One fund - two continents
Nature provides the foundation for our existence and is the basis for economic activity. And yet it is facing ever more pressure from human intervention: mining, intensive agriculture, deforestation and unregulated fishing are increasingly threatening natural resources. In many parts of the world, the impacts of this are already clearly visible: soils are degrading, forests are disappearing and water is polluted.
We are seeing unprecedented biodiversity loss. According to figures from the IPBES biodiversity platform, up to a million plants and animals are at risk of extinction. This means that today, the rate at which species are dying out is at least ten times higher than the average rate over the last ten million years.
When humans encroach on nature
The coronavirus pandemic offers a good example of the importance of an intact environment to human survival. Scientists have identified that around 60% of all existing illnesses and more than 70% of new illnesses seen in humans have zoonotic origins, meaning that they have jumped from animals to humans. The more humans invade areas of nature, the higher the likelihood that pathogens are able to spread.
To halt this dangerous trend, new economic practices are needed that rely on sustainability instead of resource depletion, alongside effective nature conservation. This is why KfW established the eco.business Fund in 2014, on behalf of the Federal Government and working in partnership with Conservation International and Finance in Motion.
First in Latin America, now in Africa too
The fund exclusively supports companies that replace conventional production processes with sustainable alternatives. Its work started in Latin America, and since the end of 2019 has been extended to sub-Saharan Africa. The two regional funds work separately but under a single umbrella.
The fields of assistance in both regions are: agriculture and forestry, fishery, aquaculture and ecotourism. To this end, the fund brings together private and public investors who assume different levels of risk. The involvement of public institutions creates a risk buffer for other investors – this makes the fund more appealing and attracts more private capital. In Latin America, private investment now accounts for 30% of the total volume.
A lot has been achieved already
In Latin America, the fund grants “green credit lines” to local banks, which in turn extend loans to local companies. In Africa it grants loans both to banks and to companies themselves. They must have sustainability certificates from the Rainforest Alliance or FSC, for example, or be striving to acquire them, or be implementing a sustainable measure in line with the green “fund principles”. Since the fund’s formation, loans totalling more than EUR 1.1 billion have already been disbursed to ultimate borrowers.
In Africa, operational work is just getting underway; the focus is currently on countries in East and West Africa and on deforestation-free agricultural products like cocoa, coffee and bananas. In general, however, the fund could feasibly cooperate with every country in Sub-Saharan Africa. The first commitment was made in March 2020, to a cocoa producer in Côte d’Ivoire that was certified by the Rainforest Alliance. This was followed by a commitment for cultivation of sustainable tea and coffee in Kenya. Further investments are planned in the near future.
The fund has achieved a lot since 2014. In Latin America, for example, it has helped to protect more than 160,000 hectares of land from deforestation and to save over 4 million cubic metres of water. Soil protection measures were also implemented on over 117,000 hectares of farmland; this is roughly equivalent to the area of Berlin. Furthermore, agroforestry saved around 8 million tonnes of CO2 and preserved and created 380,000 jobs in the eco sector. The intention is for the fund to achieve a similar impact in Africa, as the region is currently facing major challenges due to poverty, undernourishment and high population growth rates, while still dealing with COVID-19.