Farming finance: creating positive land use change with a natural resource management leverage fund
Final report for MBI project 46
Steve Hatfield-Dodds, Carl Binning and Bruno Yvanovich
July 2006
PDF file
About this report
The pilot focused on the potential contribution of leverage based approaches, defined as policy approaches that involve joint investment of public and private funds. These issues were explored through the creation of a Land Innovation Fund with a mandate to identify, develop, and invest in near-commercial projects providing a mix of public environmental benefits and financial returns. The fund had access to $1 million in public capital, to be matched by at least $1.5 million in private investment.
The leverage approach used by the fund has three main distinguishing features:
- the pilot used a staged due diligence process based on venture capital methods, involving the collaborative development of investment proposals and progressively more detailed external assessment of environmental and financial merit.
- the logic of co-investment requires projects that provide environmental benefits and financial returns to both public and private investors. This focuses investment on near-commercial projects (rather than ‘pure public good’ activities), and allows the level of net public support to be based on actual rather than predicted outcomes.
- investment leverage generally allows a larger scale of operation than normal grant based approaches. This allows access to some additional sources of benefits - such as through mergers or existing farms or the creation of new enterprises, but may preclude other sources of benefits.
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