JAKARTA — 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. The planted areas will serve as a buffer zone to protect a threatened national park from encroachment.
The 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. This is the first corporate sustainability bond in Asia and the first sustainability bond in ASEAN.
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) forests 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, H.E. Siti Nurbaya Bakar, Hon’ble Minister of Environment and Forestry, Republic of Indonesia, 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.
“It is the role of banks today to make sure we can enable sustainable and impactful projects everywhere. While not without its own challenges, this transaction is proof that financial institutions can generate socially beneficial outcomes when we really work hard,” said Eric Raynaud, CEO, Asia Pacific and Member of Group Executive Committee at BNP Paribas. “This complex structuring arrangement also demonstrates that our institutional investor clients have the appetite to invest in projects and companies that combine commercial and financial performance with clear environmental and social purpose and impact.”
Luc Cardyn, President Director of PT Bank BNP Paribas Indonesia, added “As the Lead Manager on this groundbreaking Sustainable Bond transaction, BNP Paribas is proud to help generate economic, environmental and social benefits for Indonesia.”
ADM Capital co-founder and partner, Chris Botsford said, “Reversing the current adverse trends on deforestation and climate change will take many billions of dollars. Private sector capital must be an essential part of the solution. We hope this transaction will inspire many others to step forward urgently.”
“We are delighted to be involved in this exciting and innovative funding approach,” said Tony Simons, Director General of the World Agroforestry Centre (ICRAF). Simons noted “A new paradigm is emerging here with high value investments that seeks to contribute substantial environmental and social dividends alongside risk shared financial returns”.
The US$ 95,000,000 Fixed Rate Secured Notes comprise of the following classes: US$ 30,000,000 Class A Notes due 2033, US$ 20,000,000 Class B1a Notes 2033, US$ 15,000,000 Class B1b Notes due 2023, US$ 15,000,000 Class B1c Notes due 2025 and US$ 15,000,000 Class B2 Notes due 2033. The Class A notes have been assigned a Aaa(sf) rating by Moody’s.
This transaction marks the first corporate sustainability bond in Asia and the first sustainability bond in ASEAN. Vigeo Eiris, the Environmental, Social Governance (ESG) research agency, has confirmed that the Notes are ‘Sustainability Notes’ with a positive contribution to sustainable development and aligned with the ICMA Sustainability Bond Guidelines (http://bit.ly/2GKQx9L). More information is available at https://tlffindonesia.org.