January 20, 2020
A project to expand FSC certified teak and UTZ certified cocoa plantations in the rural Siuna region of Nicaragua scores exceptionally high points in Finnfund’s development impact assessment. The high score is based on the project’s contribution to carbon capture, protection of fauna and curbing deforestation as well as the various social impacts, such as proper jobs, improved income for local smallholders and equal opportunities for women.
Finnfund is providing a 10 million USD loan to finance the expansion project of MLR Forestal de Nicaragua, a forestry company operating teak and cocoa plantations. The company will sell most of its certified teak through international traders to Indian and other Asian markets. The fine cocoa produced is currently sold in the local Nicaraguan market but as production continues to increase, international markets will be sourced. “The demand for sustainable and responsibly produced fine cocoa is on the rise while there are established markets for teak products”, says Finnfund’s Investment Manager Ilkka Norjamäki.
“What MLR is doing with our loan has the potential to make this one of our highest impact investments ever”, says Norjamäki. “The company operates in one of the poorest parts of Nicaragua, which is one of the poorest countries in its region. The positive impact on people, climate and the environment is clear and measurable. There are obvious risks related to this type of operations and we have to work with the company to manage them effectively.”
Finnfund has paid special attention to the environmental and social risks related to land acquisition, presence on indigenous populations and biodiversity management as MLR plans to expand its planted area by another 1,900 hectares to reach a total area of approximately 4,500 hectares. “During our due diligence visit to the site, I was convinced of MLR’s commitment and competence to manage the risks and impacts. They have built a multidisciplinary and solid team with expertise from different parts of Latin America. The company already holds an FSC forest management certification and a UTZ certification for cocoa production. The team is committed to continue the development of their social programmes with the local communities and enhance their environmental practices. It will be a pleasure to work together on these”, says Finnfund’s Environmental and Social Adviser Harold Gordillo.
The development impact of the project includes
- Significant increase in production of certified, sustainable and responsible teak and fine cocoa
- Curbing deforestation and forest degradation, increasing carbon capture and acting as carbon sink.
- Protection and promotion of fauna through established ecological corridors
- Transformative impact on local economy through 480 formal jobs, annual salaries increasing to 2.4 million US dollars, purchases of cocoa from local farmers worth 1.4 million US dollars annually
Investment Manager Ilkka Norjamäki, ilkka.norjamaki (a) finnfund.fi, tel. +358 40 866 8642