GCBC Logo

Enabling private investment to protect forests through a Payment for Ecosystem Services mechanism

2022
Enabling private investment to protect forests through a Payment for Ecosystem Services mechanism
Visit Site

Relevant Topic(s) Tags

Technical Assistance & Project Preparation
Risks & Opportunities: The Business Case
Carbon Markets & Carbon Finance

Summary

Lestari Capital, a market access player, created a Payments for Ecosystem Services (PES) market to enable forest-positive business models in Indonesia. This effort was supported by Partnerships for Forests (P4F) a grant and technical assistance programme funded by UK Aid and delivered by Palladium and Systemiq. The project addressed both demand- and supply-side challenges in connecting corporate sustainability commitments with forest conservation and restoration. On the demand side, P4F supported Lestari Capital to implement a buyers’ collective for sustainable forestry projects. Lestari Capital also developed a Sustainable Commodities Conservation Mechanism, an innovative solution that finances projects over a 25-year period. On the supply side, P4F supported eight village communities to develop business plans for selling forest conservation outcomes, with two villages securing 25-year PES agreements. The projects have led to over £69 million in investments and the protection of 41,000 hectares of forest, while unlocking additional sustainable sources of income for forest communities.

Key Takeaways:

Market Creation: New markets for ecosystem services can help ensure natural capital is more valuable intact than destroyed. Creating mechanisms to ensure that local communities who steward these ecosystems benefit from these markets is vital.

Supply and demand interventions: Action to mobilise buyers for PES projects is most effective when coupled with pipeline and supply-side support, with a significant role for concessional capital and technical assistance.

Credible demand signals: Long-term financing, purchase agreements, and buyer accountability mechanisms are key to create credible incentives for project development.

Aligning with certification: Support for villages involved aligning projects with RSPO certification. Aligning projects, sustainability, and investment frameworks with common standards can boost clarity for investors and reduce risk.

Was this case study helpful?

We'd love to hear from you! You can share your feedback or suggest a Case Study below.

Share Your FeedbackSuggest a Case Study
Author Organization(s)
Partnerships for Forests
Relevant Tags
Pipeline Development
Relevant Sector
Nature (Agriculture, Forestry & Land Use, Oceans, Water)
Featured Organization(s)
Lestari Capital
Partnerships for Forests
Type of Featured Organization or Stakeholders
Asset Managers
Technical Assistance Providers
Local Communities
Relevant Asset Classes & Other Instruments
Natural Capital
Geography
Indonesia
Original Language
English

Was this case study helpful?

We'd love to hear from you! You can share your feedback or suggest a Case Study below.

Share Your FeedbackSuggest a Case Study