Indonesia’s first sustainable natural rubber plantation

Michelin and Barito pacific JV USD95 mm loan

On February 26th, the Tropical Landscapes Finance Facility (“TLFF”) announced its inaugural transaction, a landmark US$ 95 million loan to help finance a sustainable natural rubber plantation in two heavily degraded landscapes. The transaction will incorporate clearly defined social and environmental objectives and safeguards.

A long-dated Sustainability Bond will fund PT Royal Lestari Utama (“RLU”), an Indonesian joint venture between France’s Groupe Michelin (49%) and Indonesia’s PT Barito Pacific (51%) for sustainable natural rubber plantations in Jambi, Sumatra and East Kalimantan provinces. In a total plantation size of 88,000 hectares, 70,000 sits in Jambi and 18,000 in East Kalimantan.

In all, only an estimated 34,000 ha will be planted in rubber, while the rest will be left for conservation, restoration and Community Partnership Programs. The project is designed to enhance the livelihoods of about 50,000 local people and create 16,000 fair-wage jobs. In Jambi, the plantation will function as an important buffer zone to stop further land speculation and encroachment in the 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 original and ecologically significant BTP Landscape is 400,000 hectares and includes two WWF ecosystem restoration concessions that will also benefit from the protection from encroachment the plantation will provide. Protection will come from “boots on the ground” plantation workers, smallholders and planted areas themselves. WWF is a project partner since 2015 and has worked with RLU to set aside HCV/HCS areas as “no-go” zones for planting.

At maturity, the plantation will represent 10% of natural global rubber purchased by Michelin.

RLU, through its plantations and smallholder programs, is targeting a higher annual rubber yield per hectare of 1.7 tons, compared to Indonesia’s current 0.8 tons.

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.

Royal Lestari Utama (RLU)

A multi-tranche Sustainability Bond arranged by BNP Paribas (BNPP) and issued by TLFF I Pte Ltd.

  • For climate smart, wildlife friendly, socially inclusive production of natural rubber in Jambi, Sumatra and East Kalimantan provinces.
  • Out of a concession area of 88,000 hectares, roughly 45,000 hectares will be set aside for community livelihoods and conservation.
  • At maturity, the plantation will provide 16,000 jobs for local communities.

East Kalimantan Estate

PT Multi Kusuma Cemerland ("MKC")
Total Area 18,045 ha / 9,000 ha

Jambi Estates

PT Lestari Asri Jaya ("LAJ")
PT Wanamukti Wisea ("WMW")
Total Area 70,758 ha / 35,000 ha