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Design of the Kubu Raya Landscape Fund

Overview: Convergence awarded a feasibility study grant to PT. Kandelia Alam (KLIA) through the Asia Natural Capital Design Funding Window, funded by the RS Group. KLIA is partner of IDH (The Sustainable Trade Initiative) through the Production, Protection & Inclusion (PPI) Compact in Kubu Raya District, West Kalimantan, Indonesia

With grant funding from Convergence, KLIA will explore the design of a blended finance vehicle that aims to support the aggregation of forestry concessions in Kubu Raya. The vehicle will support concessionaires in the transition towards sustainable forest management combining multiple business models including ecosystem services, non-timber forest products, and ecotourism.

The blended finance vehicle will create an investable structure by aggregating small scale concessions, while allowing for landscape-level impact through increased collaboration and a holistic approach to sustainable forestry management. This approach will help protect key species, such as the proboscis monkey native to Borneo, and the Irrawaddy dolphin; these species are at risk due to excessive land conversion and poaching practices. The vehicle is expected to advance reforestation of over 5,000 hectares of degraded area, protect over 40,000 hectares of mangroves, peatland, and forests, and support the livelihoods of nearly 25,000 people.

KLIA and its partners will initially focus on assessing the feasibility of innovative revenue streams for the aggregated concessions. In addition, revenues from complementary sources such as the sale of non-timber forest products, aquaculture, and ecotourism will also be explored.

Design question and learning potential for the market: How can the aggregation of small, heterogeneous forestry concessions lead to an investable structure and landscape level-impact?

KLIA, in collaboration with IDH, will be leading a consortium of adjacent concessions in the Kubu Raya District in West Kalimantan to pilot a landscape-level business model with a diverse set of revenue sources. This bottom-up approach to aggregation across concessions will lead to close collaboration among foresters and a cohesive approach to sustainably manage the land.

The feasibility study will focus on the design of the project-level special purpose vehicle (SPV), which is expected to aggregate three adjacent forest concessions. In the longer term, the vision for the initiative is to set up a holding company that will raise finance to invest in a series of project-level SPVs, each of which will aggregate a critical mass of diverse concessions. This aggregation is ultimately expected to provide investors an investable opportunity, with exposure to impact and returns across multiple landscapes.