Shaun Paul, Ejido Verde’s CEO, joins us to discuss the astounding economical and environmental impacts of the pine resin industry not only to local indigenous peoples, but also to the world.
LISTEN TO THE CONVERSATION ON:
What does pine resin have to do with regeneration? How do you build true wealth for indigenous people through building assets you don’t own? What do investors get from a 20-year business cycle?
Resin’s Economical and Environmental Impact
Pine resin has a huge economic potential as it has many commercial uses. Slowly extracted from barks of pine trees, the use of pine resin goes way back—from being used in the making of Noah’s Ark as a sealant, all the way to being used as medicine by the indigenous cultural group Purépecha. To this day, pine resin is used in preservatives, kosher ingredients, pharmaceuticals, and electronics, among others. Because of its sticky component, pine resin can also potentially pose a positive impact to the environment by being used as a substitute of petroleum, which is used in making adhesives such as shoe glue.
“Commercially, the volume of pine resin traded today in the world is equivalent to the volume of cacao traded in the world.” – Shaun Paul
Ejido Verde and Pine Resin
Ejido Verde, which operates in Michoacán, Mexico, is an innovative company that taps the potential of the pine resin industry. At scale, they work on restoring mostly degraded community-owned and iindegenous lands with the use of their unique finance system and technology package. They restore hectares of eligible degraded lands through agroforestry designs (i.e. initial planting, eventual density reduction, etc.) that are specific to the characteristics of the land. At the moment, they manage more than 4,000 hectares of land, comprising about 750 family farms.
“I’d say our purpose of being in the business is building transformational wealth for forest communities, industry, and investors.” – Shaun Paul
Ejido Verde’s Integrated Capital Structure
Because land restoration and resin yields take time, one of the challenges of Ejido Verde’s business cycle is it’s 20-year term. This is quite long compared to what investors usually prefer (3-5 years). As it’s hard to get Timber Investment Management Organisations (TMOs) to invest (they prefer monoculture), Ejido Verde innovates by using an integrated capital structure, relying on various means such as equity, mezzanine debt, donations, and subsidies. Ejido Verde targets investors whose concern is fighting climate change and creating solutions to wealth inequality, rather than fast return of investment.
“I think our value proposition in the investor stepping forward is not just about financial reward and financial risk, but they’re all valuing what’s the impact and what’s the social return on investment.” – Shaun Paul
Transformational Wealth for the Community
Ejido Verde’s business model is quite radical. In their model, 90% of the wealth acquired from planting trees and resin extraction goes to the communities and farmers, while 10% goes to the investors. However, it’s not an issue because this 10% should still be an attractive sum. As a 10 year old tree could produce resin for the next 80 to 100 years, Shaun firmly believes that 12,000 hectares in a 30-year period would generate billions of profit, which can possibly reclassify the communities to middle class and later create a transformational wealth for the community.
“Our model allows people to choose if they want this to be a full-time activity, or they want this to be a family employment activity.” – Shaun Paul
Other Points Discussed
Koen and Shaun also talked about the following:
- How we need to keep the money flowing, rather than it being concentrated;
- The kelp farming in Alaska;
- A bio-based substitute for glyphosate;
- The need for new models or new ways to think about business and finance;
- How we need to find a way for capital markets to be more inclusive of indigenous people worldwide.
To know more about Shaun Paul and Ejido Verde, download and listen to this episode.
Feedback, comments, suggestions? Reach me via Twitter @KoenvanSeijen, in the comments below or through Get in Touch on this website.
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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.