We are in the midst of an extinction crisis, with biodiversity loss occurring at a rapid and increasing rate. Sustainable Development Goal #15 (SDG 15) targets most of the planet’s biodiversity, and focuses on habitat loss as the main threat. However, achieving the goals of SDG 15 will require very significant financial resources, with costs estimated in the hundreds of billions of dollars per year.
Impact investing is a fast-growing asset class that can help bridge the gap between the philanthropic and private or public sector dollars allocated to SDG 15. However, most impact investments have been allocated to a few well-developed sectors such as renewable energy and infrastructure, leaving nature behind.
Targeting a triple bottom line
Recognizing this financing gap, in 2023 the Hempel Foundation has launched an Impact Investment Initiative for Biodiversity on Land. This initiative aims to invest in the preservation, sustainable management and restoration of tropical forests – the most biologically diverse terrestrial ecosystems on the planet.
The Hempel Foundation Impact Investment Initiative identifies and invests in funds that target a triple bottom line comprised of financial, social and environmental returns. We look for funds that allow us to invest in tropical forest and biodiversity protection, and large-scale tropical reforestation. These investments not only help to address the biodiversity crisis, they also reduce the impact of the climate crisis by lowering CO2 emissions, absorbing CO2 from the atmosphere, and helping vulnerable communities in the Global South to adapt to a changing climate.
As Anders Holm, the Executive Director of the Hempel Foundation, explains: “The Hempel Foundation has prioritised the biodiversity crisis for our philanthropic support, and we strategically focus our philanthropy on high biodiversity tropical forest landscapes. We recognise that philanthropy can catalyse further investments, and that impact investments provide a new and growing opportunity to sustainably finance biodiversity conservation at scale. We therefore want to build on our philanthropy by investing in low to medium risk impact investment funds that have the greatest potential to support biodiversity in the areas of the world where we are already funding conservation projects. We screened over 40 different funds, and initially identified two that fitted our strict investment criteria.”
We are proud to announce that the Hempel Foundation Impact Investment Initiative has now invested in these two funds to help address the biodiversity crisis. These are the New Forests / Tropical Asia Forest Fund 2 (TAFF2), and the Timberland Investment Group / The Reforestation Fund.
"We want to build on our philanthropy by investing in low to medium risk impact investment funds that have the greatest potential to support biodiversity in the areas of the world where we are already funding conservation projects."
Investment in sustainable plantation forestry and reforestation in Southeast Asia
TAFF2 is a nature-based solutions strategy that will invest in certified sustainable plantation forestry on degraded lands and conservation areas across Southeast Asia. The Fund aims to reduce pressure on natural forests and deliver climate outcomes, as well as enhance biodiversity and improve livelihoods of local communities. TAFF2 has a blended finance structure which includes a dedicated impact tranche to deliver positive impact outcomes around climate, biodiversity and livelihoods. Some examples of the planned impact activities which TAFF2 is targeting include maintaining and restoring natural habitats within its production landscapes, establishing wildlife corridors, and creating natural forest conservation areas.
The press release for TAFF2 can be found here: https://newforests.com/new-forests-announces-first-close-of-tropical-asia-forest-fund-2-raising-us120-million-2/
Investment in sustainable plantation forestry and reforestation in Latin America
The Reforestation Fund supports large-scale investments in sustainable plantation forestry in Latin America. The business model is to buy large areas of degraded land, then to restore and permanently protect a large proportion of the land as natural forest for biodiversity conservation. Sustainably managed tree plantations are grown on the remaining degraded land, following highest FSC standards. This fund has partnered with renowned international conservation NGO Conservation International, who will advise on biodiversity and impact targets and methodologies.
More details on this partnership can be found here: Conservation International to Serve As Impact Adviser for TIG’S New $1 Billion Reforestation Strategy In Latin America – TIG (timberlandinvestmentgroup.com).
The Hempel Foundation Impact Investment Initiative is a new component of the Hempel Foundation’s growing engagement in biodiversity conservation worldwide, building on years of philanthropic support for tropical forest conservation projects in Latin America, mainland Africa and Madagascar, and Indonesia. This new initiative comes soon after the announcement of the purchase of a large area of land in Lolland, southern Denmark, that will be returned to nature as a way to support biodiversity conservation in Denmark.
The Hempel Foundation Impact Investment Initiative will continue to identify and invest in high-impact funds that support triple bottom-line returns and have strong emphasis on tropical forest biodiversity conservation.