Most private investors do not invest directly in farms, especially small farms: they are considered too complex with too many actors involved, too risky with a slow return on investment. Usually, they take an equity stake in companies which process raw materials from agriculture, that may have an indirect impact on farms and their environment.
Fill the gap between smallholders & sustainable sourcing
The Livelihoods Fund for Family Farming (L3F) is an investment vehicle that has been created precisely to fill this gap and foster a systemic change in agriculture, particularly with smallholders. The fund invests directly to empower farmers, help them succeed in the transition to sustainable sourcing through efficient agricultural practices, and often the replantation of millions of trees.
A key lever of L3F is to be rooted in the needs of corporations that are contractually committed to purchase from L3F projects and can mobilize their chain of suppliers. In L3F palm project in Indonesia, Mars Incorporated, Danone and L’Oréal are committed to purchase the production that will be generated in the 10 coming years by 2,500 farmers on 8,000 hectares of palm plantations. Musim Mas, a strategic supplier that purchases from palm farms and runs mills and refineries is fully engaged in the project.
Up-front investment which benefits the farmers & partner businesses
L3F takes the risk of up-front funding. With a carefully phased approach, the fund brings the financial resources to implement the project on the ground. In most cases, the money goes to a non-for-profit project developer, an NGO, a cooperative… which has a long track record working with farmers and a proven capacity to perform in this environment. L3F does not purchase land, own equity in farms or plantations. Its investment benefit directly the farmers who play a key role in the transition, through their workforce, adoption of sustainable land practices, loans, gathering in cooperatives…
Corporate offtakers reimburse the fund year after year on a result-based payments scheme: volumes of sustainable raw materials delivered, number of farmers empowered, number of hectares under regenerative agriculture practices. As a result, L3F is an ever-green investment fund which return is secured by its partner offtakers.
Public partners to generate local environmental, social and economic benefits
In several L3F projects, public institutions co-fund the project. If these projects benefit farmers and the business, they also produce a wide range of externalities that are public goods related to the UN SDGs: environmental impacts on climate through carbon sequestration, restoration of biodiversity, of soils, water resources… Social impacts such as poverty reduction, rural development, gender, food security. This approach of private-public partnership contribute to share the risks and to enhance the impacts of Livelihoods Fund investments.
Learn more about L3F business model & projects.
More about Livelihoods palm oil sourcing project in Indonesia
A functional coalition for sustainable & inclusive palm oil
What are the main challenges & ways forward for the palm oil industry?