USAID Green Invest Asia Forum Advances Sustainable Land Use Investment in Southeast Asia

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May 30, 2023 (BANGKOK) – The United States Agency for International Development (USAID) Green Invest Asia project convened more than 200 participants and partners in a sustainable land use forum on May 18-19, 2023 in Bangkok to close out years of technical and business advisory that improved partners’ investment readiness, co-created climate solutions to increase their supply chain sustainability, and increased “green” investments in agriculture and forestry that had a positive impact on the environment. Forum participants learned about business and investment models that have resulted in $446 million of investment into various businesses that source from Southeast Asian soil, transactions that Green Invest Asia helped de-risk, structure, arrange, or close.

“What’s changed in recent years, besides the urgency of tackling this sector…is our ability also to be more flexible and more creative in our financing structures. And that’s a lot thanks to donor partnerships in blended finance funds,” said Susan Olsen, Senior Investment Specialist with the Asian Development Bank’s Private Sector Financial Institutions, Mekong Region in a panel on trends, challenges and opportunities in investing in agriculture and forestry climate solutions. Blended finance is a mix of concessional finance—loans or in-kind support extended on more generous terms than market loans— and commercial funding.

Unlocking capital for more sustainable land use

Since its launch in late 2017 until 2023, USAID Green Invest Asia leveraged the U.S. government’s seed investment at a ratio of 20 to 1 to unlock finance from multinational corporations, commercial banks, impact funds, and asset management companies into low-emission land use projects. Investments funded supply chain improvements, carbon projects, green bond issuance, a sustainability linked loan tied to environmental indicators for natural rubber cultivation and production, and sustainable cultivation and production of agricultural and forestry commodities. (Learn more about USAID Green Invest Asia’s partners here.) These investments are expected to reduce carbon emissions by 156 million tons over the next 15 years, and improve management of 1.7 million hectares of land.

Commodity-crop expansion was by far the largest driver of deforestation from 2000-2015 period in Southeast Asia, according to a USAID-funded study published in 2021. Sixty percent of the 15.8m hectares of forest loss in that period now supports cash crops, e.g., rubber, oil palm, pulpwood, coffee and orchard.

Nicolas Hayon, Investment Director with Mirova, explained how partnering with USAID Green Invest Asia resulted in a $14 million investment by Mirova’s Land Degradation Neutrality Fund into The Kennemer Group, which includes Kennemer Foods International, a Philippine agribusiness specialized in primarily cacao; Kennemer Eco-Solutions: and Agronomika Finance Corporation. Over almost three years, USAID Green Invest Asia supported Kennemer with its investment pitch, financial modelling, company structure, and carbon accounting. (Podcast interview with Nicolas Hayon on Kennemer investment.)

“One of the things that made it easier for us to take an investment decision into this company is definitely the involvement of GIA [Green Invest Asia]. The biggest outcome has been to reduce the hurdle rate of taking the investment decision,” said Hayon.

Green Invest Asia also supported an investment by the global investment manager, New Forests in Thailand with a feasibility study. “Without the support provided by them [Green Invest Asia], I think this project wouldn’t be where it is today…It’s really catalytic, I would say and our investors in the fund is very appreciative of technical assistance like this, because it basically means that every dollar that they put in can be stretched further,” said Carrie Heng, Associate Director of Investments for New Forests. (Podcast interview with New Forests.)

“You keep hearing this the point that there’s no pipeline. Actually, there is a significant pipeline, but it can be challenging,” said Michal Zrust, founder and CEO of Lestari Capital, referring to the critique that there is capital ready to be deployed into sustainable projects, but lack of Investment-ready pipeline. “What it needs is the right level of risk appetite, of course, but it also needs the right type of financing, at the right scale, at the right time…to mature it and ensure its ability to deliver.”

USAID Green Invest Asia supported Lestari Capital with baseline studies for investment projects in Indonesia, involving readiness support and de-risking social forestry projects nationwide. Lestari Capital’s investment committee approved two projects that Green Invest Asia supported with a combined $28.4m investment. The two projects are expected to reduce greenhouse gas emissions over the next 15 years by some 1.3m tons of carbon dioxide equivalent (CO2e), the equivalent in emissions from 3 million barrels of crude oil.

In addition to investment trends in forestry and agriculture asset classes, the forum covered metrics behind carbon commitments, partnership models, the Voluntary Carbon Market, and social inclusion, analyzing trends that influence investment outcomes in sustainable agriculture and forestry.

Convening corporates for joint climate action

“Partnerships work,” said Steve Olive, Mission Director of the USAID’s office in Asia, the Regional Development Mission for Asia. “As a trusted neutral broker and convener, USAID through Green Invest Asia had the privilege to witness these climate collaborations.”

Starting in 2018, USAID Green Invest Asia co-launched with the multinational chocolate and cacao manufacturer, Barry Callebaut, a series of Sustainable Coconut Roundtable events that brought together over 80 buyers, processors and other actors actively involved in coconut supply chains to find sustainability solutions for the sector. This resulted in the industry’s first Sustainable Coconut Charter, a set of guiding principles that outline areas of focus for sustainability programs in coconut supply chains. Today, this initiative is being formalized into the Sustainable Coconut Partnership, the latest multi-stakeholder platform in the commodities sector. Jessica Wettstein, Barry Callebaut’s Sustainability Sourcing Manager for Asia Pacific, said that “having a neutral party [like Green Invest Asia] as a facilitator can help to make pre-competitive partnerships successful and allow partners to navigate sensitivities around sharing information and addressing sometimes conflicting priorities.”

In the coffee sector, USAID Green Invest Asia has released findings from an unprecedented 15-company collaboration that it oversaw, which standardizes a method to measure carbon emissions in Southeast Asia’s coffee sector. This carbon footprint study covers the Central Highlands of Vietnam and Southern Sumatra in Indonesia, two major Robusta coffee sourcing regions that together supply 20 percent of the world’s overall coffee.

“We all face the same complex challenges which we can’t solve on our own,” said Wouter De Smet, Nestlé’s Green Coffee Farmer Connect Manager for Asia, Oceania and Africa, “So why not work together to address these challenges as long as they are pre-competitive?” He echoed Wettstein’s call for a neutral moderator “to align all stakeholders and to maintain the focus on the main shared objective in order to reach the best result. This was done well within this specific partnership.”

Metrics for mitigation

Science-based targets provide companies with a path to reduce emissions in line with the Paris Agreement goals. To date, some 2,700 companies have committed and set targets aligned with the emission-lowering Science Based Target Initiative (SBTi),  an internationally accepted set of environmental impact indicators. Of those, close to 1,800 have made net-zero commitments. At least 70 percent of carbon emissions from food and beverage companies happen at the farm level; for buyers to understand carbon emissions from their entire supply chain, they would need to conduct what is known as a Scope 3 emission study.

“Scope 3  accounting can seem intimidating because of the amount of data required. Companies may not know where to start, leading to a paralysis of action. But this is an iterative process,” said Lyra Pinto, Principal Consultant – Agricultural Value Chains, for South Pole, which develops and implements emission reduction projects and strategies, on the “Meeting Climate Commitments: Carbon Baselines, Traceability and Verification” panel.  “Even if all the right data is not available at the first attempt, it is possible to use the best information available, applying secondary data where available and improving granularity each year. The most important thing is to use the tools we have to get started on the climate journey.”

Carbon markets

More than half of the threatened forest loss in Southeast Asia could be protected as financially viable carbon projects, according to some estimates. Panelists analyzing the future of carbon credits noted how nascent the marketplace is, but also its potential. “Nobody can [achieve] the transition of energy or reducing emissions without carbon credits,” said Riza Suarga, President and CEO of Agraus Resources.

Jonathan Joson, Country Manager, Philippines for Kennemer Eco Solutions, noted carbon credits can help communities if utilized properly. “It is double-edged. People can just use it merely as a financial tool. But it has to have climate benefits foremost and co-benefits for carbon rights owners as well, which are the local communities, and aligned with national government and local government priority environmental and economic development agenda to make sense out of this meaningful resource.” The Kennemer Group was awarded the first carbon credits issued in the Philippines. USAID Green Invest Asia supported an assessment of past and future deforestation drivers, as part of Kennemer’s plan to create a forest restoration and protection program compliant with the Verified Carbon Standard (VCS) program.

Bryan McCann, Commercial Director, Origination for Climate Impact X, a global marketplace, auction house and exchange for carbon credits, said , “As [carbon markets] continue to scale and are viewed by some as a commodity, how can you continue to grow this market while still supporting the communities that ultimately all of us depend on?” (Hear more from Climate X on this podcast about the Voluntary Carbon Market.)

The forum’s final panel, “Investing in Inclusivity: Benefits for smallholders, Women, and Vulnerable Populations” continued the discussion on sharing carbon benefits, among other aspects of social inclusion – ensuring that long marginalized groups have equal participation, agency, and say in how the land  on which they live is commodified. Panelists acknowledged the challenge of communicating the complexity of carbon markets and benefits.

Next steps

USAID Green Invest Asia is scheduled to close mid-July 2023. Globally, the U.S. Government has committed to mobilizing $150 billion in public and private climate finance by 2030, mostly from the private sector.

“This is just the beginning. Green invest Asia’s partners proved that with advisory support coupled with actual capital invested at the right time, at the right place with the right people can shift business as usual,” said Sashi Jayatileke, USAID’s Senior Climate Finance Advisor.

“USAID is committed to continuing to support conduits like Green Invest Asia, to help channel our work from US government investments to the people who need it…For as risky as the land use sector might be to invest in, USAID recognizes the risk of not engaging almost always outstrips the benefits of working with businesses in the land use sector,” said Jayatileke.

Speaker presentations are available here. 

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