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Design of Asia Climate-Smart Landscape Fund (ACLF)

Overview: Convergence awarded a proof-of-concept grant to ADM Capital Group for the design of Asia Climate-Smart Landscape Fund (ACLF), a $200 million blended finance fund for providing medium to long-term small ticket size ($5-20 million) loans to small and medium enterprises (SMEs) engaged in sustainable agriculture, land regeneration, and forest protection in Indonesia.

Indonesia is the fourth largest emitter of greenhouse gases globally, with over 60% of emissions stemming from a change in land use from forestry to agriculture. With over 50% of Indonesia’s forest canopy lost, there is a need to balance economic development with environmental protection, which could be managed by regenerating degraded land and preventing further forest loss through credit covenants.

The fund intends to provide long-term senior secured loans to SMEs focusing on opportunities across the agricultural commodity supply chain in Indonesia. It will target opportunities that emphasize land rehabilitation, forest restoration, and improving rural livelihoods, with a strong focus on gender. The fund also intends to fully integrate development impact into the investment process by setting definitive impact targets for the portfolio, including carbon emission deductions, higher jobs with a specific focus on women, and more land under sustainable practice.

Design question and learning potential for the market: How can a fund be structured with an integrated gender lens to address the long-term financing gap for SMEs across sustainable agriculture, land regeneration, and forest protection in Indonesia?

During the proof-of-concept phase, ADM Capital Group will design the structure and gender lens framework for the fund. Majority of the existing financing initiatives for SMEs in Indonesia are short-term and lack flexibility, while the available longer term financing alternatives typically have larger ticket sizes that are unsuitable for the needs of SMEs. Building on the experience of implementing the Tropical Landscapes Financing Facility in Indonesia, ADM Capital Group intends to address this financing gap by structuring a blended fund supplemented by a guarantee. ADM Capital Group will also work on designing the gender and environmental strategy for the fund and incorporating it in the investment and operational process.