New Strategies Needed to Close the Funding Gap for Nature

Nature as an asset class is significantly underinvested. Estimates of the annual value of nature-positive business opportunities range from US$4 trillion to US$10 trillion annually by 2030. The economy of Southeast Asia – where APRIL’s operations are based – is highly dependent on its natural assets, with 60% of GDP at risk from biodiversity and nature loss.

And yet there is a huge shortfall in funding for conservation and biodiversity protection – around US$ 700 billion per year.

Why does this gap exist, and how do we close it?

This was a key discussion point at the International Union for Conservation of Nature (IUCN) Leaders Forum in Geneva, Switzerland, last month. Speaking at the event, RGE’s Group Director of Sustainability, Lucita Jasmin, said the private sector needs to step up.

Protecting nature is resource intensive, requiring long-term technical, financial and operational support: something that business can provide, she said. “Many businesses have yet to understand or assess our impacts and dependencies on nature, and therefore are unable to justify investing in nature.”

For APRIL, that stems from a recognition that, as a resource-based business, it has an intrinsic dependence on nature, she said. “Investing in nature has always been seen as an imperative in terms of the long-term viability of the business,” said Jasmin, who is also APRIL’s Director for Sustainability and External Affairs.

For APRIL, there are many advantages that come with operating in a balanced, integrated landscape that includes sustainably managed plantations, protected and conserved natural forests and community land – notably the ecosystem services it provides; revenue opportunities for local communities; carbon sequestration that impacts on the company’s emissions reduction targets; and potentially revenue from carbon credits.

To achieve this balance, APRIL has created a 1-for-1 target, where the company preserves and restores one hectare of forest for every hectare of plantation forest. It is currently around 80% of the way to reaching the target.

Once the business model is established, it is necessary to lay down sufficient resources. Landscape conservation and rehabilitation is expensive. In the region, the cost of conservation could be between US$25 and US$100 per hectare and licenses typically last 60 to 90 years.

Relying on grants for such projects is not viable over the long term, but businesses can commit to the long term and they can also help in other ways such as operational land management and legal compliance requirements.

APRIL has developed an innovative conservation finance mechanism that links the company’s productivity with its conservation work. It has created an internal levy of US$1 per ton of fibre delivered to the mill at its complex in Pangkalan Kerinci in Riau Province, Sumatra. Last year, that generated close to US$15 million to fund the company’s conservation efforts in its concession boundaries and beyond through partnerships. As productivity goes up, that annual figure is set to increase.

Another key point is the importance of working in partnership with local communities. “Unless you provide social economic opportunities and livelihood options for the communities, then conservation and nature protection will not necessarily be viable over the long term,” said Jasmin.

Consider the generous pledge by Norway in 2010 to provide Indonesia with US$1 billion to combat deforestation, she said. “There are currently 26 million people in Indonesia living below the poverty line. Even if you gave that US$1 billion directly to those people, they would only end up with around US$38 each. Meanwhile, a hectare of oil palm plantation can generate 5 million tons of palm oil per year. And with a ton of palm oil selling at around US$825, that’s a big economic incentive to convert land to production.”

APRIL is working with local communities on participatory land use planning where the company signs agreements that set out livelihood plantations and conservation areas. These agreements come with incentives of US$10,000 a year that villages often spend on social infrastructure. This initiative is a work in progress and a blunt instrument, says Jasmin, but it is a starting point for spreading community conservation work beyond APRIL’s operational boundaries.

None of this can happen though without a mindset shift that leads to a new business strategy incorporating nature. “We’re advocating for a transformation of the business model where nature is actually integrated in the business approach,” said Jasmin.

This commentary is based on remarks delivered at the IUCN Leaders Forum, held in Geneva in October 2024.