In this episode from the asset vault, I’m joined by Daniel Farchy, an expert in multilateral finance who has worked across the World Bank, the International Finance Corporation (IFC), the European Investment Bank (EIB), and the Green Climate Fund (GCF). In this conversation, Daniel describes the development and impact mandate behind most multilateral finance institutions. We talk about blended finance (particularly what structure works well for forestry) and the power of concessional capital to crowd in more risk-averse investors. Daniel explains the conundrum of the finance available in capital markets compared to the relatively small need for climate and nature solutions – where legally restricted allocations mean the finance pool is not as big as we think. We discuss the heavy lifting that multilateral or DFI finance can do in screening and due diligence. Conversely, this can also be perceived as a downside, as the investment process in such a partnership takes more time.

Quote: For asset owners, that's [forest investment] very attractive because if you're a pension fund, and you need to be able to deliver, a boring, steady, predictable return over 10 number of years, it's great to have that kind of thing in your portfolio because that gives you a certain degree of sustainability of return, which you will not get in much more volatile sectors.

00:00 – Introduction & Guest Background

03:30 – Understanding Multilateral Development Finance Institutions

07:05 – Returns, Capital Structure & Investment Mandates

09:50 – How to Partner with Multilateral Investors

12:00 – Due Diligence, Safeguards & Approval Processes

17:20 – Blended Finance Explained

19:35 – First-Loss Capital & Risk-Sharing Structures

23:30 – The Limits of De-Risking Capital

26:30 – Capital Allocation Trends in Climate & Nature

28:30 – Public-Private Partnerships: Opportunities & Challenges

34:30 – Do DFIs Slow Down Investment?

36:30 – The Untapped Potential of Sustainable Forestry

38:00 – Advice for Fund Managers Seeking DFI Capital

40:00 – Why Forestry Appeals to Long-Term Investors

41:40 – Future Demand for Wood & Forest Products

42:25 – Closing Remarks & Further Resources

Founding Director and Host: Shauna Matkovich - The ForestLink

Producer and Editor: Magdalena Laas - Unscripted Creatives

Nature by MaxKoMusic/Soundcloud

Sopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/Soundcloud

Ambient Documentary by Sound Guru (Pixabay)

Sign up now for the ForestLink’s newsletter, where you’ll receive technical advice, reflections, and best-practice guidance to support you with your forest-linked investment strategy or business straight to your inbox.

Hosted on Acast. See acast.com/privacy for more information.