A partnership wants to create a “climate-smart” investment fund that supports sustainable agriculture and provides a decent return. The Agroforestry Partnership Fund invests in smallholder producers around Vietnam to help them become more efficient and successful, while offering a portfolio guaranteeing environmental and social standards along with a healthy profit.
Investment in up to 25 sustainable agriculture projects around Vietnam
$500 million estimated fund volume
Mid- to high-single digit return
Enhancement of sustainable, low-carbon, and efficient agriculture faces a number of barriers. On the producer side, fragmentation of the sector means it is difficult for farmers to access financing. Smallholders also lack information about how to adopt sustainable or more efficient practices. In addition, producers face the risk of failure when switching methods or stock, for example to higher-yield seeds. On the investor side, few socially and environmentally responsible funds focus on the agricultural sector – leaving a gap in food security investment.
Under the umbrella of the Green Growth Action Alliance, the Agroforestry Partnership Fund is working with multiple public, private, and non-governmental stakeholders to package a portfolio of climate-smart agricultural and forestry projects for investment. The fund has developed a set of environmental, social, and governance metrics to evaluate the projects. These include social and food security indicators, greenhouse gas mitigation, reduced carbon emissions, crop resilience, and likelihood to generate environmental and social co-benefits.
The fund will invest in 20 to 25 small-to-medium sized enterprises in various regions of Vietnam, such as: organically produced shrimp; wood that has been certified by the Forest Stewardship Council; and replacing coffee varieties with cultivation of a more efficient hybrid. The package intends to get off the ground with initial public funding of 20 percent.
Helping the planet
Investment in sustainable and efficient agriculture will reduce greenhouse gas emissions that contribute to climate change. More efficient agricultural practices and stocks will help conserve precious natural resources, such as water and arable land. Sustainable agriculture also reduces extractive pressures, for example on marine environments.
The focus on smallholder producers more directly benefits local populations, rather than transnational corporations. The fund’s orientation toward food security should benefit those more vulnerable to fluctuations in food prices, in particular the poor. Since the fund is being co-designed with Vietnam’s Ministry of Agriculture, it is closely aligned with the country’s rural development strategy, which should help improve the lives of people living in the countryside.
The fund is structured for scale, and its initial goals can be expanded once they are successfully reached. The fund intends to circulate templates for sustainable business models among distributor networks like farmers’ associations and warehouses, as well as making its own investment blueprint publicly available for potential spinoffs. The combination of a climate-smart and commercially viable investment fund has novel potential and strong investor interest – meaning, great prospects for expansion, as well.
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