IFC as implementing entity of the GAFSP PSW is expected to provide US$ 7.5 million in the form of a First Loss Guarantee (“blended concessional finance guarantee”) to support IFC’s own account investment. Without the support of the blended concessional finance guarantee the impact as described, in particular on smallholder farmer incomes in Sub Sahara Africa through higher trading levels of agricultural commodities and supply of inputs, will not be achievable and much less at the expected scale as IFC would not be able to provide the funding to ETG and would also not be able to mobilize additional funds through a syndication. As a result, ETG’s trading levels would be reduced until suitable bank financing becomes available again. The level of concessionality (i.e., “subsidy”) provided by the blended concessional finance co-investment is estimated to be 0.8% of the total project cost of US$150M. This estimate is based on the difference between (i) a “reference price” (either a market price if available; the price calculated using IFC’s pricing model, which comprises three main elements: risk, cost and profit; or a negotiated price) and (ii) the “concessional price” being charged by the blended concessional finance co-investment. Further details and historical information on estimated subsidy levels in IFC’s blended finance portfolio can be found at: www.ifc.org/blendedfinance. As is the case with all of IFC’s blended concessional finance co-investments, this project has been assessed against the Enhanced Blended Concessional Finance Principles for DFI Private Sector Operations adopted by IFC and more than 20 other DFIs in 2017. Further information on these Enhanced Principles and IFC’s blended finance approach and governance can also be found at: www.ifc.org/blendedfinance.

The proposed investment is a Category A project in accordance with IFC’s 2012 Policy on Environmental and Social Sustainability. Category A projects are defined as those which have business activities with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible and unprecedented. This is driven in particular by ETG’s sourcing high risk commodities, among others, cocoa beans in West Africa, which is associated with significant E&S risks related to the prevalence of harmful child labor, forced labor and conversion of natural/critical habitats (leading to biodiversity loss), with this sector-wide context presenting significant supply chain risk for cocoa bean buyers and additional soft commodities from specific origins, such as cotton and maize, as identified during the high level supply chain assessment described in this document.            

See link - https://disclosures.ifc.org/project-detail/ESRS/43692/etg-term-facility