Impact Investments for the Sustainable Use of Biodiversity in Peru (BioInvest)
Full Solution
Bridging the Gap between Enterprises and Investors
GIZ ConoSur
As one of the world's 17 megadiverse countries, which are home to 70% of the world’s species of flora and fauna, Peru economically depends on non-renewable natural resources, with consequent impacts on its rich biodiversity. The country has huge potential to market biodiversity products and services. However, one of the major obstacles faced by biodiversity-friendly businesses is the precariousness of the conditions for making sustainable investments, specifically "impact investments".
Recognising this, the Peruvian Ministry of the Environment (MINAM) emphasises the need to improve investment conditions. The project ‘Impact Investments for the Sustainable Use of Biodiversity in Peru (BioInvest)’, implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), aims to assign economic value to biodiversity and transform the current model towards a green economy. The project’s goal is to improve conditions for impact investments and other forms of sustainable financing in biodiversity-friendly enterprises.
Last update: 24 Apr 2024
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Context
Challenges addressed
Navigating coordination with public institutions posed an initial hurdle for the team. The decisions and implementation activities required close collaboration, introducing complexities in the project's early stages.
Environmental challenges centered on identifying enterprises with sustainable practices in Peru that adhere to good practices. The project team identified more than 1,300 such enterprises, requiring an extensive qualification process. Additionally, engaging the private sector, including banks and microfinance stakeholders, emerged as a third environmental policy challenge as they were unfamiliar with offering services to such enterprises.
Social challenges included measuring the stability of public sector commitment, influenced by political movements and changes within ministries which often meant that negotiations had to start over, impacting project continuity. Within the private sector, the main challenge was to reconcile profit-driven incentives with the less lucrative nature of the targeted enterprises.
Location
Lima, Lima Province, Peru
South America
Process
Summary of the process
The key success factors of the project’s building blocks are interconnected to create a holistic and sustainable approach to maximise the impact of enterprises with good practices. The collaborative partnerships across impact investors, public sectors, and microfinance institutions serve as a common thread connecting the building blocks. This creates a synergistic effect, promoting sustainable practices and supporting biodiversity-friendly businesses in Peru.
Building Blocks
Bridging the Gap between Enterprises and Investors
BioInvest works with the Investment Readiness Program to bridge the gap between enterprises and impact investors. This programme educates enterprises with three training packages on key techniques and tools to present companies attractively to investors. BioInvest also organises matchmaking events to bring companies and investors together.
Enabling factors
Collaborative partnerships with impact investors, comprehensive information about financing options, and an effective matchmaking process are key for the success of this building block.
Lesson learned
It is important to identify a common language when referring to biodiversity-friendly businesses or enterprises. Recognising diversity in terms such as ‘microenterprise’, ‘small enterprise’, or ‘medium enterprise’, and understanding factors like raw materials and value chains can improve communication and align objectives. Understanding diverse levels of enterprises, be it microbusinesses, established market players, or start-ups, is essential.
Optimisation of the Public Financing Instrument
To optimise the public financing instrument, BioInvest works with entities from the public sector such as the Ministry of Agricultural Development and Irrigation (MIDAGRI) and the Ministry of Environment (MINAM) to integrate sustainability criteria into their financing instruments. This involves optimising existing programmes to support biodiversity-friendly businesses.
Enabling factors
Close cooperation with the public sector, clear understanding of sustainability criteria, and effective communication are essential.
Lesson learned
Clearly communicating the objectives of the financing instruments is vital. Ensuring that both the enterprises and the government understand the goals and intended outcomes of the programmes establishes a foundation for successful collaboration. This transparency aids in building trust and fostering a supportive environment for the development of biodiversity-friendly businesses.
Green Financial Instruments with Microfinance Institutions
BioInvest developed sustainable methodologies to create green financial instruments and measure their impact on the environment in collaboration with microfinance institutions.
Enabling factors
Collaborative partnerships with microfinance institutions, customisation of green financial instruments, and continuous monitoring for effectiveness are enabling factors.
Lesson learned
The development of customised methodologies in collaboration with public and private sectors is crucial. These frameworks play an important role in responding to sector-specific needs and promoting sustainable practices.
Impacts
Impact on the public sector:
- A collaboration between MINAM and the Ministry of Economy and Finance (MEF) resulted in the first Green Finance Roadmap in Latin America, establishing lines of action to mobilise resources for green investments.
- MINAM and the Ministry of Agricultural Development and Irrigation (MIDAGRI) jointly promote the adaptation of a law to create a special incentive for biodiversity-friendly business models.
- The Promotion Program for Internationalization has catalysed approx. €8.3 million for companies with biodiversity-friendly business models. It is the first public funding instrument to integrate biodiversity conservation criteria.
Impact on the private sector:
- Four biodiversity-friendly companies secured €1.5 million in funding following a matchmaking event.
- The first matchmaking event was held in 2022 with 32 businesses meeting impact investors. The second edition of the Investment Readiness Program facilitated interactions between 38 companies and 14 impact investors.
- MINAM advised two financial institutions on the development of four credit lines for biodigester plants and domestic agricultural products, with a potential to catalyse up to €78 million for companies with biodiversity-friendly business models.
- A collaboration between MINAM and two Peruvian universities enabled over 40 lecturers to participate in a training programme on biodiversity finance.
Beneficiaries
By 2023, 70 biodiversity-friendly companies have successfully participated in the Investment Readiness Program. Four companies secured €1.25 million in funding and 14 certified business models benefited from €280,000 in non-reimbursable resources.
Sustainable Development Goals
SDG 1 – No poverty
SDG 8 – Decent work and economic growth
SDG 9 – Industry, innovation and infrastructure
SDG 12 – Responsible consumption and production
Story
Participants of the Matchmaking Event
BioInvest
In August 2023, MINAM hosted a matchmaking event titled "Impact Investment as a Financing Mechanism for Bio-Businesses", marking the second consecutive year of this high-impact initiative. Supported by the International Climate Initiative (IKI), the event served as a key platform to connect 38 biodiversity-friendly businesses with 14 impact investors, with the aim of mobilising private finance for positive social and environmental impact.
The participating companies came from 13 regions of the country, and the impact investors panel included renowned institutions such as Amazonia Impact Ventures, Alterfin, Bamboo Capital Partners, Beneficial Returns and Global Partnership, Root Capital, and others.
The event also provided a platform to highlight the success stories of two biodiversity-friendly enterprises that have secured funding through the 2022 investment round. One of these examples is La Campiña Peru, a company from Junin and a beneficiary of the Amazonia Impact Ventures fund. La Campiña Peru produces and exports organic ginger, turmeric, cocoa, and yacon.
Another success story is that of Cooperativa Laguna de lo Cóndores de Amazonas, as the cooperative has benefited from two impact investment funds (Alterfin and NESsT). The organisation focuses on the production and marketing of traceable and quality-safe products, currently working closely with 800 coffee producing families. It creates direct trade models with roasters in Europe or the United States.
Founders of both enterprises commented on their successful experiences and provided recommendations to guide others in their pursuit of impact investment.
