Innovative Blended Finance Initiative Aims to Sustainably Transform Palm Oil Production
In an ambitious move to combat deforestation and empower local farmers, Abler Nordic has launched the Sustainable Oil Palm Replanting in Indonesia (SOPRI) project in collaboration with the Temasek Foundation, Musim Mas, and Livelihoods Funds. This initiative is particularly significant given that smallholders account for over 40% of Indonesia's oil palm land. However, many of these farmers are facing the pressing issue of aging oil palms that lead to diminishing yields. The SOPRI project seeks to address this by providing financial resources and education to help them sustainably replant oil palms.
The initiative's funding model is grounded in blended finance—a strategy combining public, charitable, and private investments. It was initially inspired by the Climate Smart Fund, which received backing from the Norwegian Ministry of Climate and Environment. Abler Nordic is leading the charge by bringing together capital from different sources to create a sustainable and deforestation-free value chain. The Temasek Foundation plays a pivotal role by offering catalytic capital, which guarantees loans for smallholders, making financing more accessible and affordable.
In its first phase, the SOPRI project aims to assist 400 smallholders across an area of 400 hectares in Sumatra. To achieve this, it offers a range of support, including long-term loans for replanting, training in financial management, advice on sustainability certification, land title assistance, and community planning for responsible land use. In return, the farmers commit to avoiding expansion into forested areas, with their adherence monitored using advanced satellite technology and on-the-ground assessments.
This program is not merely a financial initiative; it represents a holistic approach to sustainability. Abler Nordic has partnered with local entities, including Koltiva and Bank Amar, to facilitate effective implementation. Meanwhile, Musim Mas is providing essential technical support to help smallholders attain sustainable palm oil certification and access lucrative markets, while Livelihoods Funds contribute expertise in training and advisory services aimed at transitioning farmers to more sustainable agricultural practices.
Moreover, the project recognizes the importance of integrating climate-resilient strategies. Plans are underway to explore agroforestry models that combine oil palms with shade trees and cash crops, which not only enhance soil health but also help farmers adapt to the changing climate.
Looking to the future, Abler Nordic aims to grow the Climate Smart Fund from an initial USD 10 million to a substantially larger USD 40 million fund in its first close. This expansion will be facilitated through a mix of investments, guarantees, and grants to ensure the fund's effectiveness in promoting sustainable actions against climate change.
In the words of Arthur Sletteberg, Managing Director of Abler Nordic, building long-lasting relationships with smallholders and their communities is essential to their vision. He expressed optimism, stating, "What we're doing is complex and unprecedented in many ways, but the results so far demonstrate that we have the right model and risk mitigation to expand the Climate Smart Fund and create long-term, meaningful change for both smallholder farmers and the climate."
Livelihoods Ventures echoes this sentiment with its commitment to fostering long-term solutions that tackle challenges at their root. As Sébastien de Royer, Senior Project Manager for Southeast Asia at Livelihoods Ventures puts it, the goal is to empower smallholders with the necessary resources to enable a shift to sustainable and resilient farming.
The leadership at Musim Mas also emphasizes that the initiative transcends financial support; it seeks to empower smallholders through knowledge and resources, fostering a culture of sustainability in palm oil production. Mr. Rob Nicholls, General Manager of Projects and Partnerships at Musim Mas, stated, "We believe that through collaboration and commitment, we can create a positive impact on both the environment and the communities involved in palm oil production."
Finally, Heng Li Lang, Head of Climate and Liveability at the Temasek Foundation, expressed confidence in the pilot initiative, referring to it as a potential game-changer in unlocking financing for sustainable replanting. She highlighted the catalytic capital's role in minimizing risks for smallholders and underscored a shared commitment to building a public-private-philanthropic partnership aimed at developing nature-based solutions to combat climate change. Together, this collaborative effort represents a promising step toward not only preserving the environment but also uplifting communities dedicated to sustainable palm oil production.
The initiative's funding model is grounded in blended finance—a strategy combining public, charitable, and private investments. It was initially inspired by the Climate Smart Fund, which received backing from the Norwegian Ministry of Climate and Environment. Abler Nordic is leading the charge by bringing together capital from different sources to create a sustainable and deforestation-free value chain. The Temasek Foundation plays a pivotal role by offering catalytic capital, which guarantees loans for smallholders, making financing more accessible and affordable.
In its first phase, the SOPRI project aims to assist 400 smallholders across an area of 400 hectares in Sumatra. To achieve this, it offers a range of support, including long-term loans for replanting, training in financial management, advice on sustainability certification, land title assistance, and community planning for responsible land use. In return, the farmers commit to avoiding expansion into forested areas, with their adherence monitored using advanced satellite technology and on-the-ground assessments.
This program is not merely a financial initiative; it represents a holistic approach to sustainability. Abler Nordic has partnered with local entities, including Koltiva and Bank Amar, to facilitate effective implementation. Meanwhile, Musim Mas is providing essential technical support to help smallholders attain sustainable palm oil certification and access lucrative markets, while Livelihoods Funds contribute expertise in training and advisory services aimed at transitioning farmers to more sustainable agricultural practices.
Moreover, the project recognizes the importance of integrating climate-resilient strategies. Plans are underway to explore agroforestry models that combine oil palms with shade trees and cash crops, which not only enhance soil health but also help farmers adapt to the changing climate.
Looking to the future, Abler Nordic aims to grow the Climate Smart Fund from an initial USD 10 million to a substantially larger USD 40 million fund in its first close. This expansion will be facilitated through a mix of investments, guarantees, and grants to ensure the fund's effectiveness in promoting sustainable actions against climate change.
In the words of Arthur Sletteberg, Managing Director of Abler Nordic, building long-lasting relationships with smallholders and their communities is essential to their vision. He expressed optimism, stating, "What we're doing is complex and unprecedented in many ways, but the results so far demonstrate that we have the right model and risk mitigation to expand the Climate Smart Fund and create long-term, meaningful change for both smallholder farmers and the climate."
Livelihoods Ventures echoes this sentiment with its commitment to fostering long-term solutions that tackle challenges at their root. As Sébastien de Royer, Senior Project Manager for Southeast Asia at Livelihoods Ventures puts it, the goal is to empower smallholders with the necessary resources to enable a shift to sustainable and resilient farming.
The leadership at Musim Mas also emphasizes that the initiative transcends financial support; it seeks to empower smallholders through knowledge and resources, fostering a culture of sustainability in palm oil production. Mr. Rob Nicholls, General Manager of Projects and Partnerships at Musim Mas, stated, "We believe that through collaboration and commitment, we can create a positive impact on both the environment and the communities involved in palm oil production."
Finally, Heng Li Lang, Head of Climate and Liveability at the Temasek Foundation, expressed confidence in the pilot initiative, referring to it as a potential game-changer in unlocking financing for sustainable replanting. She highlighted the catalytic capital's role in minimizing risks for smallholders and underscored a shared commitment to building a public-private-philanthropic partnership aimed at developing nature-based solutions to combat climate change. Together, this collaborative effort represents a promising step toward not only preserving the environment but also uplifting communities dedicated to sustainable palm oil production.
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