NbS Triple Win Toolkit: Economics and Finance 101 Model E – Impact fund Background Illegal deforestation in the Amazon has increased markedly at the end of 2010’s. The Althelia Biodiversity fund promotes sustainable business models which reward sustainable products and decreases the prevalence of products derived from illegal activities. It seeks to address the global drivers of deforestation whilst simultaneously providing alternative and resilient livelihoods for local communities which depend on local resources. Description of model The Althelia Biodiversity Fund is a $100 million (USD) blended finance fund which pools finance from both the private sector and the public sector 1,2. The fund is split into two different types of investments; those which are very-early stage and are thus higher risk with greater chance of failure or lower cash flow potential, and those investments which generate positive cash flow. The public sectors de-risks the private sector investment by allowing investors to invest in different financial instruments and activities with varying degrees of risk and return. The fund achieve this through the use of subordinated debt (e.g. The International Centre for Tropical Agriculture [CIAT] invest in junior debt which is repaid last) and credit guarantees (e.g. USAID cover up to half of the initial debt capital paid into to the fund) which allows the public sector to cover risky investments and losses, improving the risk profile and therefore attractiveness of the investment for the private sector. The fund uses a mixture of financial instruments, including equity, convertible debt, and variously bespoked debt instruments 3 to invest in projects which protect, restore and improve biodiversity andthe resilience and sustainability of local livelihoods, whilst avoiding further deforestation and the release of CO2, monetised through the creationof marketable carbon credits. Projects repay the fund 4 based on the type of investment made by the fund and the project activities. Repayments are advanced to the initial public and private sector investors 5 based on the type of investments made. Further reading: https://www.blendedfinance.earth/blended-finance-funds/2020/11/16/amazon-biodiviersity-fund