Financing forest restoration by enforcing supply-chain standards

For global commodity producers, certification under standards such as the Roundtable on Sustainable Palm Oil has become a business necessity. Lestari Capital, based in Jakarta and Singapore, has been working to turn such leverage into a mechanism to finance large-scale forest conservation.

Last week, Lestari announced the first ecosystem-service deal under its new Sustainable Commodities Conservation Mechanism. Cargill, the world’s largest private company, will finance a 25-year conservation project run by the Nanga Lauk community in Indonesia’s Heart of Borneo region, enabling community members to protect the forest and develop ecotourism and wild forest products.

“For the first time, the people doing this work can earn a wage to support their families,” Ibu Rusliyani, who serves on the Nanga Lauk community forest board, said in a statement.

Its support for the conservation project will help Cargill’s plantation in West Kalimantan meet the RSPO requirements, writes Lestari’s Gabriel Eickhoff. He said the Sustainable Commodities Conservation Mechanism addresses both the lack of investor demand for high-quality conservation projects and the global commodities markets undervaluing of “natural capital.”

“We address this missing link by connecting corporate demand for durable conservation outcomes with projects that need long-term operating capital on the ground,” he said. (Returns on Investment listeners heard about the mechanism on ImpactAlpha’s podcast, “Nature reduces risk.”)

The David and Lucile Packard Foundation provided early support for Lestari, as did the  Partnerships for Forests incubator back by the UK’s Department for International Development.

“We deliver private sector efficiency to a traditionally donor-driven space by reducing overheads and pushing for greater scale,” Eickhoff says. “Every day we strive to incorporate conservation into supply chain and other corporate costs, as we have done with Cargill.” Share this post.