Verde Ventures 2012 Overview

Neel Inamdar Fund Manager

Cheung 2009

Verde Ventures: Building Healthy Sustainable Economies by Investing in Small and Medium Enterprises

•  Fund Overview

•  VV Monitoring &

Evaluation

•  VV Coffee Portfolio

Impacts

VV

Fund Overview

Verde Ventures invests in small businesses that contribute to green economies in Conservation International's global priority areas

Our Mission

VV Results

•  3 main investors •  $19.2 million invested •  48 entities supported, 104

loans, 13 countries •  91% of repayment rate •  55,544 direct beneficiaries •  464,144 hectares directly

impacted •  16.4 million hectares indirectly

impacted •  482 Red-listed species •  $134 million in sales generated

by clients

2012 vs. 2011- TBL comparison

Investment by sectors

3%  

79%  

12%  0%  5%  

Investment  by  Sector  

 Cocoa    

 Coffee    

 Ecotourism    

 Natural  Products      NTFP    

Our Tools

•  SME Loans: US$30,000 to $500,000 for infrastructure, working capital, trade finance for business development in rural communities.

•  Technical Assistance: Accounting, marketing, business plan development

•  Monitoring: Triple-bottom line

monitoring (Environmental, Social and Financial)

Type of Financing

•  Long Term: infrastructure, equipment and crop maintenance

•  Short Term/Trade Finance: working capital, harvest finance.

Key Partners

���

•  International Finance Corporation (IFC) •  l’Agence française de développement (AFD) •  Fonds français pour l'environnement mondial (FFEM) •  United Nations Foundation (UNF) •  Daiwa Securities •  Global Environment Facility (GEF) •  KfW Entwicklungsbank (KfW) •  Gordon and Betty Moore Foundation (GBMF) •  Overseas Private Investment Corporation (OPIC) •  Starbucks Coffee Company

Why Verde Ventures? •  Conservation-based employment is essential to provide economic incentives for conservation

•  The small business sector is a key partner in the intersection between human welfare and conservation

•  Lack of available, affordable capital is a major constraint to building green economies

Facts

Hotspots + wilderness areas populated

VV Project Map

Further behind today than microfinance was in 1999, and is perhaps 10 years behind

Uncoordinated ���Innovation

Marketplace ���Building

Capturing the Value ���of the ���

Marketplace

Maturity

Microfinance(today)

SME Conservation

Finance

“Marketplace Building” involves: •  Building efficient intermediation to

unlock latent supply of capital •  Building enabling infrastructure for the

industry •  Developing absorptive capacity for

investment capital

Sectors

Sustainable Agriculture– VV has continued to invest in sustainable and responsibly grown coffee cooperatives and estates as well as in other agricultural products in Central, South America, and Africa. Investments in this sector are typically designed to enhance habitat conservation, and provide water and food security benefits.    

Name of Investment Central Agropecuaria Perla del Mayo (CAPEMA)

Sector/Country Coffee / Peru – Alto Mayo Region

Amount 150,000 USD

Conservation/Social Impact

CAPEMA represents 150 coffee producers from 6 communities in the Alto Mayo Protection Forest’ buffer zone. After cattle, coffee production is one of the main agricultural activities that represent a risk for conservation in the Alto Mayo watershed. Certification programs demand an improvement on agricultural practices such as soil erosion prevention, prohibition on agrochemicals use, agroforestry systems establishment and waste water management. Fair Trade certification also assures a minimum price and demands that the organization maintain an annual premium (US$10/coffee bag) for AGM agreed social investments. Associates’ families depend on coffee production and commercialization through CAPEMA as one of the bigger incomes during the year. They also produce some other crops for their own food security.

VV Deals – CAPEMA / Alto Mayo

Alto Mayo, Peru

Alto Mayo, Peru

Name of Investment Technoserve Ethiopia Coffee Cooperatives

Sector/ Country Coffee / Ethiopia

Amount 400,000 USD – Loan Guarantee

Conservation/ Social Impact

Three major impacts are envisaged: •  Protection of natural forests through the development of sustainable small

businesses that enable coffee farmers to earn more income and keep growing coffee

•  Adoption of good practices for sustainable, certified, or conservation friendly coffee

•  Reduction in freshwater consumption by coffee cooperatives With only 3% of the surface area of the country covered by natural forests, the conservation of these areas and the reduction of the demands made on these ecosystems are a conservation priority. As in many developing countries, there are very few economic options available to local populations who rely, along with a number of important species, on the ecosystem services provided by these forest areas. In Ethiopia, no less than 80 percent of the rural community and a significant proportion of the urban dwellers depend on herbal medicines for their primary health care delivery system. In addition to foods, medicine, fuel wood, and construction materials, forests provide wildlife habitat and recreational opportunities, prevent soil erosion and flooding, and help provide clean air.

VV Deals – Ethiopia Coffee Cooperatives

Ethiopia Cooperatives, Ethiopia

Ethiopia Cooperatives, Ethiopia

Name of Investment Ten Senses Africa

Sector/Country Macadamia Nuts / Kenya - Africa

Amount 75,000 USD

Conservation/Social Impact

The investment in Ten Senses Africa represents an opportunity to support a socially responsible enterprise currently enhancing the life of approximately 1,800 farmers in key areas for biodiversity by providing an economic justification to maintain tree cover in an important water tower and a region where most trees are threatened by charcoal burning. The upper Tana region is a critical fresh water resources in Kenya, important for the ivelihood of local farmers. The rivers are indispensable source of water for crops, livestock, wildlife, and human use, not only within the mountain vicinity, but also for farther arid and semi‐arid lands. The upper Tana region also hosts several reserves and parks. They contribute to Kenya’s economy in the ecotourism industry and also provide direct or indirect stream of revenues to the surrounding communities. Strategies to protect this rich region include alleviation of poverty. In fact, over the years, it has been proven that poverty is as a key driver in over‐ exploitation of the ecosystem. TSA’s activities in the region and its commitment toward certification (fair trade and organic) enable the rural communities to improve upon their living standards and conserve their natural habitat.

VV Deals – Ten Senses Africa

Ten Senses Africa, Kenya

Ten Senses Africa, Kenya

Sectors

Sustainable Tourism – VV has continued to invest in priority ecotourism enterprises in Africa and in Central and South America. Sustainable, responsible tourism continues to be an important component of many sustainable economies and is an effective mechanism to secure both critical habitats and provide alternative economic opportunities to local communities in many parts of the world.    

VV Deals – Playa Viva

Name of Investment Playa Viva LLC

Sector/Country Tourism / Mexico

Amount 200,000 USD

Conservation/ Social Impact

Playa Viva is within CI’s Mesoamerican Hotspot and directly involved in supporting a turtle sanctuary with high egg counts of 5-10 nests of leatherback turtles (Red List CR), about the same number of green turtle nests (RL EN), and >2,000 nests of Olive Ridley turtles (RL VU) and low hatch rates. In addition, the developer has demonstrated a commitment to tackle habitat restoration and ecosystem function. As the only formal employer on the beach, they play an important part in providing alternative incomes and capacity building to the rural community. This presents a unique opportunity to maintain a conservation presence on an otherwise unmonitored stretch of tens of kilometers of beach. The initiative has been reviewed by the Conservation Committee, and approved on Dec 2, 2009.

Playa Viva, Mexico

Playa Viva, Mexico

Sectors

Clean Energy – Addressing energy cleanliness is a key component of developing a sustainable green economy. Verde Ventures is committed to tackling the challenges of energy poverty and the related health, climate and deforestation impacts prevalent in many hotspots.    

VV Monitoring and Evaluation

VV M+E Framework

•  Outlines, demonstrates and tests key

hypotheses: that VV investments support improved TBL impacts

•  Estimates substantive impacts

•  Embedded within management structure

•  Delivers accurate and timely reporting

•  Transparency measures built in for accountability

VV’s M+E Framework: 2 Levels

•  Portfolio-wide monitoring o  All deals o  Basic TBL information that

aggregates across o  Yearly snapshot of TBL progress

•  Project specific monitoring o  Subset of portfolio o  Specific TBL conceptual models and

indicators o  Demonstrates key links between

nature and people o  Tailored indicators

VV Portfolio Monitoring

70 Indicators (13 Social, 20 financial, 37 environmental)39 compliant with IRIS 2.2 taxonomy

1.  Organiza=on's  members  

13.  Indirect  Beneficiaries   24.  Addi=onal  finance  mobilized  

36.  Number  of  farms   48.  Total  Conserva=on  Area  

61.  CI/CELB  par=cipant  

2.  Organiza=on's  members:  Female  

14.  Total  Revenue   25.  Wages  paid   37.  Ecotourism  Area   49.  Area  Sustainably  Managed    

62.  Water  use    

3.  Full-­‐=me  Employees   15.  Earned  revenue   26.  Direct  customers   38.  Ecotourism  Clients   50.  Area  Directly  Impacted  

63.  Water  conserva=on    

4.  Full-­‐=me  Employees:  Female    

16.  Cost  of  goods  sold   27.  Buyer  contracts     39.  Produc=on:  Honey     51.  Area  Indirectly  Impacted  

64.  Water  treatment    

5.  Part-­‐=me  Employees   17.  Gross  profit   28.  Average  price   40.  Produc=on:  Wax   52.  Distance  of  water  bodies  permanently  protected  

65.  Solids  treated    

6.  Part-­‐=me  Employees:  Female  

18.  Net  income   29.  Local  market  price   41.  Beehives  Managed   53.  Number  of  cer=fica=ons  

66.  Energy  produc=on    

7.  Temporary  employees   19.  Net  worth   30.  Producer  Price  Premium  

42.  Produc=vity:  Honey   54.  Area  cer=fied   67.  Energy  consump=on    

8.  Temporary  employees:  Female  

20.  Fixed  assets   31.  Total  interest  repaid   43.  Lobster  Traps  Managed  

55.  Area  cer=fied:  Fair  Trade    

68.  Renewable/Non-­‐Renewable  energy  sources  

9.  Permanent  employees   21.  Value  of  collateral   32.  Amount  of  principal  repaid  

44.  Produc=on:  Lobster   56.  Area  cer=fied:  Utz     69.  Names  of  Important  Adjacent  Conserva=on  Areas  

10.  Permanent  employees:  Female  

22.  Return  on  equity   33.  Net  cash  flow   45.  Scale  of  Lobster  Produc=on  

57.  Area  cer=fied:  Organic    

70.  Number  of  IUCN  Red  List  Threatened  Species  Impacted  

11.  Direct  Beneficiaries   23.  Interest  Expense   34.  Produc=on:  focal  crop    

46.  Area  dedicated  to  focal  crop  

58.  Area  Cer=fied:  Rainforest  Alliance    

71.  CO2-­‐equivalent  Emissions  Avoided  

12.  Direct  Beneficiaries:  Female  

35.  Produc=vity:  Focal  crop    

47.  Total  Produc=on  Area  

60.  Area  cer=fied:  Bird  Friendly    

Impacts

§  US $19.2 M invested in 13 Countries §  464,144 ha protected in 9 hotspots §  55,544 jobs supported, 29% women

VV’s Management Tools

•  Feasibility •  VV client screening/environmental

indicators •  VV due diligence checklist •  Value Chain Ranking Matrix •  Conservation Memo •  Investment Memo

•  Implementation •  VV Annual Impact Survey •  Assessment Tool •  Certification Audit Review

•  Analysis •  Cost effectiveness •  Frequency distribution •  Performance Indices

•  Other initiatives •  GIIRS •  IRIS

VV Reporting

•  Quarterly Triple Bottom Line Report

•  Annual Impact Report •  M & E Update •  Pipeline Report •  Dashboard Report

Impact investing linkages

•  GIIRS Pioneer Fund

•  Aligned with IRIS, FAST, ANDE

•  Active at SOCAP, SVN, Investors Circle, etc  

VV Coffee Portfolio Impacts

Indicator 2011

Total  Area  Cer6fied  (ha)   13,408  

Area  Cer6fied  Fair  Trade   10,132  

Area  Cer6fied  Organic  (ha)   7,741  

Area  Cer6fied  Rainforest  Alliance  (ha)   4,139  

Area  Cer6fied  C.A.F.E.  Prac6ces  (ha)   1,397  

Area  Cer6fied  Bird  Friendly  (ha)   854  

Total  Water  Conserva6on  (L)   154,716,796  

Total  Water  Treated  (L)   29,549,064  

Total  Solids  Treated  (T)   39,175  

Energy  Produced  (KwH)   1,205,010  

Energy  Consumed(KwH)   613,607  

Average  Producer  Price  Premium   18.3%  

Summary of VV Coffee Portfolio Impact

•  There is little scientific consensus on whether these agro-ecological systems provide tangible benefits to maintaining ecosystem services/biodiversity and should be considered areas of conservation significance

•  Although shade grown coffee cultivation is no

substitute for natural forest in terms of biodiversity conservation and ecosystem service production, this form of land use provides a viable compromise between the economic needs of local communities and global conservation priorities.

Rationale for Coffee Investment

Coffee Portfolio Indicators

Coffee portfolio status in FY10 & FY11

Indicator   Life  of  Fund   2010   2011  

Total  Coopera=ve  Members  

Average  Per  Client:  1,243       3,351   2,546  

Average  Price  ($/kg)   $4.53   $3.98   $5.22  

Average  Price  Premium  (for  Cer=fied)  

18.3%  

Total  Produc=on  (kg)   Unknown   8,252,716     6,879,494    

Avg.  Produc=vity  (kg/ha)   667   871   537  

#  of  Farms  Contribu=ng  to  Produc=on  

Unknown   880   1,308  

Emissions  Avoided   15,510,578.08  Mg  CO2   3,305,026.9  Mg  CO2   5,010,522.08  Mg  CO2  

Certification Programs

The majority of investments in the Verde Ventures coffee portfolio fall into two broad categories: 1.  private landholders 2.  organized groups of

small holders (cooperatives or associations).

VV Coffee Investments

In addition to the reliance on certification programs, VV has integrated the following criteria into our process of investment selection: §  Location §  Alternative Land use §  Historical land use §  Cluster

Strategy for Investment

Certification Programs

Proportion of clients under each certification in

2012 and 2011

Thank you!

Please visit www.conservation.org/verdeventures