JAKARTA, Feb 26: The Tropical Landscapes Finance Facility (TLFF) today announced its inaugural transaction, a landmark US $95 million Sustainability Bond to help finance a sustainable natural rubber plantation on heavily degraded land in two provinces in Indonesia.
The project incorporates extensive social and environmental objectives and safeguards. Planted areas will serve as a buffer zone to protect a threatened national park from encroachment, according to Media OutReach.
A multi-tranche Sustainability Bond arranged by BNP Paribas (BNPP) and issued by TLFF I Pte Ltd. will fund PT Royal Lestari Utama (RLU), an Indonesian joint venture between France's Michelin and Indonesia's Barito Pacific Group, for climate smart, wildlife friendly, socially inclusive production of natural rubber in Jambi, Sumatra and East Kalimantan provinces.
The project involves collaboration with WWF, which has worked with Michelin and RLU to set aside remaining High Carbon Stock (HCS) and High Carbon Value (HCV) forest in the RLU concessions, as well as critical wildlife conservation and riparian areas. Out of a concession area of 88,000 hectares, roughly 45,000 hectares will be set aside for community livelihoods and conservation.
In Jambi Province, the two concession areas held by RLU and two WWF concessions form a contiguous buffer zone protecting the Bukit Tigapuluh National Park, which is one of the last places in Indonesia where elephants, tigers and orangutans co-exist. At maturity, the natural rubber plantation is expected to provide approximately 16,000 fair-wage jobs, providing a critical source of employment for local communities.
Welcoming the announcement, Minister of Environment and Forestry of Indonesia Siti Nurbaya Bakar said, "We highly support this positive drive from the private sector using an investment structure like the TLFF, which not only boosts economic development, but also improves much needed skills in the longer term."
"We are honored to take this important step alongside TLFF towards establishing an impactful partnership for the development of a more sustainable rubber industry," said David Sulaiman, President Director of RLU. "This demonstrates our commitment to a thriving, sustainable rubber market for the country and our unwavering support for local communities."
Dr Kuntoro Mangkusbroto, Chairperson of the TLFF welcomed the project's alignment to achieving the Sustainable Development Goals through a holistic triple bottom-line approach that puts people and planet at the heart of all TLFF projects.
An initial 18,100 hectares of rubber were planted as of December 2017 and the TLFF bond issue will contribute to financing further development of the plantation. USAID has provided a partial credit guarantee on the transaction.
Erik Solheim, Executive Director of UN Environment expressed his delight at the progress achieved since the MoU between UN Environment and BNP Paribas signed at the One Planet Summit in Paris in December 2017 to target innovative sustainable finance of US $10 billion by 2025 for projects that support sustainable agriculture and forestry in ways that help solve the climate crisis rather than accentuate it.
