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Fund: Liveligoods Carbon Fund 3, agricultural technology and new concepts of agribusiness

Fund: Liveligoods Carbon Fund 3

On this page: The Livelihoods Carbon Fund 3 (LCF3) launched in 2021 and combines equity capital from some international investors seeking ERC returns and others seeking financial returns to provide upfront financing for ERC activities. Read more below, or visit Strategic Guidance for Country System Assessments, Guidance for Countries in Assessing ERC Projects, or Mobilizing ERC Finance. 

FORESIGHT SUSTAINABLE FORESTRY (FSF)

Issuer

Livelihoods Funds

Key Lessons

  1. LCF3 leverages synergies between corporates seeking secured access to a
    source of high-quality ERCs and financial investors seeking to engage in ERC
    markets with minimal risk.
  2. Portfolio diversification across project types and jurisdictions helps to reduce
    the overall credit risk and operational risks for LCF3 investors, complemented
    by a partial credit guarantee from U.S. DFC.
  3. LCF3’s structure is particularly suitable for small or mid-size ERC buyers who
    do not necessarily have the resources or expertise to engage with ERC
    activities directly (e.g., extensive project and credit purchasing due diligence).

Instrument

Fund

Return

Depending on the type of share held (Class A, B, or
C), LCF3 investors may receive ERCs or receive
cash returns that are dependent on the sale of
ERCs through long-term offtake agreements.

The Livelihoods Carbon Fund 3 (LCF3) combines equity capital from some international investors seeking ERC returns and others seeking financial returns to provide upfront financing for ERC activities (Figure 9). Launched in 2021, LCF3 is a $150 million fund that invests in large-scale natural ecosystem restoration, agroforestry, and rural energy projects in developing countries across Africa, Asia, and Latin America. LCF3 is the third in a series of progressively larger and more impactful funds.

LCF3 structures ERPAs as debt transactions with an obligation to repay in the form of ERCs. There are three types of shareholders in LCF31:

  • Class A shareholders, primarily corporates, make an equity commitment in exchange for future delivery of ERCs, starting in years 2-3 of the fund. The ERCs that are delivered to Class A shareholders will gradually draw down their equity holding until it is fully redeemed.
  • Class B shareholders, primarily financial institutions, make an equity commitment in exchange for future cash returns (est. >5% IRR) that are dependent on the sale of ERCs through long-term, pre-negotiated offtake agreements with Class C shareholders. The dividends that are distributed to Class B shareholders will gradually draw down their equity holding until it is fully redeemed.
  • Class C shareholders, primarily corporates, make an equity commitment in exchange for future delivery of ERCs, in addition to entering into long-term offtake agreements with Class B shareholders.

LCF3’s investors comprise Bel Group, Chanel, Danone, DEG Invest, Eurofins, Global Environmental Facility, Hermès, L’Occitane Group, Mars, Mauritius Commercial Bank, McCain Foods, Orange, SAP, Schneider Electric, and Voyageurs du Monde.2

LCF3 creates synergies between the interests and preferred level of ERC market exposure of investors that want to receive ERC returns and those that want to receive financial returns, which is a key element among a package of risk mitigation elements. Portfolio diversification across project types and jurisdictions helps to reduce the overall credit risk and operational risks for LCF3 investors. Class A and Class C shareholders, mainly corporates, are exposed to ERC market risk in exchange for access to a supply of ERCs. Class B shareholders, mainly financial institutions, can tap into the increasing value of ERC markets through a diversified portfolio of ERC activities managed by an experienced impact investment fund manager but are insulated from market risk by the long-term offtake agreements and credit enhancement through a partial credit guarantee from U.S. DFC (originally agreed through USAID’s Development Credit Authority).

Figure 9. Financial structure of Livelihoods Carbon Fund 3

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Footnote 1: GEF, Livelihoods Carbon Fund 3 (LCF3), 2023.

Footnote 2: Livelihoods Funds, The Livelihoods Carbon Funds, 2023.

Additional Resources

This section is intended to be a living document and will be reviewed at regular intervals. The Guidelines have not been prepared with any specific transaction in mind and are meant to serve only as general guidance. It is therefore critical that the Guidelines be reviewed and adapted for specific transactions. Unless expressly stated otherwise, the findings, interpretations, and conclusions expressed in the Materials in this Site are those of the various authors of the Materials and are not necessarily those of The World Bank Group, its member institutions, or their respective Boards of Executive Directors or member countries. For feedback on the content of this section of the website or suggestions for links or materials that could be included, please contact the Public-Private Partnership Resource Center at ppp@worldbank.org.