GEF Raising African Forestry Fund
Global Environment Fund is raising $150 million for a private equity fund solely focused on sustainable forestry in sub-Saharan Africa. It already has secured a $50 million commitment from UK-based development finance group CDC.
CDC, the UK’s development finance institution, has today committed US$50m to the first private equity fund to focus solely on sustainable forestry in sub-Saharan Africa. The pioneering investment will help to develop and grow businesses in the expanding forestry sector in Africa and will bring jobs to the people in those communities, as well as broader potential ecological benefits.
CDC is committing US$50m to the GEF Africa Sustainable Forestry Fund (GASFF), which will be run by fund manager, Global Environment Fund (GEF). The first close of GASFF (“the fund”) is US$84m which is being committed principally by development finance institutions. Private investors are expected to invest subsequently, bringing the fund to its target size of US$150m.
The fund is targeting commercial returns and is expected to invest in and develop between five and 10 forestry businesses across sub-Saharan Africa, with a particular focus on greenfield and existing plantations. The forestry businesses will grow, process and market timber products to meet the growing global demand from industries including construction, energy, furniture and bio-fuel.
Richard Laing, CDC’s Chief Executive said:
“CDC has been instrumental in the creation of this fund, the first of its kind in Africa. From identifying the need for a sustainable forestry fund, selecting the manager to run it, through to providing the US$50m cornerstone investment that is essential to getting it off the ground, CDC continues to play its part in bringing innovative and vital investment to developing countries.”
“As well as the economic impact that this investment can bring, plantation forests also provide important environmental benefits, including reducing carbon emissions, protecting soil and reducing pressure on natural rainforests. Sub-Saharan Africa has the potential to reap these rewards.”
GEF, the investment team that will run the sustainable forestry fund, has a long history of investing in sectors that make a positive impact on the environment and quality of life. GEF has around US$1bn funds under management, including an emerging markets forestry fund which has invested in businesses in South America, South-East Asia and Africa. In 2009, GEF received the Financial Times’ award for Sustainable Investor of the Year.
The GASFF fund, which closed on 24 May 2010, will start to make investments immediately, with an investment size typically between US$15m and $30m. There are several countries within sub-Saharan Africa that provide good opportunities for forestry investments including Mozambique, Tanzania, Swaziland, South Africa, Uganda, Ghana, Malawi and Zambia.
The fund’s investments will drive economic improvement in the communities in which it invests through direct employment, local taxes, support for local schools, and other community projects. The fund’s investments will also support the basic needs of employees and families, including housing, schools, clinics, clean water, nutrition programs and job training.
GASFF’s forestry assets will also sequester significant quantities of CO2, and will avoid deforestation and degradation through its sustainable management of plantations and natural forests.
Richard Laing added:
“The climate and conditions in sub-Saharan Africa give it a compelling natural advantage in developing sustainable forestry, but the continent has traditionally failed to attract investment because of high perceived risks. An improving political and economic backdrop, combined with growing local and global demand for timber and increased attention on climate change issues, means that African forestry is now well placed to receive the investment its people and governments are calling out for.
“We believe our US$50m backing of the fund will be a catalyst to give other investors confidence that investment in forestry in sub-Saharan African can generate acceptable returns. Attracting others to invest is a key part of CDC’s mission and the presence of others in this new fund is an encouraging sign.”
GASFF is managed by John Earhart, one of the creators of the Forestry Stewardship Council (FSC) and Ole Sand, who joined GEF from the forest investment team at the International Finance Corporation. Their combined experience and that of their team in the forestry industry in emerging markets will mean that the fund and its investments will be subject to world-class environmental, social and sustainability standards.