Description financing model: Intermediated Financing Facility

Commercial capital is channeled through a facility that extends loans to farmers. These facilities often pool funding from both commercial and catalytic sources, enabling greater scale while balancing risk and return

Applicability: Well-suited for a range of asset owners (e.g., pension funds, institutional investors) who seek to support farmer financing without direct engagement

Considerations: Success is dependent on effective matching of stakeholders with different risk-return expectations

Description of de-risking tool(s):

Offtake agreements: Contractual commitments by value chain actors to purchase sustainably produced outputs at pre-agreed terms, providing revenue certainty and improving bankability

Ecosystem outcome monetization: Positive environmental outcomes (e.g., carbon sequestration) of farmers are quantified and monetized through ecosystem outcome credits (e.g., carbon credits). This creates an additional revenue stream for projects and links sustainability outcomes directly to financial returns

Case study description: 

This model aims to revolutionize cocoa production by converting degraded cattle pastures into regenerative & carbon-negative full-sun cocoa farms alongside large-scale restoration of adjacent Cerrado native biome

1. NewAg identifies and secures suitable properties (micro-climate, topography, soil type, water supply, scale)
2. NewAg sets up a local “LandCo” acquiring the land (Brazilian majority-owned) & a local “FarmCo” to farm & own trees (cocoa & indigenous species) and irrigation/ energy/ nursery infrastructure
3. Both FarmCo and LandCo raise domestic and foreign equity & debt (over time: concessionary loans and/or impact-linked bond)
4. NewAg has signed an MOU for a 15yr fixed price & volume forward purchase agreement on its behalf with a major global food corporate, leveraging this to raise funds from strategic and financial investors; FarmCo leases land from LandCo in a long-term, stable arrangement
5. New Ag’s local partners & C-suite are leading global experts in cocoa & nature restoration to establish the farm & execute the business plan
6. FarmCo generates carbon credits, validated by an independent partner and made available to value chain players & investors
7. Aim is to establish a “hub & spoke” system, educating other farmers to adopt and expand sustainable practices & restoration project in the wider region and support adoption with saplings, financing, processing

Targets size of $780M of which ca. $140M LandCo equity & debt, plus ca. $680M FarmCo equity (capital calls in 3 tranches over 5 yrs); target USD IRR of > 15% for FarmCo investors (higher for early-stage investors) and USD IRR >11% for LandCo