The Landscape Investment Development Hub Colombia (“the Hub) is a GEF-funded project, implemented by Conservation International and executed by IDH. The vision for the Hub was shaped by the experience of the IDH Landscape Finance (LF) in managing TA facilities for IDH partner funds, including LDN, AGRI3, &Green and Farmfit. Over the period of 2016-23, the Landscape Finance Team has built a track record of disbursing >$15 million in Technical Assistance funding, spread across 40 projects, while mobilizing $130 million of investment.
Figure 1: IDH Landscape Finance-managed TA Projects as of H1 2023
This first-hand Technical Assistance experience showed a mismatch exists between the supply and demand of capital, necessary to move the needle on sustainable land use and produce a meaningful impact on rural livelihoods and smallholders. Namely:
On the supply side,
- A lack of investment-ready opportunities with limited number of scalable companies and business models.
- Immature relationships between farmers and large food producers.
- Lack of innovation in primary business and value chain.
- Small ticket sizes
On the demand side,
- The funds have limited bandwidth, mandate, and skills to pro-actively develop high-impact projects.
- The ESG criteria are strong (which is good) but can be a challenge to meet, especially for the local operators.
- Blended finance players fund large ticket sizes and in international currency, which has an impact on the composition of their portfolios.
Keeping these challenges in mind, the Landscape Finance Team brought to the table a specific proposition to focus on developing investment-readiness opportunities, introducing the Investment Development Hub and Finance Network as new components. The Hub plays a key role in building an ecosystem for scale (as opposed to a project-based approach) in nurturing potential investments to scale, and in ensuring an exit strategy for its TA through the convened Finance Network. Specifically, it breaks down the aforementioned barriers with the following design:
- Localized and tailor-made investment preparation process, staffed with business and investment skillsets and a clearly defined investment readiness roadmap.
- A network of technical assistance providers, specialized in sustainable land management, agricultural production and ways to deliver smallholder impact.
- A grants budget to deploy to help move projects along the investment readiness map.
- Convening of the Finance Network of impact-minded financiers that closely participate in the investment preparation process through an MOU and the governance structure of the Hub.
- Harmonizing and embedding the basic requirements of funds into the investment preparation process.
- A joint pipeline sourcing process between the Hub and participating Funds.
The vision of the Investment Development Hub Colombia is to demonstrate that with specialised and localised technical assistance alongside the right capital mix, more projects can become investment-ready, and unlock investment in land degradation neutrality while promoting sustainable agricultural production and benefiting smallholder farmers.