Connecting Markets to conservation LESTARI CAPITAL Connecting Markets to conservation

Team Lestari Capital Impact Enterprise with conservation roots Forest Carbon (joint venture): 10 years in SE Asia providing technical forest conservation and restoration project services Boots on the ground in South Sumatra with 22,000 ha peatland restoration project Daemeter (joint venture): 15 years providing sustainability solutions for corporates, institutions and policy makers Strong business development connections bring in demand from commodity supply chain actors in Southeast Asia Inclusion of Capital Partners (financial sector advisers): Veteran Credit Suisse executives Connects impact enterprises to capital markets, provides TA

Purpose & Vision Founded in Singapore, 2017 Conservation and restoration projects are undercapitalized Opportunity to generate new demand, deliver efficiency and secure private sector capital in the conservation space Vision Build a diverse, internationally certified project partnership portfolio Develop innovative, systemic demand sources beyond CSR Provide a concrete, transparent solution for companies to act upon sustainability commitments and certifications Support an adaptation of market systems, by advocating that companies more fully account for environmental impacts in their area of operations

Vision: Sustainable Commodities Conservation Mechanism (SCCM) Market Demand Environmental Commitment Financing Supply Environmental Asset Project Portfolio Commodity Growers (RSPO) Example: RaCP Compliance 10,000 ha RSPO Compensation Restoration Project 50,000 ha Forest Restoration SCCM Retailer Example: NDPE Commitment Safeguarding: 3,000 ha Forest Restoration in Supply Chain Peat Rewetting Project 500,000 tCO2/Year Peat Restoration and Reforestation Energy Sector Actors Example: Insetting Sustainability Commitment: 500,000 tCO2/Year Emission Reduction Village Forest Project 20,000 ha Village Forest Protection Impact Capital Examples: & Green Althelia Conservation Project 30,000 ha Ecosystem Protection Concession

Proof of Concept: Palm Oil Sector First mover client in 2018 Proof of concept: Roundtable on Sustainable Palm Oil (RSPO) Cargill as first client, providing 25 years of financing for a community forest project in the Indonesian Heart of Borneo Payments linked to RSPO certification compliance Funding and partnerships $2m in grants for proof of concept from Partnerships for Forests Incubator (DFID) and Packard foundation Partnership with Indonesia’s Peatland Restoration Agency (BRG) Offices now open in Singapore and Jakarta Team size expanded from 3 to 11 in 2018

First Market: RSPO Context The RSPO Compensation Framework: The Roundtable on Sustainable Palm Oil’s (RSPO) sustainability certification system now requires members to compensate for past land clearance (HCV) since 2005 Certification schemes hold greater influence, now that a growing number of import markets, including the EU, have passed regulations that require palm oil to be certified sustainable (CSPO) by 2020. The RSPO currently has over 60 members with liability, spread over 250 non-compliant units. Requirements in place since 2017, which are actively creating pressures on members to identify and finance suitable conservation projects.

Addressing RSPO Company Challenges For RSPO Members: Robust, 25-year projects are difficult to identify, especially by growers with little conservation expertise Likelihood of project failure over 25 years is high, and robust checks prior to implementation are not conducted Many compensation options are non-standardized Companies face reputational and market risks when faced with potential project failure Process of concept note, proposal development, and annual monitoring is costly for companies The RSPO compensation system (RaCP) is difficult and expensive for growers to navigate

Benefits for CONSERVATION Projects For projects: SCCM portfolio is open for any project to apply with clear and transparent application guidelines Field-level due diligence is undertaken on all projects by Lestari Projects are certified and monitored under international standards (VCS/CCBS/Plan Vivo) Or, have a roadmap to certification to reach the same level of best practice. 25-year finance is provided to the project, based on performance and delivery of agreed conservation outcomes Technical support is provided to projects to build capacity Projects can, and are encouraged to, pursue other avenues of funding

SCCM: complimenting RSPO’s Framework Efficient Portfolio approach delivers economic and implementing efficiencies Can engage a whole supply chain across multiple commodities Supports existing and emerging agro-commodity certification standards Robust Professional project selection and due diligence Agreements are standardized and legally binding, linked to performance Transparent Standardizes monitoring, reporting and transparency on project outcomes Independent and professionally managed financial vehicle Leverages internationally recognized and audited conservation standards and safeguards

SCCM Supporting Frameworks Governance Multi-stakeholder governance structure, includes: Board of Directors (majority independent directors) Board of Advisors (multi-stakeholder) Registered in Singapore, with legal and financial frameworks in place Project pipeline support Donor support includes parallel funding to build capacity and support certification for partner projects Safeguards Environmental and Social Governance Policy (ESGs) Field-level Project Due Diligence Process Exit strategies, disaster scenarios and bankruptcy safeguards in place to protect all parties Annual fiduciary and operational audits start in 2019 by independent agency.

Next Steps: Build on Proof of Concept Scale up market-linked conservation finance Business Development: Diversification Build out alternative sources of demand beyond initial proof of concept market (RSPO) Diversify beyond reliance on industry certification bodies by directly engaging supply chain actors Establish proof of concept for landscape-level approaches to conservation and restoration (2019 objective) Projects: Leverage the SPV for blended finance Impact investors can tap into a proven and certified project pipeline Grant funds can support certification and capacity building for next group of projects Link offline SPV infrastructure to Ethereum blockchain

Potential Markets: Scaling Access to Conservation RSPO (Sustainable Palm Oil) SCCM for RSPO members Today …future markets… New models for emerging sustainability markets Other Commodities Compensation mechanism for other sustainable commodities sectors SCCM Project Portfolio Peer-to-Peer Leveraging blockchain for consumer participation No Deforestation Commitments Backstopping no-deforestation supply chain linked commitments ----- Meeting Notes (10/9/15 09:17) ----- Carbon Fund does all three Energy Sector Mechanisms innovated for carbon and ecosystem service management in the energy sector Landscape Scale Commitments Scaling up supply chain linked commitments through shared and collective responsibility (ICAO) Transport Sector Mechanism for International Civil Aviation Industry Offsetting

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