Unlocking the Power of Nature: Structured Finance for Sustainable Ecosystems

Intact forests and wetlands are critical for carbon sequestration, biodiversity, and community resilience, but these ecosystems are rapidly deteriorating, especially in Southeast Asia. Environmental markets offer a potential solution, but the sector faces financial uncertainties and regulatory challenges. Despite these obstacles, the growing demand for high-quality efforts to conserve and restore critical ecosystems presents opportunities for innovative financial mechanisms to support ecosystem conservation.

Preserving the Planet's Lungs: A Transformative Approach to Ecosystem Financing

Addressing the Challenges of Ecosystem Conservation

Structured Finance for Nature (SFN) is a groundbreaking initiative that aims to tackle the key challenges hindering the establishment of a new class of natural assets. By aggregating diverse assets and creating a blended capital stack, SFN mitigates high upfront costs, long return timelines, and project-specific risks. Rigorous monitoring and verification systems ensure project integrity and meet next-generation transparency expectations. This innovative approach paves the way for a replicable model for capital deployment, setting an industry standard in community benefit sharing.

Unlocking the Potential of Environmental Markets

The SFN instrument is designed to leverage the power of environmental markets, with a focus on carbon credits as a primary revenue stream. However, the initiative recognizes the need for a more holistic approach, exploring additional income streams such as payments for ecosystem services. By diversifying its revenue sources, SFN aims to create a sustainable and resilient financial model that can support the long-term conservation and restoration of critical ecosystems.

Driving Positive Impact at Scale

The SFN instrument was designed to support Forest Carbon's ambitious goal of reaching 1 million hectares under management by 2026. The portfolio targets intact forests with high biodiversity, wetland areas, and degraded forests, with 60% of the capital dedicated to protecting these vital ecosystems. By securing these areas with environmental markets, SFN aims to prevent further habitat fragmentation and biodiversity loss, directly supporting climate mitigation and carbon removal efforts.

Empowering Local Communities

At the heart of the SFN model is a commitment to community benefit sharing. The instrument dedicates a minimum of 20% of pre-tax profits to be reinvested in community-based initiatives, funding programs that support community forestry and overall well-being. Over the 40-year asset lifetime, this commitment will deliver more than USD 400 million in community investment, ensuring that the positive impacts of ecosystem conservation are felt by the local populations who depend on these natural resources.

Innovative Capital Structure for Diverse Investors

The SFN instrument operates as a Special Purpose Vehicle (SPV) to deploy capital into Forest Carbon's pipeline, with a diversified capital structure that includes equity, mezzanine debt, and a publicly accessible green bond. This approach allows for the participation of a wide range of investors, from Development Finance Institutions (DFIs) to high-net-worth individuals and family offices. The Model Forests and Biodiversity Bond, in particular, offers smaller investment increments to enable broader access to this transformative investment opportunity.

Driving Industry Transformation

By establishing a replicable model for capital deployment and setting an industry standard in community benefit sharing, the SFN instrument aims to catalyze a paradigm shift in the way ecosystem conservation is financed. The successful implementation of this innovative approach has the potential to inspire and empower other players in the environmental finance sector, ultimately driving a more sustainable and equitable future for our planet's critical natural assets.