Project Structures and Returns

Smart Model for Regreening

A sustainable world can support the environment, people, and economics. It is time to align these needs instead of pitting them against each other. This integrated vision is the foundation of the Spades’ approach to regreening. It requires all three dimensions to tap the Power of Trees™.

The world urgently needs reforesting. There is sufficient land, implementation capacity, and money.  The challenge for others has been uniting them together to build the three-legged stool of regreening.  Spades is different.

Spades is more than a carbon project developer. We are a rural development and reforestation projects integrator. Spades seeks to solve the problems that plague regreening to unlock better deals with scale.

Land

It is expensive and disenfranchises local people to acquire land for reforestation. Trees can be regrown with landowner cooperation, increasing opportunity for all by sharing returns and eliminating the need to purchase land. This trend is expanding in the timber and sustainable wood stock industry. Stakeholders include landowners, their communities, and governments. Contracts are required for access to land, protection of trees, and any work or finance. Contracting may be led by a local government, which would be the group advisor to the SPV.

Implementation

Depending upon the project design, contractors with differing service sets may be needed. Local businesses will be preferred, especially to sustain a long-term presence and serve markets created by the reforestation. Most will be subcontractors to one or two lead organizations, which will be the group link and advisor to the SPV.

Payment for services will generally be performance-based, usually per-tree. Cash advances may be available for establishing or increasing presence locally. Progress payments are made for ‘visible inventory’, such as seeds, seedlings, and plantings at each stage. Organizations should receive sufficient profit or cash flow to sustain scale for massive reforestation.

There will be contracts between leads and subs representing roles, responsibilities, and terms. Most workers will be sourced locally and be paid a premium above local wages for similar work. They will be provided benefits as required by local law, including healthcare insurance for temporary or year-round employment, depending upon the seasonality of planting. There will be suitable contracts between workers and employers.

Finance

Funds may be obtained from several sources, including investors, donors, institutions, banks, governments, etc. They will lead control of the SPV via any mechanism that they prefer to structure. Financiers will have agreements with the SPV, which will likely have performance requirements and limitations.

Balanced Finance

Carbon underpins the regreening investment, but trees deliver expanded opportunity.  Carbon plus tree-derived assets like wood stock and food unlock balanced financial returns. Enlarged return opportunity delivers critical investment expansion. Trees survive and biodiversity expands with integrated outcomes for the environment, people, and economies.

Every project is different in terms of assets created, participants, and risks. All stakeholders, including investors, asset contributors, and supply chains expect reliable and meaningful returns. The significant assets created by trees allow for all participants to benefit.

Capitalization Structure

The structure supports a spectrum of investors including government, development finance institutions, philanthropic organizations, corporations, high-net-worth individuals, private equity, venture capital, bonds, etc.

C-Corp: Spades is a USA-based ‘C’ corporation for taxation purposes. Initially formed in March 2020 as a Minnesota B-Corporation, it converted to a Delaware public benefit corporation in March 2023. Spades serves communities around the world to help restore their environment, benefit economically, and be engaged in design and implementation. Spades dedicates a portion of its profits to its mission, which is realized by engaging investors and other contributors.

Nonprofits: For donors requiring a public non-profit for donations, Spades is affiliated with Cheetah Development Inc., represented on its board, and also engages with other non-profits across the world.

IFFIm Approach:  The fund will be modeled after the pioneering International Financing Facility for Immunization (“IFFIm”).

Blended Capital: For more than a decade, the Spades’ management team has implemented impact investments and blended capital, merging equity, debt, and donors even within single funds. In such a model, donors do not ever provide profits to investors. Instead, increased impact and returns can be created for both donors and investors. For example, catalytic first-loss capital can draw more investors into a project, expanding the impact of donor funds. Alternatively, donors can support parts of a project that do not have financial returns. Foundations may seek to invest either out of their endowment corpus or their annual payouts, with investments that may be eligible for returns.