Toronto, 11 September, 2024 — Convergence awarded a proof-of-concept grant to Mekong Capital for its impact initiative, Mekong Earth Regeneration Fund (MERF). MERF is a USD 200 million blended finance vehicle that will provide growth-stage private equity funding focused on regenerative agriculture and sustainable land use business models in the Lower Mekong region. This grant is awarded through Convergence’s Asia Climate Solutions (ACS) Design Grant.
The majority of the local population in the Lower Mekong region is dependent on agriculture and rural farming, making them severely and disproportionately affected by climate change. Over the past decades, changing agricultural land use practices have led to increased exposure to climate hazards and increased GHG emissions from the agriculture, forestry, and land-use sectors. Meanwhile, private investments in the local sustainable agriculture and forestry sectors remain low and mainly take the form of debt, which is unsuitable for many businesses looking for patient long-term equity financing to support them in adopting more sustainable agricultural practices.
This initiative seeks to leverage Mekong Capital’s significant experience to address the gap of undersupplied equity funding in the region and support the expansion of impactful agri-businesses. In addition, MERF intends to provide hands-on support to investee companies through a complementary technical assistance facility that will help expand the operational capacity and impact for these companies.
MERF aims to cultivate a thriving, biodiverse ecosystem in the Lower Mekong region focusing on Cambodia, Laos, and Vietnam through sustainable land use, nature-based solutions, and regenerative farming practices. Together with climate mitigation benefits, it aims to provide significant co-benefits of improved livelihoods, climate adaptation, and enhanced resilience of farmers, and protection of biodiversity. The long-term objective is to improve the livelihoods of at least 1 million beneficiaries, regenerate at least 200,000 ha of forest, agricultural, and coastal land and contribute to over 10 million tonnes of CO2e emission reductions.
MERF received funding from the Dutch Fund for Climate and Development (DFCD)’s Origination Facility for its initial design and to complete the feasibility study. This proof-of-concept grant from the ACS Design Grant will help Mekong Capital complete the final design of MERF, as well as the technical assistance facility and mobilize more sources of capital.
“Mekong Capital and Convergence’s partnership will accelerate the mobilization of much-needed capital for climate adaptation and mitigation, while supporting farmers in the Lower Mekong region. Mekong Capital aims to lead the way in private sector investment and engagement in regenerative agriculture,” said Ellen Van, Mekong Capital Principal. “By leveraging blended capital to help private companies scale regenerative practices that replenish our natural assets and improve the lives of our farmers, MERF seeks to demonstrate that sustainable financial return and impact can co-exist.
"Mekong Capital’s Mekong Earth Regeneration Fund was selected due to its high potential for development impact, replicability in other sectors and geographies, and the team’s strong track record of engagement and regional presence," said Leah Pedersen, Convergence Senior Director, Market Acceleration and Design Innovation. “MERF is also a prime example of the field-building power of our funding. Through our grant, Mekong Capital, a mainstream private equity fund manager, will strive to enter the climate finance space for the first time.”
The ACS Design Grant targets critical climate mitigation and adaptation sectors in Asia including nature-based solutions, clean energy transition, and sustainable cities and infrastructure. It provides feasibility study and proof-of concept grants for innovative, high-impact and investible solutions using blended capital structures.
The ACS Design Grant is funded by four anchor donors: the Department of Foreign Affairs and Trade Australia, the Monetary Authority of Singapore, The Olayan Group, and UBS Optimus Foundation.
About Mekong Capital
Established in 2001, Mekong Capital is a private equity firm specializing in consumer-driven businesses. Mekong Capital’s investee companies are often among the fastest-growing and market-leading in Vietnam’s consumer sectors. Mekong Capital has completed 43 investments, with 28 fully exited, and currently advises two active funds. Mekong Capital provides proactive support to its investee companies to drive sustainable growth.
About Convergence
Convergence is the global network for blended finance. We exist to increase private investment in emerging markets and developing economies to advance the UN Sustainable Development Goals and Paris Agreement. Our members include private investors looking to diversify their portfolios, businesses seeking capital, as well as public agencies and philanthropic foundations looking to make their funds go further.
Convergence’s Design Funding Program operates as a market acceleration tool providing early-stage capital to support blended finance solutions in frontier markets and nascent sectors to accelerate the number of investible transactions in the market targeting SDGs.
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