A noble finance initiative to provide long-term finance at below market rates to projects and companies that stimulate green growth and improve rural livelihoods in Indonesia is showing very promising results.
The initiative called Tropical Landscapes Finance Facility has channeled US$95 million in financing to Indonesian rubber producers. This innovative financial model helps rubber producers to plant dense fields of trees on already marginal land, sparing virgin forests, which is key to slowing deforestation.
“This is a practical solution to accelerate investment in deforestation-free supply chains by providing long-term capital with strict sustainability-linked lending criteria to stimulate green growth and local livelihoods, protect biodiversity, and shield agriculture production from future climate hazards,” said Mirey Atallah, Head of the Nature for Climate Branch at UNEP.
This project issues loans on the condition that ambitious environmental and social impact targets are reached. It is a partnership between UNEP, the Indonesian Ministry of Environments and Forests, ADM Capital, BNP Paribas, and local non-governmental organizations.
The project faced several challenges including resolving historical deforestation and land ownership disagreements.
Along with financing compact rubber plantations, it has helped create a 9,700 ha conservation area beside Bukit Tigapuluh National Park. This is a very promising achievement from the point of view of forest conservation as this park serves as a transit corridor for elephants, tigers, orangutans, sun bears, and various endangered bird species.
This model encourages fostering sustainable commodities markets and helps in promoting the cause of safeguarding nature, addressing the climate crisis, and improving the lives of rural communities which could be followed by other countries as well.
A forest area equal to the size of Los Angeles was lost in Indonesia in 2020 alone as a result of the expansion of palm oil and timber plantations.
However, steps such as a moratorium on clearing primary forests and peatlands have slowed the country’s rate of deforestation.
Forests play a key role in addressing the issue of climate change and are home to more than half of the world’s land-based species of animals, plants, and insects globally.
Approximately 12 million hectares of forest are destroyed each year which is equivalent to the size of Portugal. Deforestation, agriculture, and other land use changes are causing climate change which contributes to 25 percent of global greenhouse gas emissions.