Posted February 4, 2021
BANGKOK, February 4, 2021 – With technical support from United States Agency for International Development (USAID), Forest Carbon closed an $11 million investment today with AXA IM Alts, locking in both debt and equity from a global leader in alternative investments with $185.6 (€153) billion of assets under management.
USAID Green Invest Asia, a technical services facility supporting green agribusiness and forestry initiatives in Southeast Asia to raise capital, facilitated the investment by supporting due diligence on Indonesia’s enabling environment and policy frameworks for carbon offset production. In addition, the facility supported the design of an environmental and social management system for Forest Carbon.
USAID Green Invest Asia provides technical support to business and investors with the aim to catalyze $400 million of investments into sustainable agriculture and forestry models. “AXA’s investment is the latest example of the bold leadership needed to shift commercial land use toward more sustainable practices that can reduce greenhouse gas emissions,” said Christy Owen, head of USAID Green Invest Asia. “Forest Carbon’s restoration model holds enormous climate mitigation potential and we aim to capitalize models like this to deliver climate action at scale.”
As part of the country’s international climate commitment under the Paris Agreement, Indonesia has pledged to reduce 29 percent of its greenhouse gas (GHG) emissions by 2030. Private companies are already acting to reduce emissions through long-term shifts in their operations. Carbon offsets play an important role in climate action, as with the Science Based Targets Initiative, which helps companies account for and reduce their emissions.
Offsets can account for emissions that can’t be immediately reduced, creating a new source of capital for forest restoration. According to the financial think tank, Carbon Tracker, demand for forest carbon offsets could outstrip supply by 2025, with carbon prices quadrupling by 2030. The German bank Berenberg estimates offset values could be worth $125 billion to $150 billion a year by 2050.
Forest Carbon restores tropical wetland forests to reduce greenhouse gas emissions, targeting Indonesia because it contains one-third of the world’s peat and mangrove wetlands. Forest Carbon’s first project, the Sumatra Merang Peatland Project, secured premium carbon offset buyers to restore a globally significant peatland forest with habitat for Sumatran tigers and other species. AXA’s investment builds on this achievement, and will reduce the time required to bring new projects to market by leveraging technology such as machine learning and Internet of Things (IoT) sensors for real-time impact verification.
“AXA’s commitment is a huge vote of confidence and the bond structure shows the sector is maturing,” said Jeffrey Chatellier, CEO of Forest Carbon. “The equity funds – along with AXA’s ongoing role on our board – will support Forest Carbon’s push to secure a portfolio of new restoration projects that can be financed by a growing community of investors, on the way to our goal of 250,000 hectares under management.”
Launched in 2019 to invest in natural capital, resource efficiency, and community resilience, the AXA IM Impact Fund Climate and Biodiversity made the investment. “Climate change is one of the most urgent risks facing the world,” said Jonathan Dean, Head of Impact Investing at AXA IM Alts. “We see this as an important model for climate change mitigation at scale, which is why we are so excited about supporting growth in Indonesia and wider Southeast Asia.”
Mirova Natural Capital—an asset manager specializing in technically sound forest, biodiversity and ocean funds—structured the deal between Forest Carbon and AXA IM Alts. “We are channeling investment into market-based approaches to forest restoration and conservation because of the potential to generate strong returns from efforts to protect vulnerable ecosystems,” said Vincent Gradt, Managing Director of Mirova Natural Capital.
The AXA IM Impact Fund Climate and Biodiversity will subscribe to restoration project bonds for at least two new projects through Forest Carbon, unlocking finance for high-priority biodiversity and wetland areas in Indonesia. The company will secure areas under threat of forest fires and conversion to commercial plantations, launching its second major project in the first quarter of 2021.