The Sustainable Commodities Conservation Mechanism

Partnerships for Forests is supporting Lestari Capital to launch the Sustainable Commodities Conservation Mechanism (SCCM) – an innovative financing mechanism that will secure long-term funding from commodity supply chain actors for high quality conservation and restoration initiatives in Southeast Asia.

Background

Through a new sustainability framework, palm oil companies who are members of the Roundtable on Sustainable Palm Oil (RSPO) are obliged to compensate for past forest clearance during plantation development. As a form of compensation, the RSPO requires that companies conduct an impact assessment and fund projects that deliver conservation outcomes for a minimum of 25 years.

With limited experience and knowledge of conservation, many palm oil companies are ill-equipped to maximize this potential to channel substantial amounts of critically needed funding into conservation and restoration efforts in Southeast Asia.

These efforts have included a growing number of high-quality ecosystem services projects, but the majority still lack market access and sustained demand. REDD+, Village Forestry (hutan desa) and Ecosystem Restoration Concession (ERC) projects all rely on short-term donor financing and have not yet tapped into the long-term sources of private sector finance.

Individual efforts by palm oil companies and conservation organisations have been largely disjointed, despite both parties standing to gain significantly from collaborating. With access to high-potential conservation projects, companies could redress their compensation liabilities at the same time as allowing conservation organisations to access a long-term source of finance for their under-resourced projects.

The Project

Lestari Capital is an environmental enterprise, founded to foster growth in conservation and restoration projects by connecting them with responsible finance in the global marketplace. Piloting this approach in the palm oil sector, Lestari Capital is working closely with supply chain actors and industry sustainability organisations to launch the Sustainable Commodities Conservation Mechanism (SCCM) – which will integrate conservation into emerging sustainable supply chain solutions.

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The SCCM was launched at the 2018 Tri Hita Karana Forum in Bali. 

Partnerships for Forests supported the launch of Lestari Capital and the SCCM through an initial seed financing grant, and is providing technical advisory services and relationship facilitation with the broader sustainable land use community.

The SCCM provides a new source of finance for projects, creating a path for companies to act credibly and transparently on their sustainability commitments. The SCCM project portfolio includes initiatives that are at the forefront of tropical conservation, peatland restoration and biodiversity protection.

This ecosystem services platform provides a reliable funding source for projects and will establish proof of concept in the palm oil sector as a solution for companies with a need to redress liabilities associated with the RSPO. The SCCM will be piloted in Indonesia and Singapore, with a strong potential for scale-up in other commodities, countries and regions.

As a result of this project, it is expected that approximately 30,000 ha will be brought under sustainable land use management, and that GBP 7.5 million of private investment will have been mobilised by 2020.