Carbon footprint prompts investors to act sustainably – USAID
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Carbon footprint prompts investors to act sustainably
Carbon footprint prompts investors to act sustainably
By Phuong Tran
Posted March 15, 2019
In News
Carbon footprint prompts investors to act sustainably2019-03-152019-03-22https://greeninvestasia.com/wp-content/uploads/2018/08/horizontal_rgb_294_white.pngUSAIDhttps://greeninvestasia.com/wp-content/uploads/istock-497297775.jpg200px200px
TweetBANGKOK, March 15, 2019 – On the heels of &Green Fund’s announcement of its $23.75 million purchase of TLFF I long-dated sustainability bonds, experts are discussing the challenge – and necessity – of measuring impact in land-based investments.
Founded in 2018, &Green Fund focuses on commercial
agricultural investments that protect and restore tropical forests and
peatlands. It is investing in a $95 million green bond that Tropical Landscapes
Finance Facility (TLFF) created in 2018 to help finance sustainable rubber
plantations in two heavily degraded landscapes in Indonesia. The U.S. Agency for International Development
(USAID) provided a partial loan guarantee that covers up to $33.25 million in
losses to reduce investor risk.
Consumers of rubber – a $30
billion market – are increasingly demanding more sustainable production. Since
2016, six of the world’s leading tire manufacturers have committed to responsible
rubber sourcing. Indonesia produced almost 3.8 tons of natural rubber in 2018,
making it one of the world’s leading producers.
USAID Green Invest Asia, a finance initiative linking sustainable agricultural and forestry companies in Southeast Asia to capital, conducted a carbon assessment to determine the carbon footprint for the investee, Royal Lestari Utama (RLU), to consider direct and indirect emissions associated with its operations; this includes transportation, mill operations and consumed energy, as well as the company’s carbon stock. RLU required the carbon assessment to unlock financing.
For Sanjiv Louis, investment director of Southeast Asia at Sail Ventures, which manages &Green Fund, third-party impact studies, such as the one conducted by USAID Green Invest Asia, are a deciding factor in its investments.
“Independent, expert studies and evaluations to supplement &Green Fund’s own due diligence efforts with RLU, or similar project companies, are crucial to inform our investment decision,” said Louis.
“Independent, expert studies and evaluations to supplement &Green Fund’s own due diligence efforts with RLU, or similar project companies, are crucial to inform our investment decision.”
The
investment
Michelin, one of the plantation’s owners, has committed to purchasing 75 percent of the plantation’s climate-smart, wildlife-friendly rubber. Of the 90,000-hectare (222,000-acre) concessions in Jambi, Sumatra and East Kalimantan provinces, only 34,000 hectares will be planted with commercial rubber, with the rest set aside for community livelihoods and conservation, including a 9,700 hectares designated wildlife conservation area. At maturity, entering the plantations’ eighth year, the company is expected to provide up to 16,000 fair wage jobs. The project also provides a combination of land, technical and finance to an estimated 3,500 rubber smallholder farmers.
At maturity, the plantations are expected to represent up to 10
percent of Michelin’s global natural rubber, so getting the balance right among
the people, conservation and commercial aspects of the project is critical,
said Lisa Genasci, CEO of ADM Capital Foundation, which is the nonprofit arm of
ADM Capital, a Hong Kong-based investment manager. ADM Capital is a founding
member of TLFF, which seeks to foster low-carbon growth in Indonesia.
Changing
landscape
Many private investors have long shied away from investing in
Asia’s agriculture, forestry and other land use sectors, according to the
United Nations Environment Program and DBS Financial Services, which estimate a
near $400 billion gap in environmentally-friendly,
low-carbon, climate-resilient investments up to 2030 in Asia.
Companies’ ability to balance competing interests (commercial, people
and conservation) in complex landscapes is key to closing this funding gap – as
are partnerships that leverage strengths from all sectors, said Genasci.
“For example, the baseline carbon study supported by USAID Green
Invest Asia will be a critical component to make decisions and assess impact,”
she added. “This study is instrumental in bringing impact capital into the
transaction. Looking forward, it will continue to provide value.”
Read moreTropical Landscapes Finance Facility– Royal Lestari Utama transaction Royal Lestari Utama Joint venture partner Barito Pacific GroupSustainable rubber policy of joint venture partner, Michelin&Green Fund portfolio
BackgroundUSAID Green Invest Asia partners with companies and investors to unlock investment into sustainable agriculture/forestry and reduce carbon emissions in Southeast Asia. Founded by U.S. Agency for International Development in late 2017, the initiative is vetting a pipeline of sustainable businesses in Vietnam, Cambodia, Indonesia and Philippines, and matching qualified companies with capital.
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USAID Green Invest Asia is a facility of the United States Agency for
International Development (USAID) and is implemented by Pact in collaboration with Mekong Strategic Partners.
USAID Green Invest Asia is a facility of the United States Agency for International Development (USAID) and is implemented by Pact in collaboration with Mekong Strategic Partners.
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