Over two dozen investment funds are making investments in tropical forest conservation and in local communities. The investment funds have at least $2.6 billion in the capital for the purpose of investing in firms and in projects designed to generate revenue from tropical forestry and agriculture.
The investments are expected to benefit smallholder farmers and forest-dependent communities.
According to an analysis from ISF Advisors, many commercial investors are hesitant to participate in efforts to combat deforestation, incentivize conservation, and improve livelihoods. The reason for this is concern about the risks.
Produce approaches to allay concerns
For example, newer funds like &Green, AGRI3, and Farmfit are working to attract capital by structuring funds as co-investments, or by taking junior positions.
And Terra Silva, a fund of funds worth $90 million, is working to help eight to 10 investment fund managers prove that it is possible to invest profitably in sustainable tropical forests. Supported by the Packard and MacArthur foundations, Terra Silva’s goal, in fact, is to “build a new asset class where none currently exists.”
Sustainability as Priority
Agriculture-focused funds, such as IDH’s Farmfit, target cooperatives and agribusinesses that source from tropical forest-adjacent farmers. The priority is ensuring that these efforts support sustainable enterprises.
New Forests company
As a case in point, New Forests’ Tropical Asia Forest Fund invests in companies that source timber sustainably.
Other funds, such as Moringa, focus on agribusinesses that grow non-timber products in tropical forests.
Securing sustainable supply chains
Securing sustainable supply chains is a key priority for many companies looking to invest in tropical forest funds. Michelin has sponsored The Tropical Landscapes Finance Facility managed by ADM Capital, while Danone, Mars, and other French companies have created the Livelihoods Carbon Fund and Livelihoods Fund for Family Farming.
The struggles for sustainability in agriculture
Small-holder farmers in tropical communities in the Global South are at the frontline in the struggle for sustainability in agriculture. A case in point is the Fair Trade movement, which is vital for combating climate change as well as curbing socially harmful and commercially exploitative relations.
The efforts of major investment funds to support sustainability in the tropical communities of the Global South may go a long way toward creating a more ecologically and socially sustainable future.