A carbon capture project
According to a report from the International Monetary Fund (IMF), Uganda has lost nearly one-third of its forest in 20 years (about 1 million hectares) due largely to massive deforestation. This has resulted in worsening climatic conditions and damage during weather events. On the ground, reforestation projects are being launched in an attempt to slow down the reduction of forest cover. One such project is supported by the crowdfunding platform Lendosphere, which specializes in sustainable development issues.
Initiated by Hummingbirds, a mission-driven company, the Mount Kei Reforestation project is located within one of Uganda's national forest reserves. It aims to plant, restore, and conserve 38,000 hectares of forest. In detail, the goal is to plant teak trees on 18,000 hectares, with sustainable management targeting environmental certifications such as Voluntary Carbon Standard, Climate Community Biodiversity Standard, and FSC. The remaining 20,000 hectares are dedicated to restoring the reserve, with a focus on reintroducing native species to strengthen local biodiversity.
With this project, Hummingbirds hopes to achieve a reduction of 3.2 million metric tons of CO2 from the atmosphere over a period of 48 years.
Creating value on the sale of low carbon credits
Beyond the environmental aspect, the project also has an economic dimension: Hummingbirds thus anticipates generating income through the sale of timber, and also through the sale of carbon credits.
Low carbon credits, or carbon credits, are a market mechanism aimed at encouraging companies to reduce greenhouse gas emissions. More concretely, they work by allowing companies and countries to offset their own emissions by investing in ecological projects that reduce or sequester carbon, such as reforestation or the development of clean technologies. Low carbon credits can be traded on regulated or voluntary markets, thus offering flexibility to economic actors wishing to reach their sustainability goals or respond to societal expectations.
This commercial dimension is supposed to allow Hummingbirds to eventually generate sufficient funds to pay investors according to a bond scheme.
Investment in the form of 3-year maturity bonds
This crowdfunding project is designed to support the second phase of the Mount Kei Reforestation project, with the goal of expanding the planting efforts already initiated by the Hummingbirds group. Investors will have the opportunity to lend funds to the company HB AssetCo Mount Kei as part of a bond issue. The entity is indirectly owned by Hummingbirds, and will in turn finance the local company Equatoria Forestry Company Ltd via convertible bonds.
The funding aims to cover an investment of 3 million euros to develop plantations between 2024 and 2025, with an initial contribution of 1.75 million euros funded by this crowdfunding round. A third phase of consolidation will require a significant investment of 60 million euros, funded by external investors.
If successful, contributors to this operation will benefit from annual interest payments at the target forecast rate of 8.75%, and a maturity repayment in January 2027, with a prospect of redemption by specialized natural asset management investors. Of course, the project carries several risks, including illiquidity and operational challenges, which could reduce expected returns or even result in total or partial loss of the initial investment, as well as the risk of not receiving the anticipated interest.
Investors interested in this project can participate in the funding campaign via the Lendosphere platform until April 11th.
