Financial model for a private forestry financing vehicle

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Client DFID
Dates 2013
Service(s)Policy & Economics, Strategy & Finance
CEPA was appointed by DfID to conduct financial modelling and analysis in order to support DfID’s efforts to tackle deforestation through establishing a private forestry finance vehicle. Our work was intended to demonstrate the commercial viability of investments in sustainable forestry, and to develop a body of experience around effective ways of working with the private sector to tackle deforestation.
CEPA began the project by analysing actual returns for different projects in target countries to understand the appropriate level for public subsidy and determine suitable model inputs. Our fund cash flow model required data on likely costs, investments, grants and potential returns for a set of stylised investments. An important aspect of our modelling approach was sensitivity analysis on key model inputs, including the mix of project types, management fee structures, rates of return, and the share of funds between Least Developed Countries and Middle Income Countries.
We subsequently provided advisory services to DfID as it developed and finalised its proposals for the forestry financing vehicle.