Vietnam-based private equity firm Mekong Capital has received a proof-of-concept grant from global blended finance network Convergence for its $200-million climate impact fund.
The grant was awarded through Convergence’s Asia Climate Solutions (ACS) Design Grant, which targets critical climate mitigation and adaptation sectors in Asia, the blended finance organisation said in a statement.
The vehicle – dubbed Mekong Earth Regeneration Fund (MERF) – had earlier received assistance from the Dutch Fund for Climate and Development (DFCD)’s Origination Facility for its initial design and to complete the feasibility study. DFCD said in 2022 that it intended to grant 303,750 euros ($334,600) to MERF.
Meanwhile, the grant from Convergence will help Mekong Capital complete the final design of its fund, as well as the technical assistance facility, and mobilise more sources of capital.
MERF seeks to provide growth-stage private equity funding focused on regenerative agriculture and sustainable land use business models in the Lower Mekong region.
It 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. The long-term objective is to improve the livelihoods of at least 1 million beneficiaries, regenerate at least 200,000 hectares of forest, agricultural, and coastal land and contribute to over 10 million tonnes of CO2e emission reductions, per the announcement.
“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,” Convergence said. Despite the threats of increased climate hazards and greenhouse gas emissions from the agriculture, forestry, and land-use sectors, “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,” the alliance added.
Mekong Capital had earlier targeted to raise $150 million for its climate fund, initially named Mekong Earth and Forest Fund.
While the firm has not started investing from this fund, it recently made its first deal in the sector through a $5-million funding in HUSK, a biochar and biofertiliser company engaged in regenerative agriculture practices in Southeast Asia.
Mekong Capital is still deploying from its fifth private equity vehicle, Mekong Enterprise Fund IV, which was closed at $246 million in 2021.
