Blended finance approach required to entice private investors as importance of land use in tackling biodiversity, climate crisis “becoming clear”.
Mirova’s second sustainable land management-dedicated strategy will increase its focus on the social impacts of land investments, while learning lessons from its predecessor as nature-based solutions continue to grow in prevalence.
The newly launched Mirova Sustainable Land Fund 2 (MSLF2) has the goal of raising €350 million (US$377.8 million) over a four-to-five year period from public bodies and institutional investors. It will invest in agroforestry, sustainable forestry, and regenerative agriculture projects in developing countries.
Gautier Quéru, Head of Natural Capital at Mirova, told ESG Investor the new fund will seek to increase social inclusion in developing regions, as well as creating jobs and bringing “prosperity to local communities”.
He also underscored the importance of the gender component of the fund. “If you’re operating in rural areas there is often a gender gap where women do not have access to land, training or financing,” he explained.
“The projects we are selecting would fill this gap and give access to women to these elements they currently lack,” Quéru added. “It’s not only for social justice, but also for efficiency, and performance.”
The fund will be structured as a blended finance vehicle, combining public and private capital. It will support sustainable land-based projects, primarily in agroforestry and regenerative agriculture in developing countries, and is set to run for 12 years.
Mirova, a dedicated sustainable investment affiliate of Natixis Investment Management, will also maintain its focus on investments in Latin America, Africa and Asia to invest in “consolidate its knowledge network” and “maximise the deployment and efficiency” of the fund’s operations.
“The main difference is the market has become more mature over the six years since we started this journey, so we can be more ambitious,” Quéru said. “There are many more opportunities out there with projects and operators.”
Blending public, private action
Under the Kunming-Montreal Global Biodiversity Framework (GBF) agreed at COP15 last December by 2030 at least 30% of the world’s land, coastal areas and oceans must be effectively conserved and managed.
A key driver behind the GBF’s was a 2019 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services report, which found that 75% of the land-based environment had been significantly altered by human actions and that climate change was significantly intensifying biodiversity loss.
An estimated US$722-967 billion a year will be needed between now and 2030 to restore biodiversity.
“Land is solution to both the climate and the biodiversity crisis,” Quéru said. “That’s really becoming clear to scientists and UN bodies that we need to have sustainable land use.”
At the Principles for Responsible Investment’s (PRI) annual conference in October, the organisation launched Spring, a new initiative that aligns with the GBF’s goals and targets. It will initially focus on investee companies’ policies and practices around deforestation and land degradation as a source of biodiversity loss.
The PRI said the initiative will target “real-world outcomes in key geographies that face high risks” of future forest loss and land degradation by focusing on “systemic policy alignment” with the GBF.
Mirova completed of the deployment of the Land Degradation Neutrality (LDN) fund through three final investments. The LDN fund was created in 2017, also as a blended finance vehicle, and raised US$208 million from public institutions and private investors.
The most recent investments brought the fund’s portfolio to a total of 13 sustainable land management projects in Latin America, Africa and Asia. The fund invested in supply chains including coffee, cocoa, wood, ingredients for the pharmaceutical industry and payments for ecosystem services.
Quéru said Mirova had learned some key lessons from the LDN fund about the “hidden value” in land, including being used for carbon credits and sequestration projects.
He pointed out that land restoration is increasingly aligned with the strategies of large corporates that need to reduce Scope 3 emissions, with regenerative agriculture and agroforestry projects able sequester more carbon and assist in reducing these emissions.
He added that the experience of running the fund had underlined that investing in emerging market is “still difficult” and that blended finance to de-risk investment remains a “must have” to entice private investors.
Quéru noted this challenge requires “solid skills in terms of fund structuring and risk management”. To meet this challenge, Mirova has reinforced its team bringing aboard individuals from development finance institutions.
There are eight people committed to MSLF2 at the firm and is under the umbrella of the natural capital platform which has 20 people working on it.
“The key success factor for these funds to work is to combine public, private and civil society partners,” Quéru added.