USAID Global Development Fellowship with Lestari CapitalJakarta, Indonesia | Summer 2017Master of Development Practice Candidate Aja Heisler

Client & ContextConservation and Restoration Funded Through Oil Palm Industry

Lestari Capital is a Jakarta-based environmental investment startup designed to fill a unique niche in the conservation and sustainable commodity space by connecting industry funding to conservation projects in need of support. • Founded by principles from Daemeter Consulting (an

environmental consulting firm) and Forest Carbon (forestry and climate change financial services)

• Partners include overseas development agencies, multinational agricultural companies, foundations, & international financial institutions

• Lestari provides turnkey services for oil palm companies that participate in the sustainability certification, the Round Table on Sustainable Palm Oil (RSPO)o Companies invest in Lestari Capital’s Sustainable

Commodities Compensation Mechanism (SCCM) investment fund at $2,500 per hectare of deforestation post-2005§ Alternatively, these companies can support their own

conservation projects, but this requires overhead and expertise they may not have

o SCCM supports a broad portfolio of conservation projects such as ecosystem and peat restoration, village forest protection, and wildlife rehabilitation projects

• 63 participating companies have outstanding deforestation liabilities valued at ~$170 million

Scope of Work & MethodologyESG Policy & Compensation Mechanism System Review

I conducted a review of compensation mechanisms (also known as biodiversity offsets, biological compensation, and conservation banking) that operate worldwide to inform the development of Lestari Capital’s financial contracting mechanism (i.e., “How should the money flow?”). My work included expert interviews with conservation bank owners and project developers, as well as reviews of: • California’s conservation banking system• The United States’ wetlands mitigation banking system• New South Wales’ BioBanking scheme• Colombia’s ecological compensation system• Brazil’s ecological compensation mechanism

I also conducted research to inform the development of Lestari Capital’s Environmental, Social, and Governance Policy. I examined the policies of other companies that operate in the socially and environmentally-responsible investment sphere, as well as certification schemes such as the:• Round Table on Sustainable Palm Oil• Forest Stewardship Council• Community, Climate, and Biodiversity Standards• International Finance Corporation’s Environmental and

Social Performance Standards

Findings & Recommendations

AcknowledgmentsAja wishes to thank USAID’s Global Development Lab and the Global Development Fellows program for supporting her work this summer, the UC Berkeley MDP Program, Daemeter Consulting, and Lestari Capital.

About the Researcher

Aja Heisler is a second-year Master's student in the UC Berkeley Master of Development Practice Program. She has nearly a decade of experience working in conservation and international development, and she has worked in the US, Indonesia, Panama, Costa Rica, and China. Her specialties include business administration, nonprofit management, economics for conservation, conservation finance, climate change, food access and nutrition, and the intersection between development and conservation. She currently serves on two local nonprofit Boards of Directors. In her spare time, Aja enjoys trail running, politics, and health and nutrition.

Wild orangutan in Tanjung Puting National Park wildlife refuge, Central Kalimantan, Indonesia

Recently-deforested land in Riau Province, Sumatra, Indonesia

Lessons Learned • Global demand for palm oil

continues to grow and place extreme pressure on forests

• Approximately 40% of global palm oil traded is involved in the RSPO sustainability certification scheme. Companies are incentivized to participate due to:

• It is important to ensure the immediate elimination of companies’ deforestation liability upon compensation payment

• Project success is contingent upon the implementation of appropriate payment schedules to support ongoing land management and project activities

o Pressure from European and US advocacy groupso Pre-compliance in expectation of regulation o Ethics-driven upper management

• Conservation & climate finance must involve the private sectoro Governments and NGOs will never have enough money to

adequately fund climate and conservation projects

• Although expensive and time-consuming, the certification of ecosystem restoration concessions and other conservation projects through accredited third-parties is critical for legitimacy

• For most attractive business model, Lestari should ensure low administrative costs, predictable compensation costs, robust supply of compensation sites, and low implementation complexity