Tropical Asia Forest Fund 2

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Founded in 2005, New Forests is a sustainable real assets investment manager focusing on generating positive impact alongside financial returns in conservation, rural land management and sustainable forest plantations.

New Forests manages multiple funds investing in sustainable forestry across Southeast Asia, New Zealand, Australia and North America. Its investments include brownfield plantations, greenfield developments, processing facilities and conservation finance projects. Institutional investors typically invest in New Forests funds.82

New Forest’ Tropical Asia Forest Fund (TAFF) was the first sustainable forestry fund for institutional investors in Asia.83 It is focused on sustainable plantation forest management in Southeast Asia and had a final close in 2013 at $170 in capital commitments.84 New Forests is currently developing the Tropical Asia Forest Fund 2 (TAFF2), its second fund focused on sustainable forest plantations in Southeast Asia. It will invest in high sustainability plantation forestry in Indonesia, Laos, Cambodia, Vietnam, and Malaysia. TAFF2 will target investments where active investment management can add value and support the transition of Southeast Asia’s forest industry toward sustainable forest management, and support the development of the whole industry in terms of training, high-quality resourcing, silviculture, information and business systems, and ESG performance. A blended finance structure will help support impact outcomes in climate change mitigation, biodiversity, and community engagement and development. TAFF2 expects to have its first close in early 2021.

Across its portfolio, New Forests manages approximately 1 million hectares of lands and forests. In Asia, this includes PT Hutan Ketapang Industri, a large scale Indonesian FSC certified rubber plantation; Mekong Timber Plantations, an FSC certified eucalyptus plantation in Laos; and Acacia Forest Industries, an FSC certified eucalyptus plantation in Sabah, Malaysia.85

82 ‘New Forests’. n.d. New Forests. Accessed 18 September 2020. https://newforests.com.au/.

83 ‘New Forests Fund’. n.d. Partnerships for Forests. Accessed 29 September 2020. https://partnershipsforforests.com/partnerships-projects/new-forests/.

84 ‘New Forests Announces Final Close of the Tropical Asia Forest Fund with $170 Million of Capital Commitments and Completes Fund’s First Transaction’. 2013. New Forests (blog). 2013. https://newforests.com.au/wp-content/uploads/2013/03/20130703-New-Forests-Final-Close-of-Tropical-Asia-Forest-Fund.pdf.

85 ‘New Forests’. n.d. New Forests. Accessed 18 September 2020. https://newforests.com.au/.

STAKEHOLDERS:

New Forests; Partnerships for Forests

Tropical Landscape Finance Facility

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The Tropical Landscape Finance Facility (TLFF) is an Indonesian government-endorsed blended finance facility, focused on sustainable agriculture and renewable energy expansion in Indonesia.86

TLFF includes a lending platform, managed by ADM Capital with BNP Paribas as structuring adviser and arranger, as well as a grant fund, managed by the UN Office for Project Services. UN Environment and ICRAF manage a Jakarta based secretariat for the facility.

TLFF’s first transaction is a sustainability bond for PT Royal Lestari Utama (RLU), a joint venture between Michelin and a subsidiary of Indonesia’s Barito Pacific Group. The transaction is the first corporate sustainability bond issued in Asia. The use of proceeds from the bond are to finance the production of sustainable natural rubber, the restoration of forested buffer zones and the implementation of a Community Partnership Programme (CPP)87 in Jambi and East Kalimantan provinces. In all, approximately half of the rubber plantation (45,000 out of the total 88,000 hectares) will be set aside for conservation, restoration and community partnership programs, while the remaining area is for commercial plantations. A Wildlife Conservation Area (WCA) created in late 2017 acts as a buffer zone to stop further encroachment into the 143,000 hectare Bukit Tigapuluh National Park – one of the world’s most precious ecosystems and wildlife habitats for endangered species such as the Sumatran tiger, the orangutan and the Asian elephant. The CPP is designed to enhance the livelihoods of the 50,000 people living in and around the concessions and train 24,000 local farmers.88 Additionally, it is expected that at maturity the plantation will employ 16,000 people who will see additional benefits in housing, health care and education as well as improved health from reduced fires as the company works to stem slash and burn agriculture in the concessions.

The bond was tranched according to investor appetite and Moody’s rated the Tranche A 15-year notes ‘’ based on a USAID guarantee. The &Green Fund is a key investor in the bond, purchasing a 15-year Tranche B note and thus helping to catalyse additional investors (see &Green case study).89 Michelin has committed to a 75 percent off-take from the project.

86 ‘Lending Platform’. n.d. Tropical Landscapes Finance Facility. https://tlffindonesia.org/lending-platform/.

87 ‘1st Corporate Sustainability Bond in Asia Issued by TLFF for a Natural Rubber Company in Indonesia’. 2018. World Agroforestry | Transforming Lives and Landscapes with Trees. 26 February 2018. https://www.worldagroforestry.org/news/1st-corporate-sustainability-bond-asia-issued-tlff-natural-rubber-company-indonesia.

88 ‘PT Royal Lestari Utama’. n.d. Tropical Landscapes Finance Facility. Accessed 7 March 2020. http://tlffindonesia.org/project-pt-royal-lestari-utama-2020/.

89 BSDC and BFT 2018. Financing Sustainable Land Use: Unlocking business opportunities in sustainable land use with blended finance.

STAKEHOLDERS:

ADM Capital; BNP Paribas; UN Environment Programme (UNEP); World Agroforestry (ICRAF); PT Royal Lestari Utama

The West African Initiative for Climate-Smart Agriculture

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The West African Initiative for Climate-Smart Agriculture is a blended finance fund, investing in advancing climate-smart agricultural practices by smallholder farmers in west Africa. It aims to convert 185,000 hectares of farmland to CSA (community-supported agriculture), mitigate 2 million tonnes of CO2 per year and improve the food security and income of 90,000 smallholder households.90

The fund is composed of a financing facility (80 precent), managed by ECOWAS Bank for Investment and Development (EBID); and a technical assistance facility (20 percent) managed by the Regional Agency for Agriculture and Food (RAAF). The financing facility provides equity, loans, and guarantees below $1 million directly to agribusinesses, or on-lends to local financial institutions at subsidised rates. The technical facility supports intermediary financial institutions to design investment products linked to CSA. Additionally, the technical facility helps farmers adopt CSA practices.91

Currently, ECOWAS and EBID have committed $8 million to finance the first pilot, out of a total of $18 million to spend over the lifetime of the fund. The fund plans to pilot its approach in six ECOWAS member states, and if successful, aims to scale up the fund’s engagement across all 15 member states.

90 ‘PT Royal Lestari Utama’. n.d. Tropical Landscapes Finance Facility. Accessed 7 March 2020. http://tlffindonesia.org/project-pt-royal-lestari-utama-2020/.

91 ‘The West African Initiative for Climate Smart Agriculture’. n.d. The Global Innovation Lab for Climate Finance. https://www.climatefinancelab.org/project/africa-climate-smart-agriculture/.

STAKEHOLDERS:

Commission of the Economic Community of West African States (ECOWAS); ECOWAS Bank for Investment and Development (EBID); RAAF

Working Forest Fund

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Founded in 1988, the Conservation Fund is a not-for-profit organisation with a mission to preserve critical ecosystems in the US, while pursuing economic development for local communities.

Due to the fragmented nature of land ownership in the US, forests have multiple owners, which prevents the development of holistic management plans and allows for unsustainable management practices to take place. Through the Working Forest Fund, the Conservation Fund protects forests by purchasing and converting them into public goods.92 By working in partnership with land trusts, public agencies and sustainable timberland managers, the WFF secures permanent protection, acquiring the most-high value, at-risk private forestry land with philanthropic, state and federal agencies capital. With the acquired land, WFF develops a sustainable harvest, habitat and wildlife plan. WFF simultaneously acquires a permanent conservation easement, forever preventing the commercial development and fragmentation of the forests. The easement allows for public access and sustainable timber harvesting using best practice. Once the easement is acquired, the WFF sells the land to private and public buyers, reinvesting capital back into further forest acquisitions.

WFF has secured over 683,000 acres of land, deployed $500 million in acquisition capita and sequestered 159 million tonnes of CO2. The fund’s portfolio includes North Coast Forests, a 74,000-acre California redwood forest that supports 1,757 jobs, stores over 23 million tonnes of CO2 and is lightly managed for biomass growth, forest health and economic viability; Logan & Hatfield McCoy, 32,410 acres of forest lands, supporting 47 jobs, storing over 6,8 million tons of CO2 with the potential for economic diversification through outdoor recreation, wildlife tourism, and wood products in coal-impacted communities; and Clarion Junction, 32,591 acres of forest lands supporting 328 jobs, storing about 7.9 million tons of carbon, with the opportunity to secure the supply chain of a local mill.

The fund plans to rapidly scale its model, seeking to secure 5 million acres of high-value conservation forests over the next 10–15 years.93,94

92 ‘Working Forest Fund: Protecting America’s Forests’. 2020. The Conservation Fund. 14 September 2020. https://www.workingforestfund.org/.

93 ‘Working Forest Fund: Protecting America’s Forests’. 2020. The Conservation Fund. 14 September 2020. https://www.workingforestfund.org/.

94 Rachel Bass, Peter Murphy, and Hannah Dithrich. 2019. ‘Scaling Impact Investment in Forestry’. Global Impact Investing Network. https://thegiin.org/assets/GIIN_Scalingpercent20Impactpercent20Investmentpercent20inpercent20Forestry_webfile.pdf.

STAKEHOLDERS:

CONSERVATION FUND