3 initiative?
INVESTORS
The mission of AGRI3 initiative is to mobilise additional public and private capital at scale, including commercial banks, development finance institutions (DFIs), impact investors and institutional investors.
The announcement made at the World Economic Forum came from the first two cornerstone investors– totalling an initial commitment of USD 80 million. The Dutch Ministry of Foreign Affairs announced that it will become an anchor public investor in the AGRI3 project by contributing USD 40 million – an amount matched by Rabobank. Together these contributions will support risk mitigation instruments that will help to mobilize commercial finance, and which can be used to finance sustainable agriculture and accelerate forest protection.
For further reading:
The investment strategy of the ‘Agri 3’ initiative is reserved for professional investors and is mainly subject to risk of capital loss.
1 WRI, 2019
2 Lancet, 2019
3 IPCC, 2018
4 WRI, 2018
Mirova Natural Capital Limited
UK Private limited company
Company registration number: 07740692
Regulated by FCA
18 St. Swithin’s Lane
London EC4N 8AD
www.althelia.com
Mirova Natural Capital Limited is authorised and regulated by the Financial Conduct Authority ("FCA") with registration number 800963. Mirova Natural Capital Limited is incorporated in the UK and the registered office is at 18 St. Swithin’s Lane, London, EC4N 8AD. The services of Mirova Natural Capital Limited are only available to professional clients and eligible counterparties. They are not available to retail clients.
Mirova
Portfolio management company - French Public Limited liability company
Regulated by AMF under n°GP 02-014
RCS Paris n°394 648 216
Registered Office: 59, Avenue Pierre Mendes France – 75013 – Paris
Mirova is an affiliate of Natixis Investment Managers.
www.mirova.com
Natixis Investment Managers
Portfolio management company - French Public Limited liability company
RCS Paris n°453 952 681
Registered Office: 43, Avenue Pierre Mendes France – 75013 – Paris
Natixis Investment Managers is a subsidiary of Natixis.
www.im.natixis.com
This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material
Food for thoughts: the challenges of agriculture
Our current agricultural system is severely affecting the environment. Agriculture is the most important driver of biodiversity loss: it accounts for a large part of the 12 million hectares of rainforests disappearing annually1, and is linked to 80% of the threats of mammals and birds extinctions2. Agriculture also plays a significant role in climate change, accounting for a quarter of global greenhouse gas emissions3: more than cars and planes combined.
However, the pressure on land use is only expected to increase, with the global population estimated to grow from 7 to 9.8 billion people between 2010 and 2050, accompanied by an expansion in food demand by more than 50% by 20504.
There is therefore an urgent need to transition to more sustainable ways to feed the world, starting with a large-scale transformation of agricultural practices.
The agriculture transition: mind the financing gap
The transition to a more sustainable and climate-smart agricultural system that can meet future demand without exacerbating environmental degradation and climate change has become an urgent priority. Such a largescale transformation of agricultural production systems however requires significant amounts of financing. Some public financing as well as a small amount of private investment is already dedicated to such a transition, however this remains far below what is needed to achieve a systemic transformation.
There are a number of barriers that currently impede the deployment of private investment at scale into sustainable agricultural production. The transition to new modes of production can involve large investments, long timescales, and significant capacity building, which imply risk levels that are beyond what private capital providers are comfortable with. This leads to the agricultural sector lacking access to finance, leaving farmers, in particular, clearly underserved.
Agri3: an initiative to unlock the power of commercial banks
Because of bank regulations and prudency, commercial banks worldwide are limited in their ability to finance sustainable and innovative agricultural solutions. The AGRI3 initiative was created by UN Environment Programme and Rabobank, together with partners IDH Sustainable Trade Initiative and the Dutch development bank FMO to support the transition to sustainable agriculture and bridge the financing gap.
The initiative will act as a blended finance vehicle aiming at unlocking at least USD 1 billion in finance towards deforestation-free, sustainable agriculture and land use. It will provide additional de-risking financial instruments and grants for technical assistance for food value chain actors and, particularly, farmers. These instruments will be available to financial banking partners and their clients to support de-risking loans and investments they plan to make in the agriculture supply chains. It is intended that these investments will serve as proof of concept to the wider community of banks, other financial institutions and value chain partners, with the aim to ultimately mainstream such sustainable practices across the agricultural and financial value chains.
The AGRI3 initiative will finance projects leading to at least one of the two following main impacts: (i) forest protection and reforestation and (ii) transition to more sustainable land use practices. They will always contribute to the third, (iii) improved rural livelihoods. Ultimate beneficiaries or target group will be the farmers, either large or small. Positive impacts will be measured based on a comprehensive Environmental and Social (‘E&S’) framework developed closely with the UNEP.
Aside from the AGRI3 vehicle, a separate Technical Assistance (TA) Facility will also be set up to enhance transition towards sustainable land use through support of deals and investees of the initiative. The TA facility will also be used to ensure the scaling-up of innovation in sustainable agriculture practices to other farmers.
What is the role of Mirova in Agri3?
Mirova Natural Capital will be the lead investment advisor to the vehicle, in partnership with Investment Advisers FOUNT and Cardano development. A pioneer in natural capital investment, Mirova Natural Capital and its parent company Mirova currently manage 400 million dollars’ worth of investments within this theme and intends to reach one billion euros worth of investments in nature-related projects by 2022. They already manage strategies supporting sustainable land and ocean management projects and has begun to deploy capital to support high-impact projects throughout the world.
Who are the investors of the Agri3 initiative?
INVESTORS
The mission of AGRI3 initiative is to mobilise additional public and private capital at scale, including commercial banks, development finance institutions (DFIs), impact investors and institutional investors.
The announcement made at the World Economic Forum came from the first two cornerstone investors– totalling an initial commitment of USD 80 million. The Dutch Ministry of Foreign Affairs announced that it will become an anchor public investor in the AGRI3 project by contributing USD 40 million – an amount matched by Rabobank. Together these contributions will support risk mitigation instruments that will help to mobilize commercial finance, and which can be used to finance sustainable agriculture and accelerate forest protection.
For further reading:
- First Investment and First Strategic Board Meeting for the LDN Fund
- Sustainable risk-adjusted returns, through sustainable land use and natural capital
- Finance Can and Must Play its Role in Fighting Land Degradation
- Acquisition of Althelia Ecosphere
- What is Natural Capital (VIDEO)?
1 WRI, 2019
2 Lancet, 2019
3 IPCC, 2018
4 WRI, 2018
Mirova Natural Capital Limited
UK Private limited company
Company registration number: 07740692
Regulated by FCA
18 St. Swithin’s Lane
London EC4N 8AD
www.althelia.com
Mirova Natural Capital Limited is authorised and regulated by the Financial Conduct Authority ("FCA") with registration number 800963. Mirova Natural Capital Limited is incorporated in the UK and the registered office is at 18 St. Swithin’s Lane, London, EC4N 8AD. The services of Mirova Natural Capital Limited are only available to professional clients and eligible counterparties. They are not available to retail clients.
Mirova
Portfolio management company - French Public Limited liability company
Regulated by AMF under n°GP 02-014
RCS Paris n°394 648 216
Registered Office: 59, Avenue Pierre Mendes France – 75013 – Paris
Mirova is an affiliate of Natixis Investment Managers.
www.mirova.com
Natixis Investment Managers
Portfolio management company - French Public Limited liability company
RCS Paris n°453 952 681
Registered Office: 43, Avenue Pierre Mendes France – 75013 – Paris
Natixis Investment Managers is a subsidiary of Natixis.
www.im.natixis.com
This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material