EM Blended Finance Fund Sees Soaring Investor Demand
Mirova seeks to support SDGs with investments in Global South agriculture and agroforestry underway.
Mirova’s Sustainable Land Fund 2 (MSLF2) is on track to hit its €350 million (US$363.4 million) fundraising target two years ahead of schedule, with institutional investor interest a key driver.
The French asset manager’s blended finance fund focused on sustainable land use in the Global South reached €100 million in its recent first close and has commenced operations. Fundraising for MSLF2 is “progressing well” towards reaching its target size of €350 million (US$363.4 million) by the end of 2025 according to Mirova.
This is a few years earlier than Mirova had anticipated, with the asset manager putting this accelerated timeline down to heightened investor interest.
MSLF was launched in December 2023 as a vehicle to catalyse a mixture of public, private, and philanthropic investment regenerative agriculture, agroforestry, and sustainable forestry in emerging markets (EMs), namely Africa, Asia and Latin America. At the time, Mirova said it aimed to raise the capital over a four-to-five year period.
“Investing in the Global South is key to meet the Sustainable Development Goals (SDGs), and while there are massive opportunities, there’s still the perception of high risk from private investors,” Gautier Quéru, Head of Natural Capital at Mirova, told ESG Investor. “Blended finance can help mitigate the risk profile and convince private investors to commit capital.”
He added that there was “great momentum” behind the fund. Additional foundations, government agencies, bilateral development finance institutions, multilateral funds, and private investors are expected to confirm their commitment to MSLF2 in the first half of 2025.
The coalition financing the fund so far comprises a mix of public, private, and philanthropic investors. Mirova noted the SDG Impact Finance Initiative had played a “crucial catalytic role” as MSLF2’s first junior investor, alongside institutional investors Abeille Assurances, Allianz France, and BNP Paribas Cardif. The initiative aims to unlock up to CHF 1 billion (US$1.1 billion) in capital towards the SDGs by 2030.
“The market has changed and biodiversity has become a very important topic and there is an increased awareness of natural capital now,” said Quéru. “Investors, especially private institutional investors, are looking to invest in the strategies addressing these topics. The trend is more favourable compared with the first fund because there is a real awareness from investors.”
This coalition also includes development finance institutions FMO and Proparco, which are set to commit investments ahead of the fund’s next close. Meanwhile, the Rainforest Alliance will help create a nature-based solutions project pipeline and support high-quality initiatives on the ground as part of the strategic partnership established with Mirova last June.
Supply chain transition
The MSLF2 is modelled on Mirova’s Land Degradation Neutrality Fund (LDN), which closed at US$208 million in June 2021, four years after its original launch.
“We are replicating the strategy of LDN fund because we’ve seen great opportunities out there,” said Quéru. “There are 2 billion hectares of land around the world to be restored, and the vast majority are in EMs.”
MSLF2 will focus on financing three activities at project level. It will invest in tree nurseries, equipment, workforce, land preparation to restore degraded land. It will look to add downstream value upstream by building processing units and do primary transformation, a function often filled intermediaries or traders and creating added value locally.
It will also support access to sustainability certification through the partnership with the Rainforest Alliance. This potentially includes carbon credits, with the additional trees being planted by the fund eligible for carbon certification from the Rainforest Alliance.
“With these three dimensions, we can support both impactful and financially attractive projects,” said Quéru.
“This fund is about impact for nature, climate, and communities, but it’s also seizing a real market opportunity in the transition of supply chains, which need to be traceable, transparent, resilient,” said Quéru. “Sustainable food and fibre supply chains are becoming a priority for many companies and for the world economy. Our intention is to generate impacts, but the supply chain transition is an opportunity we are seizing.”
Mirova has another blended finance fund focused on sustainable energy in EMs, the Mirova Gigaton Fund, while its Climate Fund for Nature is a carbon-focused fund for corporates that invests in project that sequester carbon with nature-based solution.
Blended finance is a cornerstone of MSLF2, with Quéru noting that it was a “vital tool to mobilize more funding”, leveraging public money to attract private capital.
Last May, blended finance network Convergence’s latest latest report found that global blended finance had hit US$15 billion.
In November, the Global Sustainable Investment Alliance recommended policymakers explore “innovative” financing mechanisms such as blended finance and green bonds to support climate adaptation and mitigation projects, particularly in EMs in a report released on COP29’s Finance Day.
Meanwhile, guidance from the University of Cambridge’s Institute for Sustainability Leadership released last month said that governments should capitalise on “innovative financing models” such as blended finance structures to de-risk investments in adaptation and resilience and make them more attractive to investors.
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