Q. Tell us how the transformative Tropical Landscape project? How did it get initiated into becoming a partnership of stakeholders?
A. The Tropical Landscapes Summit (TLS) organized by Indonesia’s National Investment Promotion Board (BKPM) in partnership with the United Nations in Jakarta in 2015 highlighted the interest by major investors to help Indonesia transition into a green economy. To take advantage of the momentum by the Government of Indonesia, a multi-stakeholder group consisting of UN Environment, the World Agroforestry Center (ICRAF), BNP Paribas and ADM Capital established the Tropical Landscapes Finance Facility (TLFF) to bring long-term finance to projects and companies that would stimulate green growth and improve the rural livelihoods in Indonesia. The TLFF was launched by H.E. Darmin Nasution, Minister at the Coordinating Ministry for Economic Affairs, Indonesia in 2016.
This innovative platform, a world’s first, is supporting Indonesia to promote economic development while contributing to achieving its climate targets as stated in its ‘Intended Nationally Determined Contribution’. Its objectives are to reduce forest degradation by channeling finance into sustainable production of agricultural commodities that combine value-add in the agricultural sector with improved rural livelihoods and reduced pressure for forest conversion. Its objective is also to scale up investments in renewable energy and the recycling of waste which may otherwise have harmful environmental consequences.
TLFF bridges the gap between the government, private sector and communities, coordinating cross-functionally to bring large-scale positive change on-ground. It represents a model that is scalable in other emerging economies, and which would help unlock capital from institutional investors and other private finance institutions for achieving development and climate goals.
Q. Are you adding new projects under TLFF only in Indonesia or also in other countries like India? Is the SIFF the Indian-version of the TLFF?
A. TLFF is specific to Indonesia, as it is a country-led model. However, sustainable finance facilities are being planned in key developing countries to support the efforts of governments to meet their Intended Nationally Determined Contributions (INDCs) and Sustainable Development Goals (SDGs).
In early-2018, the TLFF announced its inaugural project of USD 350 million. The first tranche is funded through a landmark USD 95 million sustainability-bond issued by BNP Paribas. Its objective was to finance a sustainable natural rubber plantation on heavily degraded land in two provinces in Indonesia, which would generate direct fair-wage employment for 16,000 people and make 50,000 people living in remote areas more resilient to climate change impacts. The TLFF has several cross-sectoral projects in the pipeline and aims to generate investments in excess of USD 1 billion by 2019.
Sustainable India Finance Facility (SIFF) is a stand-alone entity specific to India, as the institutional architecture of these facilities must reflect the realities of the operating environment and challenges that it aims to address. SIFF is an innovative partnership between UN Environment, the World Agroforestry Center and BNP Paribas. Growing carbon emissions, biodiversity losses, vulnerability to climate change, droughts, agricultural instability and increasing rural poverty remain key concerns in India. SIFF fulfills a need for innovative fiscal mechanisms that exists in India and brings resources into overlooked environmental sectors, so that a national shift towards inclusive growth and emissions reduction is achieved.
(seated 2nd from right) at the launch of ZBNF Project by Andhra Pradesh Chief Minister Chandrababu Naidu
As its first project, SIFF is working with the Andhra Pradesh state government on the scale-out of the Zero Budget Natural Farming (ZBNF) program to support Chief Minister Chandrababu Naidu’s vision of converting 6 million farmers and 8 million hectares to 100% chemical free and natural agriculture by 2024. To address the problems of air pollution affecting North India and degradation of forest buffer areas, SIFF is also evaluating projects in the biomass to bioethanol sector as well as in conservation, which would preserve high biodiversity areas while generating resilient economic opportunities for communities.
Q. What efforts should be done to deepen acceptability amongst the business community about the challenge our natural capital faces? After all, the main resistance often comes from businesses.
A. Corporate behavior needs to shift from a focus on private profits to public benefits – the idea of a “Corporation 2020”. This can be achieved through a combined set of regulatory and incentives-based mechanisms. The legislative changes include (a) improving minimum environmental, social and governance standards that businesses need to conform to and going beyond environmental impact assessments to incorporating sensitive biodiversity and community-friendly safeguards, (b) redirecting harmful subsidies in fertilizers, etc., to enhance the resilience of smallholder farmers through investments in ecosystem-based approaches, (c) requiring responsible advertising and (d) integrating circular economy practices that promote “cradle to grave” approaches in manufacturing and other industries. Furthermore, the business community should consider triple-bottom-line metrics when assessing their performance, which extend beyond just corporate profits to measuring their effects on communities, natural resources and health as indicators of success.
Q. India is a young country. What is your advice to the youth so that they build better practices on sustainability?
A. There is a need for better, up-to-date and consistent education on natural capital, as well as its status and relationship with development so that there is an understanding of the interlinkages between nature and well-being of people from a young age. Urban youth should explore and spend time in rural areas to comprehend the connectivity between consumerism and lifestyle aspirations and resulting impacts on the environment. Furthermore, responsible decision-making as consumers is extremely significant in its capacity to influence corporate behavior and advocate for policy changes. Thus, the younger population should check labels when they purchase products to understand the ecosystems that are being affected in supply chains. They should also look for high standards of transparency, accountability and traceability as consumers. Latest information is widely available online and the younger population should research good sustainability certifications and practices and make informed choices.
Q. Triple bottom-line is picking up acceptance, but it really depends on developing workable business-models. What can be done to boost the innovations and their practical applicability, so that better business models emerge?
A. There are numerous best-practices that are also innovative in many parts of India which are based on better business models. Within sustainability, efforts made by smallholder farmers, urban poor communities, indigenous populations and entrepreneurs need to be mapped to determine the potential for scalability. Green entrepreneurship needs strengthened support and widespread investment opportunities. Sectors such as forestry, biodiversity, fisheries and climate resilience should be encouraged with platforms being created wherein entrepreneurs can receive mentorship and guidance on vetted business models applicable in those areas. More forums on successful international examples and emerging practices that are delivering triple-bottom-line impacts should be fostered. This will lead to discussions on the types of support systems required and the scale of financing needed for better business models.
Q. Tell us about some of the interesting business models on sustainability you heard at the recent World Environment Day conference in Delhi?
A. The idea of ‘farm to fork’ is being demonstrated well by several businesses in Canada, Germany and the USA. Nada is a zero-waste and zero-packaging grocery store that only works with farmers that adhere to beyond-organic practices. The aim is to support ecologically friendly agriculture, reduce harmful inputs and create new markets through conscious consumers that recognize the importance of supply chain transparency and of protecting natural resources. A Swedish burger chain called Max Burgers is making its menu climate positive by tracing the greenhouse emissions of its 130 restaurants and providing carbon-offsetting options. The climate analysis undertaken by the restaurant includes accounting for farmers’ soil purchases and the entire supply chain till the food is served to customers.
While this is not a business model at present, ‘forest schools’ are emerging in various parts of the world that foster a nature-based approach to education. This contributes to better awareness from a young age about sustainability and improved well-being of children. The Green School in Bali is an example. These types of schools could present interesting business opportunities and create social consciousness.
Q. Sustainability has to start from agriculture. Why has agriculture been neglected so far – is it because of the lack of working models that could be scaled up or is it a more complex reason?
A. Conventional agricultural approaches have only focused on production and yields while overlooking the holistic value-chain and the invisible stocks and flows that are non-marketable. These stocks and flows, while not being captured in economic metrics such as GDP, are important in the continued sustainability of agriculture and in achieving the Sustainable Development Goals. More emphasis and understanding about ecosystems, biodiversity, freshwater, human health and social equity needs to be integrated into agricultural systems to account for the tradeoffs between food production and degradation of natural capital. The TEEB for Agriculture and Food report explains the need for a “systems” approach and provide recommendations through framework-testing studies. However, there is a need to quantify these stocks and flows to evaluate long-terms impacts for food security and to fix existing food metrics. It is imperative to transition to agricultural practices that enable climate resilient production of sufficient and nutritious food without damaging ecosystems, biodiversity and health. A part of this transition is to assess policy changes such as removing harmful subsidies for fertilizers, etc., and redirecting them towards investments that underpin sustainable production processes.
In Andhra Pradesh, the ZBNF project presents a model that preserves natural capital, reduces inputs and generates stable yields across varying agro-climatic zones and conditions. It creates the opportunity for more diverse food sources that are more affordable for households. SIFF is working with key stakeholders such as UN Environment, ICRAF, Council on Energy, Environment and Water, Azim Premji Philanthropic Initiatives, etc., to quantify the social and environmental impacts of ZBNF. This is critical as ZBNF provides a vetted model (165,000 farmers have already converted to ZBNF practices) that can be scaled to other parts of the country, thus contributing to changing the existing paradigm of agriculture and food.
Q. The Indonesian government played the role of an enabler in the TLFF. What is your advice to Indian government to play a better role as an enabler?
A. SIFF is working closely with the Government of India and several state governments on developing and evaluating investment opportunities that will result in large-scale social and environmental benefits on the ground. These are cross-sectoral projects and there is clear interest from the government, private sector and civil society stakeholders to collaboratively scale these efforts.
Image Courtesy: UNORCID