The U.S. International Development Finance Corporation (DFC) announced a $50 million commitment to help mobilize $1 billion for the BTG Pactual Timberland Investment Group’s (TIG) Latin American reforestation strategy. This announcement was made in Oslo, Norway, on the margins of the Tropical Forest Forum, at a signing ceremony attended by White House Senior Advisor John Podesta, DFC Chief Climate Officer Jake Levine, and TIG Chief Sustainability Officer Mark Wishnie.
This formalized an investment that was originally highlighted by President Biden during the Major Economies Forum on Energy and Climate Change last year and represents the DFC’s largest-ever carbon-negative transaction.
By investing in fast-growing timber species and native ecosystems, side by side, TIG aims to generate commercial revenue while also protecting and restoring critical habitats. So far, few commercial strategies have dedicated half their land to restoration and conservation efforts. This is a forward-leaning approach, which is targeting deforested land that for many years was used for cattle ranching or other low-intensity agriculture. Reforesting this land will integrate commercial, biodiversity, and greenhouse gas sequestration goals into a single strategy.
This sustainability-linked loan structure triggers a better financial outcome for TIG if the strategy meets certain KPIs designed to enhance biodiversity and water outcomes through connectivity corridors for plants and animals, and watershed buffers that can help provide ecosystem services for natural water infrastructure.
This strategy focuses on the conservation, restoration, and planting of deforested and degraded properties in selected regions in Latin America, including the Cerrado biome in Brazil, one of the most biodiverse, seasonally dry ecosystems in the world. And about half of the Cerrado has already been converted to other uses, and the biome continues to face high rates of commodity-driven deforestation.
With Conservation International’s support, this strategy aims to protect and restore about 135,000 hectares (more than 330,000 acres) of natural forests in deforested landscapes. The strategy also seeks to plant millions of trees in sustainably managed commercial tree farms, independently certified to Forest Stewardship Council standards, on another approximately 135,000 hectares of previously deforested and degraded land. So far, TIG has invested in 37,000 hectares, and has already planted more than 7 million seedlings and initiated restoration of approximately 2,600 hectares of natural forest.
KEY QUOTES:
“This is a groundbreaking transaction for DFC. It will sequester carbon equivalent to the annual emissions of two-thirds of a million vehicles, it will restore and protect a very special ecosystem, and it will catalyze investment in the Brazilian bioeconomy. We are proud of the innovative financing structure which incentivizes reforestation and regeneration in areas key to promoting biodiversity and protection of critical watersheds. Working with exceptional partners such as BTG Pactual’s Timberland Investment Group, the International Finance Corporation, and Conservation International is the only way we can bring these transactions to fruition and bring the scale of the capital markets to bear on the imperative to drive financing for natural climate solutions.”
– Jake Levine, DFC’s Chief Climate Officer
“We commend the leadership of both the Biden Administration and the DFC for recognizing the crucial role that large-scale nature-based solutions – including forest protection, restoration, and sustainable management – can play for climate, biodiversity and rural development. This is yet another important milestone for our strategy with Conservation International, which will help deliver concrete outcomes on the ground.”
– Gerrity Lansing, Head of TIG
“This transaction with DFC, in addition to directly increasing the area of forest we can restore and sustainably manage, can help to catalyze additional investment, as well as enhance the positive impact of our investment through a sustainability-linked-loan structure that rewards actions that improve water quality and enhance habitat connectivity.”
– Mark Wishnie
