With 10 years of experience in investing in major carbon projects in Africa, Asia and Latin America, Livelihoods is launching a new impact fund to meet the needs of corporates and financial investors. Here is our interview with Bernard Giraud, President and Co-founder of Livelihoods Venture.
“We launched a First Carbon Fund in 2011, with the ambition to support companies in their carbon-neutral approach, while preserving natural ecosystems and the most vulnerable communities that are affected by global warming. Our investment model is based on supporting climate-friendly companies that are looking for carbon credits with high social and environmental value.”
Bernard Giraud, President & Co-Founder of Livelihoods Venture.
Why launching a new Livelihoods Carbon Fund?
Bernard Giraud: « We are observing a strong acceleration in the needs of companies that make commitments to reach carbon neutrality and are setting goals to reduce their carbon footprint, and at the same time to offset their unavoidable carbon emissions. The financial sector is also starting to get involved, as it is looking for investments that couple profitability and high environmental impact.
The Livelihoods Carbon Funds rely on 10 years of experience in impact investing, and in financing large-scale projects in what can call the “green infrastructure”. We launched a First Carbon Fund in 2011, with the ambition to support companies in their carbon-neutral approach, while preserving natural ecosystems and the most vulnerable communities that are affected by global warming. Our investment model is based on supporting climate-friendly companies that are looking for carbon credits with high social and environmental value.
Together with Livelihoods’ partner companies, we have built a robust model that has enabled our first two Carbon Funds outperform and deliver carbon offsets that are consistently above business plan projections. The new Livelihoods Carbon Fund #3, which will be created in 2020, will accelerate and allow both companies and financial investors benefit from this opportunity.»
What makes Livelihoods stand out from other impact funds?
Bernard Giraud: « The robustness of our projects relies on the strong involvement of communities that benefit from Livelihoods’ investments in restoring natural ecosystems, agroforestry, regenerative agriculture and sustainable energy. We invest only when we are convinced that the project will be carried out over the long term by highly involved local communities and partners who have demonstrated their ability to implement this kind of projects successfully.
Livelihoods provides upfront financing to plant millions of trees, provide trainings to the farmers in sustainable land management, soil restoration, production and distribution of rural energy solutions. All benefits go to the local communities, from increased fish stocks thanks to the restoration of mangroves ecosystems in Africa and Asia, to coffee and fruit from the Araku valley in India. In return of its investment, the Livelihoods Fund receives carbon credits that are audited and certified under the highest international standards.
Our specificity relies the fact that we have built a coalition of companies that are investing in our funds and that receive the carbon credits in proportion to their investments. The investors of our Livelihoods Funds, can take part in governance decisions and be highly involved in the projects. They are therefore in a position where they can monitor the quality of their investments, have a strong visibility of the generated impacts, unlike in other carbon credits purchasing scenarios from the carbon markets.”
What’s in for corporate and financial investors in the Livelihoods Carbon Fund #3?
Bernard Giraud: “LCF3 can interest two types of investors: on the one hand, corporates that need carbon credits to offset their unavoidable carbon emissions, and financial investors on the other hand who are looking for impact investments.
A company that invests in equity in the Livelihoods fund receives high quality environmental and social carbon credits annually at their production cost and in proportion to its investment in the fund. In return, it benefits from a combination of carbon credits from a large investment portfolio, which helps multiply investment opportunities and reduce the investment risk simultaneously. The new Carbon Livelihoods Fund (LCF3) also helps companies make carbon purchasing commitments to financial investors as the fund combines equity investment and carbon credit purchases. Thus, the company has the possibility to program its carbon credit supplies over time according to its reduction and offsetting goals by selecting its amount of investments both in equity and carbon purchasing.
Financial investors who invest in the LCF3 fund in equity benefit from an annual dividend distribution mechanism that ensures profitability. Financial investors are protected from the risks of fluctuating carbon market prices because all the carbon credits generated by their investment in LCF3 are purchased in advance by major companies according to a pre-negotiated price mechanism in the launch of the fund, which ensures a good balance of interests between financial investors and corporates.”
Beyond carbon credits, what are the other impacts generated by the Livelihoods Funds’ investments?
Bernard Giraud: “First, we measure and verify the carbon impact of our investments very carefully. We work closely with a network of organizations specialized in the certification of carbon credits according to internationally recognized methodologies. All our credits are certified under Gold Standard or Verra, which are the main voluntary carbon standards in the carbon market.
Beyond carbon, the core goal of our projects is to generate a strong social, environmental and economic impact for the populations involved. In each project, we select which United Nations Sustainable Development Goals (SDGs) will be impacted and we set up the goals and impact measurement criteria. For example, our mangrove restoration project in Senegal, launched in 2009, has planted 80 million trees on 10,000 hectares, which is the size of the city of Paris. Over 20 years, the project will sequester about 800,000 tonnes of carbon, but also improve the lives of local communities in 450 villages. In 2018, a study conducted by La Tour du Valat, a scientific organization specialized in marine and coastal ecosystems, measured the social and economic impacts of our mangrove restoration programme in Senegal. The study outlined a sharp increase in fish and shellfish stocks (4,200 additional tonnes per year), restoration of rice fields protected from land salinization, increased incomes for fishermen, women’s groups and farmers. What is important to highlight is that the project has been fully adopted and implemented by the local communities who have expressed a strong feeling of pride, among the 800 villagers who answered the survey. Communities being fully involved in the projects is a key component of the Livelihoods Funds.
What are the key success factors of the Livelihoods Funds and how is risk management anticipated?
Bernard Giraud: “We select the projects and partners we want to invest in very methodically. Livelihoods Venture, which is the social business responsible for project design and monitoring by contract, has developed strong expertise in these types of projects. The Livelihoods Venture team is a group of around twenty specialists: agronomists, forestry experts, carbon specialists, and all of them have strong field experience in the countries where we operate. Each project requires between 6 months to one year of technical and financial structuring with local partners, before they are submitted to the Fund’s Investment Committee.
We apply risk management rules, defined with our investors, including in the diversification of the typology and location of projects, local partners. We ensure a project planning and phasing along time to verify achievements and close field monitoring, by the Livelihoods teams.”