This presentation by UNCCD Global Mechanism was given at a session titled "Land Degradation Neutrality (LDN) Fund" at the Global Landscapes Forum: The Investment Case on June 10, 2015. For more, please visit http://www.landscapes.org/london/

1. Global Landscapes Forum
London, 10 June 2015
Simone Quatrini (LDN Fund Coordinator)
Siv Øystese (Advisor: Land, Private Finance and Investments)

2. 1. WHY AN INVESTMENT FUND
12 million hectares of land are degraded every year by human activities.
By rehabilitating this land:
• we create a land degradation neutral economy
• we achieve food security by 2050
• we contribute to biodiversity conservation
• we mitigate climate change by sequestering up to 20% of CO2 emissions by 2050
Bankable projects for transitioning to land degradation neutrality can
deliver strong social and environmental benefits and long-lasting positive
impacts alongside with market average or above-average financial returns.
1

3. New York Declaration on Forests 350m ha by 2030
Bonn Challenge 150m ha by 2020
WRI/IUCN 20x20 initiative 20m ha in LAC by 2020
Meta-Atlantica Pact 15m ha by 2050
WBCSD Action 12m ha per year by 2020
2. SIZE: A LARGE SCALE ENDEAVOUR
$ 100-150 / ha average cost of land rehabilitation
± $ 1.2-2 bn/year financial needs for rehabilitation
2 billion hectares of degraded land worldwide are available for rehabilitation
18 Countries voluntary committed to LDN (> 30m ha):
Algeria, Armenia, Belarus, Bhutan, Chad, Chile, Costa Rica,
Ethiopia, Grenada, Indonesia, Italy, Korea, Myanmar, Namibia,
Nicaragua, Panama, Senegal, Turkey
+ China, East/Southern Africa, Central Asia, Mekong, Caribbean
2

4. 3. NO ‘LAND GRABBING’
The fund willThe fund will not
 secure access to degraded land
 promote commitment to sustainable
use by all concerned stakeholders
 finance rehabilitation operations
× buy/sale land
× execute land transactions
× finance land-use operations
Via the provision of finance conditional to long-term land rehabilitation
and sustainable use the LDN Fund will address:
 Inefficient markets
 Weak regulations
A rigorous due diligence process will:
 Identify suitable land and investable projects
 Produce positive social and environmental impacts
3

5. PLATFORM
12 Million hectares of degraded land upgraded to profitable assets, per year
 Private investment fund
 Evergreen
 Leveraging private investors
 Enhanced by public funding
 In partnership with international and local operators
 Developing & Developed Countries
 Large scale rehabilitation projects & medium scale via partner intermediaries
 Debt & Quasi-equity instruments
 All sustainable land-use sectors: sustainable agriculture, sustainable forest
management, conservation, renewable energy, infrastructure, eco-tourism, etc.
 Complemented by targeted technical assistance
• ANNUAL
LDN
STRATEGY
TARGETS Mobilised Rehabilitated Reached Reduced
$ 2bn
$ 50bn• 20 YEARS
12m ha
300m ha
5-6 countries
Worldwide
1Gt
20Gt
4. HOW IT WILL WORK
4

6. Fin. Returns
Profits
Land Value
INVESTORS
BUSINESSES
LANDOWNERS
LAND (SUPPLY)
- Public
- Private
LAND (DEMAND)
- Multinationals
- SMEs
FINANCIAL CAPITAL
- Institutional
- Impact
REHABILITATION
LDN
5. DIRECT CHANNEL: LARGE DEALS
5

7. CO-
INVESTMENT
Financial
Institutions
FUND of
FUNDS
(marginally)
10-25% of Fund’s assets could be allocated for small and medium scale projects through:
 Selection of partners funds/investors
 Entering into cooperation agreements
 Deal by deal basis
 Mainly debt financing
 Financing existing/new funds
 Supporting innovative strategies
 Targeting regions/sectors not
accessible by a large fund
 Building trust relationship with local land
rehabilitation project promoters
 Providing debt funding and capacity
building services through local banks
Examples of potential partners:
6. INDIRECT CHANNEL: OPTIONS
6Companies are mentioned for illustrative purposes only. This should not be considered as a firm commitment to partner with the LDN Fund

8. 7. BUSINESS MODEL (INDICATIVE)
Current
Land Use
Type
Land
Ownership
Land
Degradation
Severity
Opportunity
Costs
Intended
Land Use after
Rehabilitation
Market Value
Generated
from
Rehabilitation
LDN
FUND
Channel
LDN FUND
Investee
LDN FUND
Instrument
LDN FUND
% Portfolio
(indicative)
Private Low Medium
Sustainable
soft
commodity
production
Medium Direct
Agri-
business
Loan 25-30%
Public Medium Low
Renewable
Energy
+ Livestock
High Direct
Energy
company
Loan /
Equity
25-30%
Public Low Low
SFM +
Conservation
High Direct
Forestry
company
Loan 10-15%
Public /
Private
High High
Sustainable
Infrastructure
Low Direct
Construction
company
Loan 10-15%
Private Medium Medium
Value chain
development
High Indirect
Financial
intermediary
Loan 5-10%
Public /
Private
High High
Sustainable
Mining
Low Direct
Mining
company
Loan 5-10%
Communal Medium Low
Holistic
Livestock
Management
Medium Indirect Existing fund Equity 0-5%
7

9. 8. TYPICAL INVESTMENT
8
Cash flows from
leasing out
upgraded land
LDN Fund investments
Opportunity
costs to access
degraded lands
Debt finance for
rehabilitation
activities

10. • Under-performing
land assets can be
upgraded via debt
financing.
• Land restoration
companies can bid
for rehabilitation
projects enabled
by the LDN Fund.
• Upgraded land
assets can be
secured for long-
term sustainable
use against leasing
fees, commitment
to LDN, social and
environmental
standards and
impact reporting.
• Stranded land
assets can be
made available for
rehabilitation and
sustainable use.
• Companies invest
in the Fund to
pursue/achieve
LDN targets.
• Productive land
assets are
available for
continued
sustainable use by
the same or new
land operators,
under renewed
commitment to
LDN.
9. OPTIONS FOR BUSINESS ENGAGEMENT

11. High risk
• Forestry (forestry, papers, metals, etc.)
• Construction and materials
• Food and beverage
• Industrial goods and services
(transportation, packaging, etc)
• Leiure and travel (airlines, hotels,
restaurants, etc)
• Personal and household goods (consumer
electronics, tobacco, clothing, etc)
• Utilities (water, electricity)
Medium risk
• Chemicals
• Health care (e.g. equipment and services)
• Insurance
• Oil and gas
• Real estate
• Retail
Source: ELD, 2013
10. LAND MATERIALITY RISK

12. 10. BUSINESS COMMITMENTS
Companies are mentioned for illustrative purposes only

13. RISKS BARRIERS
LDN Market risks Pipeline
Viability Track record
Innovation Risk/Return imbalance
Size/Concentration Scalability/Replicability
Operational risks Financial
Transaction costs Unsuitable instruments
Liquidity Investors’ short horizon
Currency Volatile local currencies
Political risks Regulatory
Policy change Uncertainty
Access & Exit Lack of policy support
Communication Unlevelled playing field
12. SPECIFIC FEATURES
Source: adapted from ‘Green Finance and Investment’, OECD series, January 2015
RISK MITIGANTS TRANSACTION ENABLERS
Risk management Platform
Insurances/Guarantees Multiple channels
Portfolio diversification Blended capital
Co-investment Warehousing/Pooling
Credit enhancement Other incentives
In-house expertise Direct channel, TA facility
Tailored notes issuance High capital & return protection
Hedging, First loss Portfolio hedge
UNCCD oversight LDN commitments
Enabling conditions Investment-grade policies
Public stakes Land tenure policies
Disclosure Strategies and roadmaps

14. Through a successfully tested layered fund structure
 Private Institutional Investors investing in well protected Notes with adapted liquidity and return
 Private Impact investors participate as senior shareholders
 DFIs and donor agencies support private investors by providing credit enhancements through
junior equity or guarantees to the LDN Fund
 All investors pooled to invest collectively in upgraded land through rehabilitation
13. BLENDED CAPITAL STRUCTURE
9

15. With an efficient independent governance structure
 LDN Fund = private entity managed by private Fund Manager targeting private investors
 High reputation Fund Manager advised by specialised rehabilitation finance firms
 Alternatively, Fund Manager established as a private equity firm
 Board of Directors (BD) representing interest of shareholders
 Decisions on investment proposal approved by expert Investment Committee (IC)
 UNCCD Global Mechanism (GM) leveraging commitments to LDN and ensuring ethical standards
Board of
Directors
Investment
Committee
International
Private
Fund
Manager
Investment
Advisor
Sector 1
Investment
Advisor
Sector 2
Investment
Advisor
Sector 3
14. PRIVATE GOVERNANCE STRUCTURE
10

16. 11
Country Project Developer / Incubator Project Size
(m. ha)
sustainable livestock intensification Althelia Climate Fund 0.5
certified teak plantation + intercropping Across Forest + Nica-Forestal 0.8
reforestation of degraded tropical forest President + Min. Environment 0.8
restoration of the Oasis ecosystem Ministry of Water, Energy, Environment 1.0
dryland restoration with rural communities Niger river basin authority 1.0
solar energy (PV) project Green Silk Road Fund – Elion Foundation 1.3
sustainable economic land concessions (ELCs) Conservation International + MAFF 2.0
renewable energy in economic dev zones Jordan Investment Commission 2.0
land banking to support land consolidation Ministry of Agriculture 3.0
holistic livestock management in Patagonia Aurora Impact – Savory Institute 6.0
Total Land 18.6
Brazil
Nicaragua
Costa Rica
Morocco
Niger
China
Cambodia
Jordan
Turkey
Argentina
15. PROJECTS OF INTEREST (SAMPLE)

17.  June – Sep 2015 : identification of
anchor investors and setting up of a
co-promoters committee
 June – August 2015 : selection of
fund manager and identification of
specialised investment advisors
 July 2015 : press release at the
Finance for Development
conference (Addis Ababa, Ethiopia)
 June – Oct 2015: preparation of investment cases
for initial pipeline
 October 2015 : business commitments to LDN
announced at UNCCD COP12 (Ankara, Turkey)
 December 2015 : official launch at UNFCCC
COP21 (Paris, France)
13
16. NEXT STEPS

18. CONTACT
Mr Simone Quatrini
LDN Fund Coordinator
Private Sector Finance & Investments in Land
The Global Mechanism of the UNCCD
UN Campus, LE-1414, Bonn, Germany
P: +49 228 815 2860
M: +49 173 278 6901
E: squatrini@unccd.int