© RLU

Royal Lestari Utama (RLU)

Pioneering Sustainable Natural Rubber

View the map of the project area here.

Country: Indonesia

Provincial Jurisdiction: Jambi

Investee Company: PT Royal Lestari Utama (“RLU”)

Project Sponsors: Barito Pacific Group and Michelin Group

Supply Chain: Rubber

Date of Note Purchase: 26/02/2019 (trade date)

Total Project Requirement: ~ USD 400 million

&Green Contribution: Purchase of Notes with a Face Value of USD 23.75 million

Description: &Green is financing the development of three sustainable rubber concessions operated by RLU in Jambi and East Kalimantan through the purchase of 15 and 7 year Notes, organized by BNP Paribas and monitored by ADM Capital under the Tropical Landscape Financing Facility (TLFF). The Notes allowed TLFF to provide a loan of USD 95 million to RLU.

View the Project Structure here.

Investment Rationale

The project aims to deliver ambitious environmental and socio-economic benefits: At the heart of these efforts is the establishment of a wildlife conservation area on the Jambi concessions as a buffer to the Bukit Tigapuluh National Park in Jambi, which is a habitat for critically endangered fauna such as tigers, orangutans and elephants. This will help protect the southern border of the National Park from encroachment in a landscape with high population pressure and severe degradation of other existing forest conservation areas. In addition, RLU has set aside all High Conservation Value (HCV) and High Carbon Stock (HCS) Areas, as well as riparian areas for protection on both the Jambi and East Kalimantan concessions. These conservation areas add up to 31% across all concessions. In terms of socio-economic benefits, besides the creation of an estimated 16,000 jobs, RLU is committed to the development of sustainable out grower programs for smallholder farmers through their Community Partnerships Programme.

View the Press Release

Environmental and Social Return

The Environmental and Social Return targets and progress displayed below cover the two concessions in Jambi, not the concession in East Kalimantan. While significant Environmental and Social Return is targeted for that concession, East Kalimantan is not, as yet an approved jurisdiction for the &Green Fund, and hence the Environmental and Social Return generated there is not counted in the Fund’s accounting. However, &Green will be monitoring the progress of the Environmental and Social Return expected from these areas. For more detail, including maps of the concessions and surrounding landscape, please refer to the Landscape Protection Plan.

Environmental Return

The map below shows existing forest cover on the RLU concessions and in the surrounding landscape in Jambi Province. Due to high levels of historic deforestation over the past two decades, only small parts of the concessions are currently forested. The other parts contain a mix of RLU rubber and land claimed by local community members or land speculators – some of it bushland, some of it planted with rubber or (illegal) oil palm. In those parts of the concessions that RLU controls, including all intact forest cover remaining at the outset of the project, forest will be actively protected. In total, RLU has set aside 18,370 ha for conservation on the Jambi concessions, based on High Conservation Value (HCV) and High Carbon Stock (HCS) studies. RLU strives to gain control over these areas over time, however progress will be influenced by the need to balance conservation targets with social dynamics. As a result, it is possible that not the entire area set aside for conservation may ultimately be restored during the tenor of the &Green financing.

Beyond its own concessions, RLU aims to contribute to forest protection in the surrounding landscape through the creation and management of a Wildlife Conservation Area (WCA) of approximately 9,700 ha located in the part of the concession that is directly adjacent to Bukit Tigapuluh National Park and to two Ecosystem Restoration Concessions under management of PT Alam Bukit Tiga Puluh (PT ABT). With this, RLU and its partners are working to reduce encroachment pressure on all protected areas in the landscape. For more detail, including maps of the concessions and surrounding landscape, please refer to the Landscape Protection Plan.

Forest Cover

Forest Cover in and around the RLU Concessions in Jambi

RLU Jambi Concessions

View the historical track record here.

Intensified Agricultural Production

RLU Plantations (in hectares)

Smallholder Plantations (in hectares)

Note: The Smallholder element of RLU’s Community Partnerships Programme is being planned in 2019 and expected to commence on the ground in 2020.

View the historical track record here.

Social Return 

Total Households Benefiting (no of households)

Smallholders Benefiting (no of smallholders)

Note: The Smallholder element of RLU’s Community Partnerships Programme is being planned in 2019 and expected to commence on the ground in 2020.

View the historical track record here.

Landscape Protection Plan

For more detail, including maps of the concessions and surrounding landscape, please refer to the Landscape Protection Plan.

Environmental & Social Risk Assessment

The E&S risks of this project are high due to the complexity of the landscape and social dynamics in and around the concessions. Social risks relate to the development of plantation rubber estates within an already highly encroached area and the need to carefully manage relations with surrounding communities, including Indigenous People, who depend on these lands for their livelihood to varying degrees. The most important environmental risks relate to biodiversity conservation, in particular regarding impacts on forests and endangered species. Other risks relate to erosion control and water management.

RLU is addressing E&S risks with a commitment that exceeds business-as-usual efforts of concession holders in Indonesia: The company runs an extensive outreach programme to engage local communities and is committed to developing out-grower schemes to enhance opportunities for smallholder rubber farmers. RLU is investing heavily in environmental protection, in collaboration with the National Park Authorities and NGOs.

Future E&S commitments are addressed in the Environmental & Social Action Plan (ESAP). &Green is represented in RLU’s E&S Advisory Board, which oversees E&S strategy and implementation.

Environmental & Social Action Plan

Click to download document.

Third Party Verification of Environmental and Social Return Progress

A third party specialized consulting firm is assessing RLU’s progress with the Environmental & Social Action Plan, Landscape Protection Plan and other internal environmental and social policies and plans on a yearly basis. A summary of their conclusions will be published here annually.

 

© RLU

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Amsterdam, The Netherlands
info@andgreen.fund
+31 (0)70 744 8884

Investment Advisor:

&Green was developed under the leadership of IDH as incorporator of the Fund in close collaboration with NICFI. IDH has received design and structuring advice from Innpact, a consulting firm specialized in the setup of impact finance funds.