Impact Earth is planning to launch a biodiversity fund that raises between $50-100 million focused on either Latin America or Southeast Asia, similar to its existing Amazon strategy, Carbon Pulse has learned.

The fund, likely to be officially announced by the end of next year, will focus on using nature-based solutions for impacts across biodiversity, climate, and social, said Vincent Gradt, co-founder and managing partner of London-based investor Impact Earth.

The strategy is likely to maintain key features of Impact Earth’s Amazon Biodiversity Fund, such as raising blended finance for project finance and venture capital investments, while engaging with a local subsidiary based in its target region, Gradt told Carbon Pulse.

Impact Earth will either look at opportunities across Latin American countries such as Peru, or focus on investments in Southeast Asian nations such as Indonesia, he said.

“We’ve got several options we are discussing at the moment,” Gradt said, adding that the fund will target raising “$100 mln maximum”, though it is likely to be smaller.

Unlike the Amazon Biodiversity Fund, the new strategy will look to invest in companies engaging with biodiversity credits, he said.

AMAZON BIODIVERSITY FUND

Impact Earth’s private equity Amazon Biodiversity Fund, focused on the Brazilian Amazon, announced it had raised BRL250 mln ($44 mln) at the beginning of 2024.

“We’ve deployed a bit more than BRL 100 mln already. The idea is to basically to deploy the full fund by the end of next year,” Gradt said.

This means Impact Earth is looking to deploy at least another BRL100 mln, allowing for investment fees, across venture and project financing.

The strategy aims to invest in sustainable enterprises that have impacts on conservation, smallholders, and agriculture, through tailor-made financing products such as profit-sharing loans.

For example, on the venture side it has invested in coffee agroforestry organisation Amazonia Agroflorestal, food and beverage manufacturer Manioca, and organic powdered food supplier Horta da Terra.

Investors include Alliance Biodiversity International, the US Agency for International Development, and ASN Impact Investors.

TIMING

According to the Amazon fund’s 2023 impact report, its investments have supported conservation over 7,800 hectares with high biodiversity value, 284 ha of restoration in degraded areas, and sequestered 264,000 tonnes of CO2e.

The biggest issue with venture funding is timing, with some companies taking five years to become financially viable, and the strategy term due to end in 2030, Gradt said.

The fund has to be patient in supporting portfolio companies through the initial high-risk phase until they reach a stage where they can attract broader investor interest.

Impact Earth is on track to achieving net returns of 10-12% over the lifetime of the fund – a modest return compared to the high central bank rates in Brazil, but one that matches the risk profile of the fund’s senior investors while delivering impact, Gradt said.

Biodiversity-specific funds passed $1.5 billion by the end of 2023, with eight vehicle launches throughout the period despite relative underperformance across the board.

By Thomas Cox – t.cox@carbon-pulse.com

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