The FCCF seeks to pioneer a viable business model for timber production within secondary and degraded forests. Novel ventures, such as the FCCF, have potential for high impact but are naturally risky.
Therefore, the FCCF developed a financing scheme to reduce the risk for private impact investors by offering two classes of shares: I (Impact) Shares and J (Senior) Shares. Public entity investors will provide a first loss tranche (up to 50% of the Fund’s target size), providing a strong risk mitigation instrument for private investors subscribing to J shares. This means that impact investors in J shares benefit from a risk buffer which kicks in in case investments fail. This allows us to push the limits of conventional models.
The Fund will use a range of financial instruments to appropriate to each individual transaction including equity and debt instruments. Although the Fund’s reference currency is the US Dollar, it may invest into local currencies and take open exposure and contract derivative instruments to reduce or completely eliminate its exposure.
Our bottom-up approach implies that we start small and in a focused way. The Fund will close I and J Share Classes at USD 15-20 million. Managing such a small vehicle is made possible by our existing asset management infrastructure and the public funding received through the Technical Assistance Programme.