Project detail - The Reforestation Fund I, LP

Who is our customer

The Reforestation Fund I, LP (“TRF” or the “Fund”) is a private equity forestry fund developed to invest in Latin America, targeting marginal pasturelands for the purpose of protecting and restoring natural forests on 50% of its holdings, and planting sustainable commercial tree farms on the remaining 50% of its holdings. The Fund will be managed by Timberland Investment Group (“TIG”), a timberland investment management organization (TIMO) that seeks to deliver sustainable timberland investments to institutional investors at scale. TIG is collaborating with Conservation International, the global conservation NGO, which serves as Impact Adviser to the strategy.

What is our funding objective?

The Fund seeks to acquire degraded land and develop timberland assets in major timberland areas in Brazil (focusing on Minas Gerais State, São Paulo State, Mato Grosso do Sul State, Paraná, and Santa Catarina States), as well as Uruguay and Chile. TRF’s investment strategy will seek attractive risk-adjusted returns via a combination of commercial timber revenues from FSC-certified plantations, and the sale of carbon credits from both the commercial plantations and areas that are restored beyond legal requirements. Additional impact will come from the sustainable manufacturing and sale of long-lived solid wood products when the commercial plantations mature, and from displacing more carbon-intensive materials like concrete, steel or plastic.

Why do we fund this investment?

With FMO’s commitment, we will be supporting the development of an innovative forestry investment model where the combination of commercial forestry and conservation on previously deforested and degraded land will lead to both attractive investment returns as well as significant ecosystem and climate benefits at scale. FMO’s commitment is expected to play a strong catalytic role by attracting further institutional capital to the sustainable forestry sector. TRF is also a clear fit for FMO’s Forestry strategy and climate action ambitions linked to SDG 13. In addition to generating attractive risk-adjusted returns, the Fund aims to sequester an estimated 32m tons of CO2 (equivalent) over its life through reforestation of degraded land. Furthermore, TIG projects that when fully implemented, the strategy will result in the restoration of native cover on up to 120,000 hectares over and above legal requirements and enhanced connectivity of natural habitats. TRF will also create sustainable long-term local employment opportunities for the communities near and around the assets.

What is the Environmental and Social categorization rationale?

This is a category-A Fund given the potential materiality of E&S risks and impacts on site and landscape level, that need to be managed by subject matter experts and through sophisticated ESG-informed management measures. TRF’s portfolio triggers IFC PS 1-4 and 6, whilst PS 7-8 may be triggered in future regions although the Fund’s policy is geared towards avoidance. Key E&S risks further stem from the planned land use change from degraded pastureland (i.e. previously modified habitats) into eucalyptus production stands, the managed regeneration and conservation/ protection of natural species, and the use of contracted labor (including from off takers). A strong E&S management system and monitoring regime based on international best practices will be implemented to manage the risks and materialize positive impacts.

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Date	Total FMO financing
9/23/2024	USD 40.00 MLN