Stichting andgreen.fund (“&Green”) has invested USD 12 million as an 8-year loan facility in PT Hilton Duta Lestari (“HDL”) to construct a Crude Palm Oil mill and to create an inclusive palm oil supply base in West Kalimantan, Indonesia that ensures No Deforestation, No Peat, and No Exploitation (NDPE). &Green, a blended finance vehicle established to de-link deforestation from tropical agricultural commodity production, will work with HDL to reduce deforestation across four districts and improve incomes for up to 85,000 inhabitants, mainly indigenous (Dayak) communities. By empowering smallholders throughout a 30km radius around its estates, HDL will be able to source only from no-deforestation oil palm fruit (FFB) suppliers, which will therefore support forest protection in a landscape that is experiencing accelerating rates of clearing.
Palm oil supply chains are highly fragmented, opaque, and result in steep price deductions for smallholders. HDL found high transport costs and low yields causing farmer incomes to be more than 50% lower. HDL will engage with independent smallholders, local institutions and government agencies to support land regularization, improve production and enhance landscape forest protection for an improved, transparent and inclusive model of FFB sourcing and processing. Through a publicly accessible Landscape Protection Plan developed with &Green, HDL’s new sustainable sourcing strategy will establish its NDPE-compliant mill and support rural development.
“Thanks to our partnership with &Green, HDL is ready to take a leap forward in the Indonesian palm oil sector by maximizing sustainable production while ensuring transparency, traceability and inclusivity in the supply chain,” said V. Govindasamy, HDL’s CEO, adding that “HDL is looking forward to becoming an exemplary business model for other small independent producers across Kalimantan and Sumatra to follow.”
IDH – the Sustainable Trade Initiative manages a Technical Assistance (TA) Facility that aims to strengthen projects for &Green’s investments. The TA Facility and IDH experience in convening oil palm companies, CSOs and government agencies to serve smallholder communities and promote forest protection in West-Kalimantan has helped HDL assess the presence of High Conservation Value (HCV) and High Carbon Stock (HCS) land and conduct an Environment and Social Impact Assessment (ESIA) to prepare a robust sourcing strategy and roadmap to NDPE and sustainability compliance. It also helped HDL understand the legal pathways and engagement required to collaborate with indigenous communities in order to secure the legal protection of 1,900 hectares providing ecosystem services and of cultural significance to indigenous communities. HDL will coordinate the development of joint-management plans for the preservation and environmental safeguarding of this area.
“Leveraging our know-how, resources, and complementary roles to develop transformational blueprints, we are excited to see the realization of &Green’s investment into PT HDL” said Fitrian Ardiansyah, Yayasan IDH Executive Chairman. “HDL’s landscape protection plan, linked to &Green’s financing, demonstrates the different solutions available at the hands of private companies for protecting forests, preventing deforestation and supporting the prosperity of communities.”
Environmental and social targets for the project include: intensification of oil palm production, forest conservation, through comprehensive traceability system from mills, and forest restoration; inclusion of smallholders through a profit-sharing scheme and farmer support programs. HDL’s year-on year performance will be made public on &Green’s website. In line with &Green’s requirements, HDL also commits to achieving compliance with international sustainability standards, such as the IFC PS and the RSPO.