Convergence has awarded a feasibility study grant under the Asia Climate Solutions Design Grant to Palladium International LLC to design and structure, the Nature Catalyst, a USD 100 million blended finance vehicle that will bridge the financing gap for early-stage nature based solutions (NbS) in Cambodia, Vietnam, Laos, and the Philippines. This facility is led by consortium partners Palladium, Impact Earth, and Capital Continuum Advisers, with each partner bringing about complementary strengths. Through its dual-facility approach, the Nature Catalyst Incubation Facility will strengthen the pipeline of investment ready NbS through a combination of performance based grants and technical assistance while the Nature Catalyst Fund will provide tailored capital such as loans, revenue-based loans, and convertible debt to scale projects into commercially viable investments in the sectors of agriculture, fishery, and forestry across Southeast Asia.
The global bioeconomy is projected to reach US$30 trillion by 2050, with Southeast Asia capturing a significant share due to its rich biodiversity and agricultural base. However, the region is experiencing significant nature degradation and biodiversity loss. Despite the critical role that NbS play in promoting climate mitigation and adaptation, investment into early stage NbS remains underdeveloped with most investments targeting a larger ticket size and high expected rates of return required by investors. In addition, most NbS projects are not deemed investment ready and local capacity to scale the pipeline is limited. Through tailored financing and structured technical support provided across the capital continuum, the Nature Catalyst ensures that early stage NbS projects move rapidly from concept to commercial viability, thus attracting additional investors and reinforcing the long-term sustainability of nature-based investments in the region.
By targeting critical financing gaps, The Nature Catalyst aims to deliver high-impact outcomes across climate, biodiversity, and socio-economic goals in Southeast Asia. Its long term goal is to cut up to 25 million metric tons of carbon emissions, restore 200,000 hectares of land, boost native species use by 25%, and support endangered species protection. Additionally The Nature Catalyst aims to create at least 50,000 climate-resilient livelihoods, targeting 50% women, and to keep 50% of nature-positive revenue within local communities.
Design question and learning potential from the market: How can a blended finance vehicle mobilize private capital, including investment from local investors, into early stage NbS?
During the feasibility study, Palladium will seek to complete an in-country market study that supports the identification of partners including pipeline developers and technical assistance providers that can accelerate the investment readiness of pipeline companies. The market study also comprises an analysis of the competitive landscape of the carbon market in the region and an evaluation of the different financial instrument types that could be applicable for the vehicle. The study will culminate in the finalization of the capital structure for the vehicle, in addition to the development of an impact framework integrating a gender action plan.
The grant will support The Nature Catalyst in the formulation of an investor engagement strategy targeting a mix of concessional and private investors with a particular focus on local investors. As part of its fundraising strategy, The Nature Catalyst will leverage Palladium and its consortium’s strong local network to engage with regional family offices, impact investors, corporates, and asset managers with an interest in NbS. By utilizing a structured and phased approach, the Nature Catalyst will initially target concessional capital for a smaller first close while attracting commercial funding for later rounds.
The incubation-to-investment model financed by a blended structure consisting of grants and concessional capital allows the Nature Catalyst to reduce the perceived investment risk into early stage NbS, eventually mobilizing larger scale private capital for NbS investments.
