Practical Solutions to Mobilize Finance for Sustainable Land-use in Indonesia

Investing in sustainable land use practices, such as regenerative agriculture, agroforestry, and ecosystem restoration not only promises financial returns but wields the power to generate significant measurable positive social and environmental (E&S) impacts. This is underscored in FOLUR’s newly released factsheet ‘Investor Guide to Environmental and Social Opportunities and Risks in Indonesia’. By integrating environmental and social considerations into financial decision-making processes, financial actors can not only mitigate risks but also uncover new investment opportunities, thus building more resilient portfolios that are aligned with global climate and nature goals. 

In Indonesia, Agriculture plays a pivotal role in exports, comprising 27.5% ($72.7 billion) of total exports in 2021. The archipelago nation is at the forefront of sustainable development efforts, grappling with challenges including forest and biodiversity loss and social inequity while actively pursuing opportunities in sustainable agriculture, conservation, and community development. Given the country’s rich biodiversity and associated importance of natural resources to its economy, there are many opportunities for investment to drive landscape-level action in ecosystem restoration and protection. 

The factsheet ‘Investor guide to environmental and social opportunities and risks: Indonesia’, published by the Food and Land Use Restoration Impact Program (FOLUR), in collaboration with the United Nations Environment Programme (UNEP) and UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) identifies several key areas in Indonesia that stand out as opportunities for targeted investment in sustainable land use.

Firstly, there is potential in sustainable agriculture and plantation practices, particularly in cultivating climate-resilient crops like palm oil, rubber, and cocoa. Ecosystem conservation and restoration efforts, such as supporting peatland and mangrove restoration and carbon credit creation, also offer avenues for impactful investment aligned with sustainability objectives. Additionally, the factsheet offers suggestions to support the transition to low-emission agricultural practices, improving water management, and facilitating reduced pesticide and fertilizer usage.

This is the first country-specific factsheet in a series and will be followed by a dedicated factsheet for Paraguay and other biomes. These resources aim to help institutions understand and assess environmental and social opportunities and risks in land-use finance at a regional scale.

In addition to the factsheet, the Good Growth Partnership, in collaboration with WWF Indonesia have developed a series of training modules tailored for financial institutions in the region, accessible through the IKBI network platform. These modules provide guidance, tools, and capacity-building resources for financial actors in Indonesia. Topics covered by the modules include deforestation risk for banks in Indonesia, mitigation strategies, the impact on Fis to comply with environmental policies, application of new emerging regulations, and provide insights to existing private sector products and services that can support zero deforestation commodity production. Financial institutions have an identified role in funding the transition to zero-deforestation commodity production in Indonesia.

The ‘Investor Guide to Environmental and Social Opportunities and Risks: Indonesia’ serves as a testament to the opportunities and risk mitigation strategies awaiting investors. As financial institutions contemplate the investment landscape, insights from these resources illustrate the potential to contribute to a more resilient and sustainable future.

By |2024-06-05T21:18:41+00:00June 5th, 2024|Blogs|