About
In Africa, 65% of land is affected by degradation, reducing the resilience of communities to drought, flood, and other effects of climate change. At the same time, as African economies grow and urbanize, demand for domestic industrial wood products continues to rise, but new forest plantations are difficult and costly to establish.
Smallholder forestry presents a critical opportunity to meet these twin challenges. Smallholder forestry can restore unused, degraded portions of smallholder farming plots. At less than 20% of the cost of traditional plantations, smallholder forestry can also provide climate resilient long-term savings and diversification to farmers.
INNOVATION
The Smallholder Forestry Vehicle is the only investment mechanism that enables private investors to invest in smallholder forestry in Africa, while also reducing capital costs for forestry companies that provide technical support and market linkages to smallholders. Specifically, the Vehicle:
fills a crucial gap in Africa, where extremely limited investment is occurring in forestry. It also improves results through a strong cooperation model between an operating company and farmers, and reduces transaction costs for investors and reduces some risks of plantation forestry.
IMPACT
At scale, each Smallholder Forestry Vehicle could restore 15,000 hectares of degraded land, providing each of 50,000 farming households with US$ 1,500 in climate resilient savings and achieving a modeled 17% gross internal rate of return. Smallholder farmers accumulate wealth similarly to a savings plan, by maintaining trees and receiving payments at thinning and harvest. By providing non-climate dependent income and crop diversification, the partnership thus reinforces farmers’ climate resilience. Beyond the proponent’s own operations, other smallholder forestry projects, such as those run by international organizations, out-grower programs, conservation funds, and NGOs, as well as intermediaries operating in other sectors, such as agriculture, may also raise financing using this approach.
DESIGN
Prior to planting, the Company will work with farmers and their communities to assess land suitability and secure land use rights for tree growing. The land consists of unused, degraded portions of smallholder plots. Once enrolled, farmers contribute land and labor, and are paid a market price for harvested trees. The Company provides training, planting inputs, maintenance support, harvesting services, and a guaranteed market for the trees.
The Company sells a portfolio of tree production contracts to a Special Purpose Vehicle (SPV) after approximately one year of tree growth. The Company will buy back the tree production contracts prior to final harvest. Farmer compensation is set by a transparent algorithm that establishes a minimum compensation price, but rewards farmers for better-than-expected tree growth and market prices.
The Vehicle is under development by Komaza, a smallholder forestry company in Kenya with more than 10 years’ experience in partnering with 14,000 smallholder farmers, over half of whom are female, to plant and harvest 3,800 hectares of trees. The instrument will first be deployed in coastal Kenya in Kilifi and Kwale counties, the site of the Proponent’s current operations and an area of high vulnerability to climate change.
Details
News & Events
2018 Lab proponent Komaza receives investment from new Conservation International fund
August 29, 2019Conservation International’s New Program to Invest $200 Million in Green Businesses over the Next Decade August 29, 2019 – Together with partners, Conservation International Ventures — the impact-investing arm of Conservation International — today announced that it will provide $200 million over the next decade to businesses that deliver measurable, meaningful environmental and social outcomes at scale. […]
Fast Company: Environmental nonprofit just started a venture fund to put $200 mn into conservation businesses
August 30, 20192018 Global Lab proponent Komaza was selected as one of the first businesses to receive investment from Conservation International’s new fund, and was featured in an article in Fast Company. View the original article here. — By Adele Peters, 29 August 2019 – Komaza, a “microforestry” startup in Kenya that pays farmers to raise tiny […]
Webinar: Investing in smallholders’ regenerative practices
August 10, 2021Download the presentation slides In the Climate Finance for Sustainable Agriculture: The Lab Webinar Series, developed for IFAD, the Lab presents some of its innovative financial instruments to catalyze greater investment into the sustainable agriculture sector, including key elements identified through the Lab development and updates on the current status. Each one-hour session has an […]
Investors launch new financial instruments for low-carbon transit, sustainable land use, and clean energy in developing countries
September 27, 2018New York, 27 Sept 2018 – The Lab – an investor-led initiative that aims to drive billions of dollars for climate action by developing and supporting innovative finance instruments – has launched its 2018 class of nine new investment vehicles. Over 30 high-level Lab members from governments, private investors, philanthropies, and development finance institutions convened […]
The Lab’s 2018 class of nine innovative vehicles for sustainable investment makes progress towards launch
May 30, 2018Nine new early-stage investment vehicles that aim to drive millions to clean energy, low-carbon transit, and sustainable land use in developing countries, continue to make progress towards launch. The investment vehicles comprise the Lab’s 2018 class, selected at the start of 2018 from a pool of over 100 crowd-sourced, competitive ideas to mobilize needed investment […]
The Lab picks top finance instruments for action on climate change in developing countries, particularly Brazil, India, and in Sub-Saharan Africa
February 14, 2018LONDON — The Lab – a public-private initiative composed of experts in sustainable investment from governments, development finance institutions, and the private sector – has picked a new class of investment vehicles to drive much-needed finance to low-carbon, climate-resilient global development, out of over 100 ideas submitted into a competitive pool. The nine new instruments […]