International Finance Corporation

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International Finance Corporation
Conservation Finance Activities
Sustainable Conservation Finance
Retreat Harbourtowne, Maryland February 2002
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IFC Overview

• Private Sector Arm of World Bank Group
• Investment bank that provides equity, debt
  advisory services (e.g., development of
  concessions)
• In FY 2001, IFC approved US 3.7 billion of
  investments in 240 projects
• As GEF Executing Agency, IFC has a 129M
  portfolio (12 projects) and 20M p.a. pipeline
• Highly innovative projects that have pioneered
  the use of non-grant financing (e.g., loans,
  guarantees, contingent finance, equity)

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IFCs Approach to Conservation Finance

• IFC approaches conservation finance from a
  private sector angle.
• IFCs projects aim to generate sustainable
  conservation financing by catalyzing viable
  businesses.
• IFC searches for instances where there is a
  business case to support biodiversity
  conservation.
• IFC seeks innovative business models.
• IFC seeks to finance projects on a commercial
  basis IFC tries to minimize concessional funds.

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IFCs Approach to Conservation Finance

• IFC develops projects that provide long-term
  conservation finance via
• Concession Fees (e.g., river concessions, tourism
  concessions in parks)
• Ecotourism Fees
• Business Profits

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IFCs Biodiversity Investments

• Terra Capital Fund
• 15 M private equity fund for LAC (4 M IFC 5
  M GEF)
• Small and Medium Scale Enterprise Program
• Provides loans of up to 1M to financial
  intermediaries (e.g., CI, TNC) who on-lend for
  shade-grown coffee, ecotourism, organic
  agriculture, etc.
• Conservera Amazónica (Peru)
• 4 M FSC-certified hearts-of-palm project in the
  Amazon Rainforest
• Ecotourism Investments
• Equity investments and loans for lodges in or
  near conservation areas (e.g., Boundary Hill,
  Inka Terra, AK) in some cases GEF grants are
  used to catalyze incremental biodiversity-benefiti
  ng activities

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Terra Capital Fund Equity Investments to Date

• Certified Pure Ingredients
• Organic berry farming (Chile)
• Muaná Alimentos
• FSC-certified hearts-of-palm company located in
  the Amazon river estuary (Island of Marajo,
  Brazil)
• Tobasa Bioindustrial
• Harvesting and processing of babassu coconut in
  the Amazon (Tocantins State, Brazil)
• CIAPAR
• Organic vegetables farming (Sao Paulo, Brazil)
• Frezzi
• Organic grapes in Argentina

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Symbio
Example SME Investment

• Polish company that assists small-scale farmers
  in buffer zones to convert to organic agriculture
• Symbio buys the products and sells them into EU
  wholesale market, making a margin on the sale
• Symbios principle barrier to growth is the
  inability to acquire working capital (WC)
• Banks wont provide a credit line due to high
  perceived risks, lack of familiarity with organic
  sector, and weak balance sheet
• 3-4 year guarantee is being offered to Polish
  bank so that it extends WC credit line to Symbio
• Guarantee will be scaled down each year as Symbio
  strengthens its balance sheet and meets financial
  performance indicators

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IFC/GEF Biodiversity Pipeline

• Komodo National Park Concession
• Concession awarded to JV (which involves TNC and
  will receive no financial returns). GEF grant
  will help cover management costs during initial
  years it will be scaled down and eliminated
  after 7 years as park revenues increase.
• EcoEnterprises Fund
• TNC-managed investment fund and technical
  assistance facility for small-scale ventures in
  Latin America with strong links to local NGOs
• Kijani Initiative
• Investment Fund and Business Development Facility
  for biodiversity projects in Africa
• European Conservation Farming Initiative
• Investment fund and Tech. Assistance Facility to
  catalyze shift to
• conservation farming in Central and Eastern Europe

9
Asian Conservation Corporation Foundation

• The Asian Conservation Foundation (ACF) will fund
  conservation activities run by local NGOs in
  priority areas in the Philippines
• GEF and other grant funding will be used for
  5-7 years
• The Asian Conservation Corporation (ACC) is a
  holding company that takes majority (or
  significant minority) equity stakes in for-profit
  ventures that can provide biodiversity benefits
  in priority areas
• The ACC will pass board resolutions or include
  clauses in its share purchase agreements
  that obligate investee companies
  to fund the ACF after its grant funding runs
  out.

10
Fly-Fishing Concessions in Mongolia and
Kamchatka

• Eg-Uur Watershed (Mongolia)
• Mongolia-American JV will receive concession to
  operate fly fishing trips on pristine river GEF
  funds will catalyze conservation activities for
  surrounding watershed conservation activities
  will be sustained by ongoing concession fees.
• Kamchatka Wild Salmon Center Project (Russia)
• Innovative financial mechanism (e.g., dedicated
  credit line or guarantee facility) to get
  domestic and foreign outfitters to jointly
  develop sustainable sport fishing operations on
  watersheds throughout the Kamchatka Peninsula.
  Project will develop concessions and a
  certification system for environmentally-friendly
  sport fishing operations.

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Poison Dart Frog Ranching

• IFC is catalyzing a new Peruvian venture that
  will save rainforest alleviate poverty via
  sustainable production of poison dart frogs
• By overcoming the limiting factor (i.e., of
  suitable breeding sites) the project can produce
  a surplus population for export to U.S. and
  Europe.
• Profits will fund park rangers community
  projects

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IFCs Staff

• IFC has only several individuals who focus on
  conservation finance, but we can leverage
• Many in-house economists, engineers, lawyers,
  environmental social specialists, and
  investment officers (IFC is the highest
  concentration of MBAs in Washington!)
• Biodiversity expertise of the World Bank IUCN
  (Deborah Vorhies is based at IUCN
  headquarters)and
• Top consultants for project development purposes.

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IFCs Expertise regarding Conservation Finance

• Business Appraisal
• Tremendous in-house capabilities regarding
  financial, technical, environmental, social,
  legal, and economic analysis.
• Extensive investment experience in many sectors
  countries
• Concession Design
• IFC can leverage its experience with water,
  electricity, tourism concessions
• Investment Structuring
• IFC can structure equity, quasi-equity, debt,
  guarantees, etc. for for-profit ventures in
  developing countries.

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IFCs Needs Potential Role in Conservation
Finance Alliance

• IFCs Needs
• IFC is looking for viable business opportunities
  that will benefit biodiversity conservation.
• IFCs Potential Contributions
• For viable projects, IFC could provide
  significant financial engineering expertise as
  well as commercial and/or concessional financing