Financing sustainable peatland management: Mobilizing, utilizing and leveraging public and private investments to reach Indonesia’s peatland restoration targets

Ambitious global restoration goals have been set as per development agenda which would require close to $36-49 billion in investments each year. Indonesia, whose emissions are led by the Land Use Sector, requires an investment of more than $80 billion needed to rehabilitate forests alone. 2015 witnessed massive forest fires resulting in emissions spiking as much as daily emissions from the entire European Union for 26 days that put communities and critical biodiversity under threat.  Indonesia is currently falling short for investments needed to scale peat restoration activities. Mobilizing additional finance and utilizing current investments to scale would help protect the livelihoods of forest dependent communities, allow sustainable production of commodities to fulfill competing land use demands and build resilience at the landscape level by preventing loss and damage worth over $16.1 billion.

The BRG has made great strides in efforts for financing Indonesia’s peat restoration target, for which the World Bank estimates initial cost for rehabilitating the 2 million hectares to be approximately IDR 27 trillion ($2 billion). The Government of Indonesia prepared an economic package last year which resulted in up to IDR 860 billion for 250,000 ha (12.5% of target) being financed through allocations from the 2017 State Budget. The private sector has pitched in financing for restoration of 400,000 ha (20%) on concession lands, and donor contributions would help in restoring an additional 50,000 Ha (2.5%) (including over US$800 million from Norway, US$3 million from the UK, and US$2.9 million from the US and potential pledges from CLUA and Packard of $15Million). In addition, significant momentum has been built towards financing sustainable landscapes through varied instruments—fiscal, private sector investment, green landscape bonds, etc.—and initiatives are working in parallel towards peatland restoration and sustainable management of land use like the Landscape Fund, the first ‘forest bond’ issued by IFC  on the London Stock Exchange, the Tropical Landscape Financing Facility and Belantara Foundation’s Landscape restoration program. However, these contributions are still fall short to fulfill the country’s target by 1.1 mHa.

This session begins with exploring options to mobilize finance for the gap and leverage existing initiatives and investments towards sustainable land use for landscapes.

Key questions:

1. ( Mobilizing finance) How can we best mobilize the scale of finance needed to meet restoration targets? What is needed and from whom? What are some of the considerations for financing for large scale private investments, donor contributions and public sector investments?
2. ( Instruments and utilization) How can we capitalize and fully utilize current investments to incentivize sustainable peat restoration?  What works and what doesn’t in Indonesia, in terms of financial instruments for sustainable landscapes – public/private/blended, market based, fiscal/regulatory?
3. ( Stronger business case/ viability) How can sustainable landscape management attract more finance towards sustainable rehabilitation, peatland restoration and conservation? Is there evidence from current investments/programs (such as public private partnerships) for financing sustainable peatland restoration to reach scale?

Background and further reading:

1. Sustainable financing for forest and landscape restoration – Opportunities, challenges and the way forward, published by FAO and the Global Mechanism of the UNCCD (2015). Key Messages
2. Fiscal Policy Framework for Sustainable Land Use ( BKF, Fiscal Policy Agency Indonesia)
3. Is the time for landscape bonds now? Experience shows some barriers remain
4. Financing and incentive options for sustainable management of peatland forests in Southeast Asia, Macmillan 2013, ASEAN Secretariat GEF
5. Best Practices from other countries : Financing Restoration of peatlands in Europe, Lessons and ways forward,  Financing Restoration of Peatlands in UK, understanding financing mechanisms for peatland restoration in UK
6. The Landscape Fund: Concept note, OECD, How landscape funds could solve deforestation
7. .Sustainable Landscapes: Investor Mapping in Asia and  Strategic Action Plan Engagement opportunities in conservation finance December 2015 USAID, Dalberg
8. Green Bonds and Land Conservation: A New Investment Landscape? Stanford Social and Innovation Review Dec 2016
9. Financing Sustainable Forest Landscapes, Mark Burrows 2014