Triple bottom line: Abler Nordic's Climate Smart Fund, Indonesia
We seek to make it profitable for individual smallholder farmers to do the right thing for the climate.
Rainforests play a crucial role in mitigating climate change by storing carbon, yet the growth of oil palm, coffee and cocoa plantations in Indonesia for the past two decades has led to considerable deforestation.
Abler Nordic’s Climate Smart Fund seeks to achieve deforestation-free value chains by providing long-term affordable working capital, agricultural training and support with sustainability certification for smallholder farmers, enabling them to intensify production on existing plots. In return, the farmers commit not to encroach on the rainforest, with compliance and local deforestation closely monitored.
The pilot phase has been funded with the equivalent USD 10 million from Norway’s International Climate and Forest Initiative (NICFI), the country’s most important endeavor to mitigate climate change. NICFI is managed by the Norwegian Ministry of Climate and the Environment.
The Challenge
- To support their income, low-income farmers expand their plots into the rainforest.
- These farmers have limited access to credit, so they resort to using low quality seedlings and fertiliser. Combined with inferior farming practices, output may be only a third of what could be achieved.
- Weak land rights reinforce the tendency for short-term solutions.
The Idea
- Offering attractively priced, long-term replanting loans, combined with comprehensive agricultural services and quality seeds and fertiliser that help increase productivity and income.
- Facilitating sustainable crop certification that increases prices and improves access
to market. Globally accepted standards of sustainable production achieved by commitment to RSPO/ISPO and other certifications. - Supporting efforts to secure land rights, which can then be collateralized to reduce credit risk.
- Ensuring that farmers commit to conservation—agreements on ‘no deforestation’ are monitored through satellite and drone data, as well as extensive ground verification.
The Goals
ENVIRONMENTAL: Reduced emissions and deforestation, and increased biodiversity.
SOCIAL: Poverty alleviation - farmers improve their income sustainably.
FINANCIAL: Fair financial returns from investing sustainably in small-scale agriculture.
Next Steps
The Fund is still in its pilot phase but key assumptions underpinning the concept have already been verified, resulting in a 35% income increase for participating farmers.
Next steps include scaling up agricultural training, sustainability certification and long-term lending for 15,000 – 30,000 additional smallholders.
