High Impact Investments – Limited Risks

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 uses 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.