How can we scale agroforestry to have the impact we need in terms of climate, biodiversity, social impact and food and fibers? We need the biggest investors in the world to invest and to follow the examples of the renewable energy industry which grew from very small projects here and there 20 years ago to a massive investable and bankable industry.
In this interview with Richard Focken, CEO of 12Tree, we explore the 4 year due diligence which led to a German pension fund investing 200M into agroforestry.
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In this episode together with Richard Focken, co-founder and current CEO of 12Tree, we talk about how make agroforestry investable and bankable, the barriers for institutional investors to invest and the successes they achieved after years of research and hard work.
12Tree’s Theory of Change
12Tree’s Theory of change has two focal points:
- they transform finance for professional and large scale investors because they made sustainable nature or soil based as a real asset class
- it is accessible and can deliver on sustainability issues and operational issues.
“Improving the way that forestry and sustainable agriculture is being done today, and to marry that into the financial world in such a way that all stakeholders benefit.” – Richard Focken
Investing in Agroforestry
Learning from the investment sector in renewable energy, Focken was able to raise attention to find serious capital for agroforestry. Having good management and good operational discipline allows to achieve sustainability goals without losing profit.
“The key challenge is this marriage between the impact objectives on the one side, and to still achieve sufficient profitability that allows pension funds to pay their pensions. This is completely achievable.” – Richard Focken
Barriers for Institutional Investors
Agroforestry is in the process of moving from small scale to large scale. The concept is unknown for most people. There are not enough people thinking about agroforestry. That is why there is a need to engage people, educate them in the wonders of agroforestry, and how it will benefit everyone.
“They don’t know that it exists basically, that it’s just not an asset class yet. When they do the asset allocation, nobody is thinking of agroforestry. It’s our job to get it into the radar screen and to create successful cases. Here, today’s sustainability drives. It’s happening now.” – Richard Focken
Communication with Investors
The process of communication starts from their side by presenting their case to the consultant that helps their pension funds to manage their money. At first, they are not convinced unless the return is double-digit, but they tried again to engage people, to pick people’s interest in sustainability.
“I like to apply energy, making good things, work better and bigger and get more impact, more traction. This is what they (investors, ed.) saw. They saw this energy and trusted us to create this opportunity, every investment that we do. – Richard Focken
Returns in Agroforestry
Agroforestry is a long term business, it took and will take years to see improvements. Years of research and gathering information, implementation of cases and proposals. However, the net asset value can still be measured reasonably. There can still be an increase of value established by independent experts, both on the biological forestry and on the financial side.
“Being part of a professional investment management process, we have a quarterly assessment. Once a year, there are physical controls of everything. So we know that we are developing reasonably well.” – Richard Focken
To learn more about Richard Focken and investing in agroforestry, download and listen to this episode.
Richard Focken is the co-founder and current CEO of 12Tree, pioneer in making sustainable forestry and agriculture projects investable at a large scale.
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