Clément Chenost is Co-founder and Managing Director of the Moringa Fund, a private equity investment vehicle supporting sustainable agroforestry in Latin America and Africa. The Global Environment Facility became an equity partner in Moringa in 2015, as part of the GEF’s blended finance portfolio. In an interview, Chenost shared his motivation to launch the Fund, the power of organic certification, and what cashew nuts have taught him about farm-to-fork value chains.
What inspired you to launch the Moringa Fund 10 years ago?
At the time the Fund was established, various discussions were underway on carbon projects and carbon credit markets and it appeared to us that a new business model was needed to help preserve forests and promote reforestation while supporting local communities. Indeed, there is no forest preservation if local communities do not have the means to sustain their livelihoods. The Moringa Fund is therefore the result of long and careful reflection.
We observed new consumer trends such as the growing demand for organic and healthy products - which continues to this day. And we were convinced that sustainable land use in Africa and Latin America could only work by bridging the gap between these new market needs and local production, moving from local philanthropic projects - not always sustainable in the long term - to profitable and inclusive commercial enterprises that create long-term social and environmental impact.
How does the Moringa Fund operate?
We invest in agroforestry companies in Latin America and Africa through equity. We are committed to the entrepreneurs and support them in the development of their businesses, particularly in the building of local processing units that enable them to capture added value and redistribute locally. Around these processing units, the enterprises develop and structure outgrower networks. The supply of the companies depends almost entirely on small producers who are supported for organic certification or can benefit from other support such as pre-harvest financing or training in good agricultural practices.
We also specialize in the development of agroforestry models based on fruit trees to allow a combination of short, medium, and long-term revenues to the producers, the companies and our investors. By developing agroforestry systems rooted in local contexts, starting from what farmers already produce, we aim to reduce their vulnerability and create a win-win partnership with the companies. We benefited from an exceptionally strong support from our sponsor and investors who agreed upon taking the risks to invest in challenging environments.
Which projects has the Fund supported and what results have you seen?
We have invested in 10 companies in eight countries. Thanks to these investments, we now support more than 10,500 farmers through outgrowing programs, and more than 2,500 employees of which about 20 percent are women in among the poorest rural areas of the world. We are also implementing sustainable agricultural practices on more than 11,500 hectares of land, 14 percent of which is preserved forest.
We also support our investments through our Agroforesty Technical Assistance Facility, which has developed more than 15 projects to support small producers or employees of our investee companies. One of these projects has led to the BRC Certification of one of our newly established cashew factories in Benin. Today, we are proud to participate, alongside local entrepreneurs, in the creation of unique enterprises developing new paradigms in the coffee, processed fruits, nuts, and oil industries.
What are the next steps or frontiers for the Moringa Fund?
We plan to focus on Africa where we have already developed strong outgrower networks associated with processing platforms. Our ambition is to broaden and diversify these supply bases which will be valuable assets in tomorrow’s agri-food sector.
We will also reinforce our strategy by investing downstream in importers and distributors of organic tropical products based in Europe and the United States. Directly connecting farmers to the market is a key for a fair share of the price paid by consumers. We are now developing a new company with a permanent capital structure - to build integrated sustainable value chains from farm-to-fork.
What are the benefits of sustainable agroforestry?
Moringa recognizes sustainable agroforestry as a means to create socio-economic benefits while restoring natural resources through methods such as carbon sequestration, creation of microclimate, improvement of soil structure and water infiltration, increased biodiversity, potential diversification of revenues for the farmers, and more.
We are supporting our investee companies to move toward organic production and improve their sustainability by taking more into account the quality of the soils and the benefits of growing multiple crops in proximity (intercropping). In Brazil for instance, the implementation of regenerative agriculture on depleted lands (used for cattle grazing for many years) has allowed for the increase of organic matter and nutrients in the soils. Earthworms reappeared after six months of implementation.
What needs to happen for more investment to flow into this area?
Long-term, patient capital is needed to support farmers and entrepreneurs in the development of sustainable agroforestry activities. The development of green and impact finance is a positive signal. We are now seeing a growing interest from investors in the area. But two elements need to be tackled to mobilize more funding: a track record of profitable investments with positive impacts need to be built, and the capacities of farmers, entrepreneurs, and their employees need to be reinforced to build a pipeline of bankable projects.
Can you share a success story from Moringa’s portfolio?
We have invested in Tolaro Global, one of the leading cashew processing companies in Benin, which collects cashews among a network of 7,000 farmers and makes up approximately 80 percent of national kernel exports. Today, this company implements best industrial practices, is organic, fair trade, and BRC-certified since 2019. Unlike most of the cashews that are exported to Asia to be processed and then sold in Europe and the United States, this company is the only one in Benin to process 100 percent of the nuts locally, in the rural region of Borgou. While a conventional cashew will travel roughly 10,000 miles to be processed, Tolaro cashews only travel 500 miles. This short value chain enables Tolaro to better support the farmers who are trained to improve their agricultural practices in the production of soya, shea, cotton, legumes, and others, and become organic and fair trade certified. Tolaro is also very committed to female empowerment, establishing its own on-site nursery to allow women with young children to keep working and working to support land ownership for women.
What are the biggest challenges you are facing?
Farmers and entrepreneurs are developing innovative agroforestry practices, building industries locally in the particularly challenging environment of least developed countries where much is lacking. Competition with conventional agri-businesses, mostly driven by cost competitiveness, is fierce. The proper execution of the business plan needs a lot of attention and support. This is our commitment and we aim at not only being financial partners, but also bringing technical, human resources, administrative, and commercial support.
What are you most hopeful or optimistic about?
When the Fund was initiated 10 years ago, its business model was relying on what was a niche market for sustainable food and timber products. This niche is now booming, and we are seeing a shift in the food industry: more and more consumers want healthy products and are ready to pay a premium for that. The organic market is an illustration: though it only represents 5 percent of food products in the United States, its annual growth rate is 15 percent. There is growing recognition that for products to be healthy, they need to be produced in a healthy ecological way and bring healthy revenues to farmers. That is very good news and represents a trend that opens a lot of opportunities for the future. Traceability and digitalization of food supply chains will also favor the companies we support.
What did you wish you knew when you launched the Moringa Fund in 2010?
We started by investing upstream in agroforestry plantations and primary processing in the poorest rural areas of the world – which is crucially needed. To scale up and bring more revenues to the farmers, it is also essential to invest downstream where most of the added value is made. This is a strategic shift that we will implement with the next phase of Moringa.