THE CLIMATE COLLATERAL ALLIANCE
We experienced three days of heavy rainfall before a wall of my home collapsed at midnight.
Atupele and her youngest son stand in one of her rooms that was destroyed by Cyclone Freddy in Malawi
CORE ACTIVITIES DRIVING
PROSPERITY ACROSS RURAL COMMUNITIES
By stimulating demand for local, climateoriented capital across the rural ecosystem, Opportunity International builds resiliency and productivity in global food systems.
Extensive Field Experience & Technical Expertise
Digital Innovation
Women Economic Empowerment
Farmer Support Networks
Regenerative Agriculture Support & Training
Financial Literacy & Business Training
HOW DO WE ENSURE CAPITAL REACHES THE SMALLHOLDER FARMER?
Traditional capital sources are insufficient relative to demand and do not reach the rural farmer. THE MISSING LINK
Lack of collateral available to SHFs to access loans
BREAKING DOWN BARRIERS TO CREDIT SUPPLY BARRIER CCA’S RESOLUTION
Information
Asymmetries
• Provides a funded credit guarantee equal to 40% of the loan amount, removing the need for additional collateral on qualifying loans
• Avoids moral hazard; farmer receives a loan that is usually not originated without awareness of collateral posted on their behalf
• Qualifying borrowers receive tailored support from the FSA network, which is expected to reduce crop loss and increase climate resiliency, leading to lower loan defaults over a measurable period
• Collateral availability contingent on Technical Assistance in place
Complex assessment of drivers of Ag lending
• Funded credit risk mitigation functions as an incentive to origination
• Digitally-enabled monitoring of farmer individual performance provides FIs with accurate, real-time data on farmer performance
Based on Opportunity’s extensive field experience, the CCA addresses key supply-side constraints limiting credit to smallholder farmers and regenerative agriculture
Inefficient financing markets for middle-sized agriculture enterprises
• Leverages Opportunity’s existing network of partner FIs, a broad and highly scalable segment of the banking sector who are best placed to meet the loan demand of the “missing middle”
• FIs benefit from existing FSA Networks, improved lending infrastructure (KYC and onboarding) and potential reach in 5 (7) countries
The Financial Incentives System
Foundations, Impact Investors & DFIs
Fund FIs “on-demand” with certainty of mission alignment and proven sizing of FIs’ reach & capabilities
Climate Collateral Alliance (CCA)
Catalytic investors enable credit risk mitigation while improving FI capitalization and liquidity
Financial Institutions (FIs)
Lend to SHFs after collateral barrier is removed and technical assistance is received
Smallholder Farmer
SHFs traditionally excluded from credit receive loans, on time, priced efficiently
Climate adaptation efforts locally funded, consistently
Growth in Impact Capital
As SHFs grow their income and businesses, so does their demand for capital—attracting more impact capital into the system.
THE CATALYTIC INITIATIVE
The CCA is targeting a $20M Credit Support Vehicle for 2.5x the catalytic impact; initiative powered by $5M of Technical Assistance
$20 million
Credit Support Vehicle (“Climate Collateral SPV”)
$5 million
Technical Assistance Pool
2.5x Catalytic Multiplier
$50 million+ Loans to Farmers
THE STRUCTURE
The Climate Collateral SPV is a credit support vehicle enabling consistent lending across smallholder farmer communities implementing regenerative agriculture practices Opportunity International, Inc. ( Illinois 501(c)3 )
FIs
CAPITALIZATION
Investment Details
Collateral SPV
Credit Support Vehicle (“Climate Collateral SPV”)
• Places long-term (e.g. 5 year) deposits in participating FIs
• Pledges deposits to FIs as up to 40% collateral for new eligible agloans; funded credit risk support for farmers
• Earns commercial interest rates resetting annually
• Concessional investors share losses pari-passu (80%) not covered by First Loss; senior repayment position at unwind
• $4mm first-loss layer (20%) to absorb currency & credit losses
• Impact Multipliers: Senior Concessional of 3.13x and First Loss of 12.5x
Technical Assistance Pool
• Funds Opportunity’s AgFinance expansion of Farmer Support Agents (FSAs), FI staff training and capacity building (e.g. loan product design)
• Improves existing data analytics (portfolio benchmarking, etc.) and climate adaptationoriented monitoring and evaluation
By breaking down the collateral hurdle, the Climate Collateral Alliance opens up funding for women farmers and accelerates the adoption of regenerative agriculture.
Recognitions Fueling the CCA implementation
Senior Sponsorship Executive Leadership
ATUL TANDON
Chief Executive Officer
Global leader known for building, growing, and turning around some of the world’s best-known for-profit and nonprofit enterprises. Previously served as the leader of United Way Worldwide’s 41-country International Network, helping build and shape the world’s largest network of communitybased charities. In 2000, joined World Vision and led the organization through a period of expansion over his nine-year tenure.
RANDY KURTZ
EVP, International Programs and Capital Solutions
Experienced problem-solver and business executive with experience in the private and public sectors.
Before dedicating his career to global economic development, Randy spent 27 years in investment banking, primarily with Salomon Brothers/Citigroup where he led dozens of completed M&A transactions spanning North America, Europe, Asia, and South America, ranging in size up to $10 billion.
TIM STRONG Head, Agriculture Finance
Manages a diverse portfolio of agriculture finance products and services throughout Africa, spearheading Opportunity’s efforts to implement and mainstream gender-inclusive services to empower smallholder farmers and ag-MSMEs.
Before joining Opportunity, Tim worked with a Silicon Valley startup coordinating Lean and Kaizen project management, the U.S. Department of Agriculture/Agricultural Research Services, the U.S. Peace Corps, and the Clinton Foundation
MAURICIO RINCON
Managing
Director
Capital Solutions
Responsible for Opportunity’s structured, blended capital solutions, designing impactfirst, return-yielding investment vehicles, often in partnership with other organizations.
Before transitioning to the development finance world, Mauricio spent ten years as a Director with Barclays’ Investment Banking Division in New York and previously worked in structuring and project finance at HBI Banca de Inversion in Bogota, Colombia.
CHRISTELLE KASENDE
Senior Technical Advisor
Agriculture Finance Manages Agriculture finance product in the Democratic Republic of the Congo.
Before joining Opportunity, Christelle worked with Financial Services Volunteer Corp to manage DRC program on AML/CFT.
Prior, Christelle was an investment officer, Portfolio Officer and ESG Coordinator at the investing firm XSML capital.
Important Notice and Disclaimer
This confidential materials included herein (the “Materials”) prepared by Opportunity International, Inc. (“OI”) are being provided to you solely for informational purposes. These Materials are preliminary in nature and describe the expected purpose and mission of the Climate Collateral Alliance (the “Alliance”).
Confidentiality. The Materials and the information contained therein are strictly confidential (and by accepting such information you agree to keep such information confidential) and are being furnished to you solely for your information and may not be used or relied upon by any other party, or used by you for any other purpose, and may not, directly or indirectly, be forwarded, published, reproduced, disseminated or quoted to any other person for any purpose without the prior written consent of OI. Any forwarding, publication, distribution or reproduction of this document in whole or in part is unauthorized. By accepting delivery of the Materials, you accept the terms of this notice and agree, upon request, to return the Materials without retaining any copies thereof. The foregoing is not intended to waive or modify any additional confidentiality obligations otherwise applicable under any confidentiality agreement between you and OI or its affiliates.
Materials Not an Offer to Sell, or Solicitation for an Offer to Buy, Securities. The Materials do not constitute or form a part of, and should not be construed as, an offer to sell or a solicitation of an offer to buy the securities of any issuer. Participation in the Alliance will be subject to definitive documents, which will be subject to negotiation between OI and participants therein (“Definitive Documents”). Participation in the Alliance may include the risk of loss, and potential participants should not rely on any other information, including the information contained in the Materials, or on any oral statements in making a decision to participate in the Alliance except the Definitive Documents. The Materials do not purport to contain all the information relevant to the Alliance, and all such information is in its entirety by, the Definitive Documents.
Recipients should not construe the contents of the Materials as financial, legal, accounting, tax or investment advice and the Materials do not consider the particular circumstances specific to the recipient to whom these Materials are provided to. Recipients should obtain advice from their own advisors. Each recipient should consult its own legal counsel, tax advisor and other appropriate consultants and advisers as to the business, legal, tax and related matters concerning the Alliance. These Materials have not been approved by any securities regulatory authority of any state or by the U.S. Securities and Exchange Commission (“SEC”), nor has any such authority or the SEC passed on the accuracy or adequacy of this document. Any representation to the contrary is unlawful.
Neither OI nor any of its affiliates will engage in activities constituting investment advice with respect to the Alliance and, as a consequence, will not act as a fiduciary to the Alliance.
Information included in the Materials is not a guarantee of future performance. In considering the information contained herein, recipients should bear in mind that the information included in the Materials is not a guarantee of future results and any information regarding past performance is not indicative of future performance. There is no assurance that the Alliance will achieve its objectives or goals. Whether or not a participant in the Alliance will receive any returns as a result of participating in the Alliance is uncertain. Actual returns may vary significantly from the returns set forth herein. There is no guarantee that participating in the Alliance will result in any returns or that significant losses will be avoided.
No obligation to update. Unless otherwise specified, the information and opinions presented or contained in this document are provided as of 9/30/2023 Subsequent developments may affect the information contained in the Materials materially. OI does not have any obligation to update, revise or affirm the projections contained in the Materials to reflect such subsequent developments
No reliance upon the Materials. You should not rely on the Materials as the basis upon which to participate in the Alliance. The Materials are being provided in summary fashion and do not purport to be complete. The information contained in the Materials has been prepared internally and has not been audited or verified. Use of different methods for preparing, calculating or presenting information may lead to different results for the information presented, and such differences may be material.
Forward-looking Statements. The Materials may also contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. No representation is made that the outcomes presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing the Materials could have a material impact on the outcomes that are presented herein, by way of example.
Projections. Projections are only estimates of future results and are based upon assumptions made at the time the projections are developed. Any financial projections of the Alliance included in these Materials are preliminary, and are based upon OI’s projections of various factors, including projections of default rates on loans, interest rates, currency exchange rates, agricultural conditions for smallholder farmers, and other factors, all of which are inherently uncertain. There can be no assurance that the results set forth in the projections will be attained, and actual results may be significantly different from the projections. Also, general economic factors, which are not predictable, can have a material adverse impact on the reliability of projections. Further, any projections, forecasts and estimates contained herein are forward looking statements and are based upon certain assumptions that OI considers reasonable. The inclusion of projections herein should not be regarded as a representation by the Alliance, OI or any other person or entity of the results that will actually be achieved by the Alliance. Many factors affect performance including changes in market conditions and interest rates and changes in response to other economic, political or financial developments. The information underlying any projections or other forecasts has been obtained from or is based upon sources believed by OI to be reliable, but neither the Alliance nor OI assumes responsibility for, and neither the Alliance nor OI makes representation or warranty, express or implied as to the adequacy, accuracy or completeness of, any such information. Neither the Alliance, OI nor any other person has any obligation to update or otherwise revise any projections, including any revisions to reflect changes in economic conditions or other circumstances arising after the date hereof or to reflect the occurrence of unanticipated events, even if the underlying assumptions do not come to fruition.
Terms with Financial Institutions Not Finalized. The success of the Alliance’s program is dependent on consummating agreements with Financial Institutions (“FIs”) to provide collateral, as described in the Materials. The Alliance has not yet finalized terms with any Fis and may not be able to obtain its anticipated terms, or acceptable terms at all. If the Alliance is unable to obtain acceptable terms with FIs, the Alliance’s program will be adversely affected.
No Operating History. The Alliance has not commenced operations and, therefore, has no operating history upon which prospective participants may evaluate the Alliance’s program. The success of the Alliance will depend upon the successful implementation of the Alliance’s program. The performance of the Alliance is dependent upon future events and is, therefore, inherently uncertain. Past experience of OI’s personnel and/or affiliates is not necessarily indicative of the prospects for the Alliance, and past performance is not necessarily indicative of future results. The Alliance will not own any interest in any prior ventures of OI or its affiliates, and therefore the results of the Alliance will differ from the results of such prior ventures. Accordingly, prospective participants should draw no conclusions from the performance of OI’s prior ventures.
Credit Risks of Ag Loans to Smallholder Farmers.
The provision of credit to smallholder farmers in developing countries entails risk. Such farmers may have incomes below the applicable poverty level and have little or no previous credit history with commercial or other lenders. Additionally, political, economic or social instability (or other economic or political developments) could adversely affect the FIs and smallholder farmers which participate in the Alliance’s program. Adverse weather conditions (such as floods or droughts), natural disasters and other factors, such as disease outbreaks, war or other conflict, as well as fluctuating commodity price also may adversely affect smallholder farmers. There is no assurance that the smallholder farmers will be able to repay the loans to the FIs, and as a consequence, the Alliance may be adversely affected.