Mr. Marco Kaiser (Managing Director) | Interview given to Ms Maria Louisa Vafiadaki
-Please talk to us about the Arbaro Fund. Where does it primarily invest in and what is its mission?
My background is in banking. I quickly realized that typical banking is not what I wanted to do. I had the chance to be exposed to corporate finance and I was always interested in politics and social development. That’s how I got into microfinance and development finance. At Finance in Motion I was looking at new investment topics: water & agriculture when I got in touch with UNIQUE, which became our joint venture partners in 2017. UNIQUE’s technical background in emerging markets investing is a great fit with Finance in Motion’s investment experience and it ensures that each investment is backed by a multidisciplinary deal team.
It’s a challenge to convince institutional investors to invest in emerging market forestry, as it is not so commonly known as an asset class yet. Now, the mindset is changing with an increasing understanding of the importance of the carbon sequestration the asset class provides. We target small- to medium-sized projects in markets with increasing demand of wood products but less developed forest plantation sector, be it due to lack of capital or knowhow. These markets have in common that they used to have significant natural forest resources that were heavily utilised and consequently these resources have been severely depleted and there are three options left: 1) continue exploiting the remaining natural forests if any are still left or 2) rely heavily on imports or 3) establish sustainable timber production practices locally. Our investors and us want to contribute to the last option.
-Which problems are you looking to face?
The key issue is deforestation and unsustainable use of natural resources. We want to use land smartly and efficiently and we target such land for our plantation development that has been under-utilised so far, e.g. by cattle farming. We never convert forests or other rich ecosystems.
Importantly, we never compete with food production. We plant on land that probably used to be forest land decades ago and was since logged and land use changed. Primarily, we want to supply local industries with locally produced sustainable timber although it is difficult to earn a premium in local markets for FSC certified timber. These industries often still rely on non-certified unsustainable resources. Our strategy allows us to educate the market, making commitments only by locally sourced and certified timber.
-What are the main sources of funding for Arbaro and why should one invest in sustainable forestry?
All our investors are sophisticated investors such as development banks, pension funds, family offices or insurances. They have different intentions. Some are financially driven and some invest in forestry because of the carbon component. Carbon as an asset class has become increasingly interesting for investors. Our investments also generates other benefits such as employment in rural areas, regions where formal employment is scarce or non-existent.
-Through which vehicles do you lobby for sustainable forestry development? Do you collaborate with other pressure groups or NGOs in the countries where you operate?
We do not actively lobby for sustainable forestry development and are not associated with specific groups. Of course, we work with FSC (Forest Stewardship Council) as all our assets have to obtain the FSC certification. We also work with local communities who are the most important stakeholders locally.
-From your perspective, how important is the role of local governmental structures in the countries where you operate in ? What should change in the current government structures?
I think it’s a long term process. There are concerns about land tenure, making sure that rights to specific land is clearly understood, not only legally but also related to customary rights. We see governments increasingly providing incentives for forest establishment, because of employment and climate impacts. Compared to agriculture, it’s much more labor-intensive and generates more jobs.
The problem is that many countries are not enforcing legislation against illegal timber and unsustainable practices. This is where the government can be more present.
-Which markets are you primarily investing in ?
Primarily, we invest in Latin America but we also invested in Ghana and Sierra Leone.
Investments in Africa are more challenging. Land is publicly owned and made available through long term lease or concession agreements whereas in Latin America we work with private sector. With a less experienced workforce and less developed local markets, there is much more project development required for many projects in Sub-Saharan Africa.
- What does sustainability mean to you?
To us, it means taking a long term view on the impact that you generate with your investment on all stakeholders, including local stakeholders who are directly affected by the business you are doing. We want to be carbon negative with every single investment that we make.
Please name some main challenges in your work.
There is still limited experience of investors as regards forest investments in emerging markets. It is important to explain the benefits of timber production, its positive impacts and its importance to develop the bio-economy.
What are your goals for the near future ?
We are planning a new fund in 2022 as we are currently experiencing increasing interest in the asset class driven particularly by the carbon sequestration component that we can offer.
How can one reach you ?
Through Arbaro’s Investor Relations team and/or the Communication Department.
Why is Arbaro successful ? Can you name some KPIs which indicate this success ?
We typically highlight three KPIs to investors: achieving carbon sequestration, employment generation in the value chain and financial return. Also, we are currently looking to include further impact indicators, particularly related to biodiversity, in our work.
Thank you.
