Sustainable business models for protecting forests

The International Climate Initiative (IKI) supports the development of sustainable business models for smallholders in Southeast Asia with the aim of preventing deforestation. 

Implementation partners for this project are WWF Indonesia, WWF Malaysia, WWF Philippines and WWF Singapore. 

The IKI project ‘Taking Deforestation out of Banks’ uses selected projects to highlight the opportunities and challenges that are associated with the mobilisation of private funds for the protection of habitats and conservation of biodiversity. 

The mobilisation of private funds for conservation, summarised as ‘Bankable Nature Solutions’, is understood to mean the development of conservation projects that can be financed by private banks and investors. One condition here is that the projects can themselves generate revenue – which can then be used to repay private loans, for example. In this way, the IKI project contributes to the goals of the Global Biodiversity Framework (GBF) that was adopted at the 15th Convention on Biological Diversity in Montreal (Canada) in December 2022.One key aspect of the GBF is the way in which it integrates private capital as an essential part of biodiversity finance.

In remote areas of the Global South – some of which are home to important ecosystems – poverty and a lack of viable alternatives are forcing smallholders to use cultivation approaches that can lead to deforestation. The IKI project is investigating threatened landscapes with a high level of biodiversity in project countries with the goal of developing sustainable and alternative business models for smallholders in these regions. Central to this approach is the participation of local communities and indigenous peoples, with an understanding of their social structures and ways of life. 

Example from Malaysia: production and sale of essential oils 

One of the current projects of interest is a project in Malaysia, in the Setiu Wetlands Area (state of Terengganu). As implementation partner for this IKI project, WWF Malaysia worked with Malayan research institutions to identify the production and sale of essential oils made from the gelam leaf as a key value chain that can work to protect the gelam forest. The pilot project ‘Livelihood Initiative Project’, in which WWF Malaysia is participating, is supporting Gelamcure – a company that manufactures the essential oil from the native gelam tree (Melaleuca cajuputi). 

Project goal: expand the sustainable source of income, protect the gelam forests

A successful expansion to the production and sale of gelam oil can offer local communities a source of income that is both sustainable and reliable. A key priority now is therefore the optimisation of the production processes used at Gelamcure, with the aim of increasing project revenue and involving more members of the community in its operations. The overall goal here is to reduce the dependence of local communities on agriculture and other economic activities that lead to the destruction of the gelam forests. 

In order to increase earnings by improving its production, Gelamcure requires financial support. To this end, the IKI project is working with various groups of stakeholders to identify potential options for further developing the Gelamcure business model. These results will be used as input to develop financing plans that can then be used as the basis for holding talks with both state sponsors and potential private investors and banks. 

Background: gelam forests

The gelam forests on the Malaysian peninsula are valuable both for their biodiversity and their economic potential. A boggy gelam forest is one of the rarest wetlands in Malaysia and is often located behind an actual mangrove swamp. A gelam forest is home to a wide range of animals, including a significant number of species that are named as endangered species on the Red List published by the IUCN. 

These forests also have an important role to play as carbon sinks. The overall economic value of the gelam forests may also potentially be increased by additional ecosystem services, such as the way they help communities adapt to fire and flooding. However, the full extent of their worth as ecological, cultural and economic assets is not yet known. Despite all of these advantages, the value of gelam forests is currently underestimated and existing gelam regions are under threat. 

Since the 1960s, large areas of forest have been cleared on the Malaysian peninsula, particularly as a result of the expansions made to rubber tree and oil palm plantations. Most recently, durians have started to be cultivated on a large scale, which could potentially offer nine times the income per hectare of oil palms. The pressure to clear even more forest can therefore be expected to grow.