Third party verification by ESG consultant, Vigeo Eiris.
- A multi-tranche, long-dated sustainability bond arranged by BNP Paribas (BNPP) and issued by TLFF I Pte Ltd for RLU, a JV between Indonesia’s Barito Pacific Group and France’s Michelin Group. ADM Capital acts as facility and ESG manager for TLFF I
- For climate smart, wildlife friendly, socially inclusive production of natural rubber in Jambi and East Kalimantan provinces in Indonesia
- Out of a concession area of 88,000 hectares, 1.25 times the size of Singapore, 34,000 will be planted with commercial rubber, while more than half will be set aside for community livelihoods and conservation purposes
- Includes a 9,700 ha Wildlife Conservation Area
- At maturity, RLU will employ 16,000 locals and improve the livelihoods of 50,000 community members
- Commercial plantations in Jambi serve as a buffer zone to protect the 143,000 ha Bukit Tigapuluh National Park, replete with important biodiversity and endangered species such as Sumatran elephants and tigers
- Project will be monitored annually by a third-party consultant against an Environmental and Social Action Plan (“ESAP”)
Indonesia’s First Sustainable Natural Rubber Plantation
On Feb 26, 2018 the Tropical Landscapes Finance Facility (“TLFF”) announced its inaugural transaction, a landmark US$ 95MM loan to help finance a sustainable natural rubber plantation in two heavily degraded landscapes. The transaction incorporates clearly defined social and environmental objectives and safeguards.
A long-dated sustainability bond will fund PT Royal Lestari Utama (“RLU”), a joint venture between France’s Michelin Group (49%) and Indonesia’s PT Barito Pacific (51%) and Indonesia’s first sustainable natural rubber plantation.
Of the total concession size of 88,000 ha, 70,000 sits in the Jambi province and 18,000 sits in the East Kalimantan province of Indonesia. In all, only an estimated 34,000 ha will be planted in rubber, while the rest will be left for conservation, restoration and community programs.
At maturity, the plantation will represent 10% of natural global rubber purchased by Michelin, and is designed to enhance the livelihoods of about 50,000 local people and create 16,000 fair-wage jobs.
RLU, through its plantations and smallholder programs, is targeting a higher annual rubber yield of 1.7 tons per ha, compared to Indonesia’s current 0.8. tons per ha.
The 70,000 ha Jambi concession forms part of a wider Bukit Tigapuluh (Jambi and Riau provinces) landscape of 400,000 ha, including two PT Alam Bukit Tigapuluh (“ABT”) ecosystem restoration concession blocks. Of the 400,000 ha, only 230,000 ha still contain forest cover.In Jambi, the plantation will function as an important buffer zone to stop further land speculation and encroachment in the adjacent biodiverse 143,000 ha Bukit Tigapuluh National Park (“BTPNP”), which is one of the last places in Indonesia to see Sumatran elephants, tigers and orangutans. The ecologically significant BTPNP Landscape is 400,000 hectares and will benefit from encroachment protection the plantation will provide, coming from “boots on the ground” plantation workers, smallholders and planted areas themselves.
The RLU and ABT concessions (~38,000 ha) form a contiguous and critical buffer to the 143,000 ha BTPNP from encroachers, many seeking to illegally plant oil palm and rubber to supply a wide range of mills in the wider landscape.
The ~18,045 ha East Kalimantan concession is situated across two blocks in the Nyapa Mangkalihat Mountains and Plains biogeographical region of central Borneo. The landscape had suffered severe deforestation and degradation, facing threats from illegal harvesting of timber, clearance for slash & burn agriculture, expanding human settlement and illegal development of palm oil.
USAID has provided a credit guarantee on part of the transaction, which has been rated “Aaa” by Moody’s. Vigeo Eiris, the ESG consulting firm, has confirmed that the bonds are “Sustainability Notes” with positive contribution to sustainable development and are aligned with the Sustainability Bond Guidelines.
Hadiputranto, Hadinoto & Partners provided important pro bono support in the initial stages of the Transaction.
|Land unit||Baseline Forest Cover (ha)*||Protected Area Delineation (ha)*||Forest Cover YTD 2019 (ha)*|
|Jambi||HCV / HCS||3,696||13,783||3,696|
|- Outside WCA||1,206||9,150||1,206|
|- Inside WCA||2,489||463||2,489|
|Riparian Area Outside WCA||-||885||-|
Forested areas and riparian zones within the East Kalimantan concession provide critical habitats for a range of protected and/or threatened flora and fauna.
Around 40% of intact forest remains within the concession and is home to a wide range wildlife such as Bornean orangutan, sambar deer, sun bear and clouded leopard.
|Land unit||Baseline Forest Cover (ha)*||Protected Area Delineation (ha)*||Forest Cover YTD 2019 (ha)*|
|East Kalimantan||HCV / HCS||7,822||9,375||7,822|
|Other (KPPN & DPSL)||-||608||-|
RLU partnered with Ecology and Conservation Center for Tropical Studies (Ecositrop) to conduct an orangutan and wildlife study in its East Kalimantan concession. The study surveyed orangutan distribution and population, assessed habitat quality and resources and recommended orangutan conservation and conflict mitigation strategy for RLU.
The study found that RLU’s East Kalimantan concession includes:
- Good quality habitat with a density of 150 trees/ha with a basal area of 27.1m2/ha
- Sufficient natural food resources for orangutan
- Orangutan nests are scattered across the forest, indicating a strong presence of orangutan
The ESAB was established to implement RLU’s sustainability strategy. The ESAB consists of key stakeholders and independent experts to provide guidance and evaluation of the progress of RLU’s Environmental Social Monitoring System (“ESMS”) and Environmental and Social Action Plan.
The ESAB conducts quarterly meetings and reports on ESG related matters and progress. An independently-audited ESG report is also published annually.
Awards and Recognitions
The project received recognition from the Jambi Provincial Government in regards to its contribution to the welfare improvement of the Jambi community, particularly to the Suku Anak Dalam (SAD). The recognition plaque was handed by Jambi Governor H. Fachrori Umar to RLU representatives.
RLU was awarded the Gold Flag in Safety and Health Management System (SMK3) by the Ministry of Manpower of the Republic of Indonesia. A gold flag is awarded to Companies that score beyond 85% in the assessment.
The CECT Sustainability Award (Project-based Business and Sustainability category) was presented to RLU for its Integrated Farming Program, designed to provide alternative livelihood for the community through the optimization of land for food security in a sustainable manner.
On October 22, 2019, RLU received the Indonesia Green Company Award from SWA Magazine and Indonesian Biodiversity Foundation (KEHATI) for the second year in a row. The Green Company Award is awarded to companies that have strong leadership and commitment in sustainability practices. Chief of the Jury, Professor Emil Salim, highlighted that there are three assessment criteria, namely the CEO’s commitment, compliance, concept, and strategy, the implementation and program, as well as the concrete results and impacts.
RLU’s subsidiary PT Multi Kusuma Cemerlang (MKC) has passed the 2019 EcoVadis Assessment to identify areas of strength, areas of improvement, and measures necessary to enhance RLU’s Environment, Social, and Ethical performance. EcoVadis is an independent assessor whose methodology is supervised by an international committee consisting of recognized experts in sustainable development.
Environmental Finance presented the Award for Innovation – Bond Structure to BNP Paribas, as part of TLFF, for issuing the multi-tranche, sustainability-labelled series of project bonds to provide a 15-year amortizing loan facility to RLU. The awards are particularly prestigious as the winners were decided by an independent panel of judges made up of some of the biggest investors in the green, social, and sustainability bond market.
TLFF Key Performance Indicators (KPIs)
(As of Dec, 2019)
TLFF has committed to track and disclose clear environmental and social (E&S) KPIs with external consultants reviewing the ongoing implementation, compliance and the progress of the E&S aspects of the project.
Core Objectives Output and Impact Indicators Value (as provided by RLU or source)
Forest Retention Hectares of actively managed HCV/HCS forest Jambi - 2,879 ha
East Kalimantan - 8,858 ha
Improved Rural Livelihoods Number of smallholder rubber farmers engaged as part of the Community Partnership Program Jambi - 33
East Kalimantan - 300
Number of smallholder households impacted by RLU’s Community Partnership Program 1,655 persons
Number of farmers receiving training from RLU
Number of farmers selling into the RLU supply chain 333 persons
Number of direct jobs created
RLU permanent employees - 1,042
Daily Labour - 3,278
Total - 4,320
Salary range of direct RLU employees Above provincial minimum wage standard
IDR 2,423,889 - 2,893,833
Number of trees planted
Rubber tree planted - 10,000,000
Restoration - 1,234 trees planted in conservation areas
Nursery - 7,108 seedlings
Number of fires registered Jambi - 92
East Kalimantan - 16
Number of hectares burnt (if any) Jambi - 101 ha
East Kalimantan - 42 ha
Jambi - (860,189)
East Kalimantan - 231,343
Greenhouse gas emissions absorbed by protected forest and planted trees
Biodiversity Protection Number of conservation programmes implemented Four:
1 – Protection forest
2 – Wildlife Conservation Area
3 – Human-wildlife Conflict
4 – Wildlife Monitoring
Number of species protected in the concessions 5 Critically Endangered Species:
Elephant (Elephas Maximus Sumatranus)
Tiger (Panthera Tigris Sumatrae)
Orangutan (Pongo Pygmaeus Morio)
Helmeted hornbill (Rhinoplax Vigill)
Yellow Meranti (Shorea Peltata)
4 Endangered Species:
Mitred monkey (Presbytis Melalophos)
Wild dog (Cuon Alpinus)
Otter civet (Cynogale Bennettii)
Malayan tapir (Tapirus Indicus)
Hectares of wildlife conservation areas 9,700 ha
Hectares of conservation habitats protected within the concessions Jambi - 18,370 ha
East Kalimantan - 9,983 ha
Patrol coverage and reporting on illegal activity findings overtime Jambi - 107,305 km
WCA - 59,261 km
East Kalimantan - 81,767 km
(4 reports on illegal activities in Jambi to government authorities, and 5 reports in East Kalimantan)
Green Notes Purchase Press Release
Press Release (English)
Press Release (Bahasa)
Second Party Opinion (Bond Issuance)
TLFF I Overview