Alliance between the Green Climate Fund and IDB Lab co-finances Mexican regenerative early-stage company Ejido Verde
Ejido Verde is the first company to be financed by the Low Emissions and Climate Resilient Agriculture Risk Sharing Facility for Mexico and Guatemala. The facility is implemented by IDB Lab, in a blended finance model with the Green Climate Fund to promote innovative climate projects.
IDB Lab, the innovation laboratory of the Inter-American Development Bank Group, approved a loan and a technical cooperation for Ejido Verde SAPI de CV, an early-stage company dedicated to the reforestation of pine resin trees for commercial use. The loan, aligned with the life and productive cycle of pine trees, will be used to co-finance the expansion of 1,200 hectares of pine resin plantation and their maintenance in Michoacán, Morelia.
Planting native pine resin species for resin production is a regenerative strategy that was initially developed as an internal project of the Unión Nacional de Resineros in 2009, and in 2018 it started as an independent for-profit company. Ejido Verde obtains raw resin from plantations managed by ejidos and indigenous communities, which is extracted from the pine trees 10 years after planting, for its subsequent processing and transformation into resin derivates. These derivates contribute to global value chains related to the production of chemical products, such as paint, adhesives, perfumes, food, and soaps, among others.
This business model is also inclusive. Ejido Verde generates rural employment in raw resin collection, and as a result of this financing, will generate a source of sustained income for 852 families in 19 indigenous communities and ejidos of Michoacán. The Ejido Verde business model also promotes the revaluation of land, which in Michoacán has been highly devalued as a result of the expansion of the agricultural frontier and forest degradation. In fact, in Michoacán around 67,000 hectares of forest are lost each year as a result of unsustainable land use.
From an environmental perspective, this scheme is aligned to the concept of Climate Smart Agriculture: the 5,460 hectares of pine resin trees are a source of ecosystem services by annually sequestering 110,000 tons of CO2, and converting degraded lands; participating indigenous communities and ejidos receive training to adapt to the effects of climate change and manage climate risks in an informed manner; and through demonstration plots and biotechnological experiments (fertilization and genetics), the company seeks alternatives to increase productivity of the forest species it uses.
The financing granted to Ejido Verde is an example of a highly-effective blended finance model in which loans directed to forestry companies, while requiring long terms aligned to their productive profiles and cash flows, can be financially feasible, socially inclusive and climatically innovative.
About the IDB Lab
IDB Lab is the IDBG innovation laboratory to promote development through the private sector by identifying, supporting, testing and piloting new solutions to development challenges and seeking to create opportunities for the poor and vulnerable populations in the LAC region. To fulfill its role, it engages and inspires the private sector and works with the public sector when needed. www.idblab.org.
About the GCF
The Green Climate Fund (GCF) was established in Cancun in 2010, as the operational entity of the Financial Mechanism of the Convention on Climate Change, to support low-emission and climate-resilient investments in developing countries. The Fund offers grants, concessional loans, guarantees and capital. The Fund's mandate is to make a significant and ambitious contribution to combating climate change by promoting a paradigm shift towards low-emission and climate resilient development pathways. https://www.greenclimate.fund/
About Ejido Verde
Ejido Verde is an early-stage company created in 2018, which, in alliance with indigenous communities and ejidos in Michoacán, promotes the establishment of forest plantations as a regenerative strategy to address mitigation and adaptation problems, and the commercial sustainable use of pine resin. In 2020, Ejido Verde was positioned as one of the “Most Innovative Companies” in Latin America according to Fast Company. https://ejidoverde.com/es/