HDL

About PT HILTON DUTA LESTARI

PT Hilton Duta Lestari (HDL) is an ambitious palm oil venture in the northern part of West Kalimantan, Indonesia. HDL owns and manages two adjacent blocks, which include 5,388 hectares of mature palm oil plantation. In 2022, &Green and HDL concluded a USD 12 Million, 8-year senior secured loan.

Supported by &Green’s financing, HDL will construct a mill to process fresh fruit branches FFB into crude palm oil CPO . HDL has no plans to expand cultivated areas and instead intends to receive FFB from third parties, primarily smallholders, to meet the required feedstock of the mill. HDL will adopt a sourcing strategy that prioritizes the inclusion of local smallholder farmers and ensures a deforestation-free supply chain, thus preventing deforestation in the landscape.

The investment being made by HDL will generate significant transformational impact for the company, surrounding communities, and the ecosystems that support them.

The producers currently lack access to a nearby legitimate mill and are forced to sell their products to mills located 50km to 120km away. This leads to inefficient and costly supply chains, decreasing prices for the producers. Of greater significance is that these mills lack certification or sustainability requirements, making the regions susceptible to deforestation.

HDL is committed to implementing a comprehensive sustainable sourcing strategy across its entire supply chain, in line with its No Deforestation, No Development of Peatlands, and No Exploitation ( NDPE ) Policy. This commitment benefits both the producers by offering a shorter and more efficient supply chain and access to a sustainable market, as well as the forest in the landscape. The investment in HDL provides a replicable blueprint for financing independent mills across Indonesia, promoting sustainability in the industry.

Transaction Summary

NAME

PT Hilton Duta Lestari (HDL)

Jurisdiction

Indonesia

Sector

Palm Oil

&Green Investment

USD 12 Million

Investment Term

8 years

Financial Structure

&Green provided an 8-year senior secured loan

Impact Targets

> 7,500 hectares of forest protected in the landscape

472 hectares of forest restored

6,000 smallholder farmers supported through capacity building programs

Full traceability and compliance in the supply chain

KEY PERFORMANCE INDICATORS

FOREST PROTECTED

721 ha

CLIMATE BENEFITS

544 tCO₂e

PEOPLE RESILENCE

27,170

ECOSYSTEM RESILIENCE

6,109 ha

PEOPLE BENEFITTING

27,385

CAPITAL MOBILIZED

USD 1 Million*

*Includes shareholder loan

INVESTMENT RATIONALE

Indonesia is the major player in global crude palm oil (CPO) production, accounting for nearly 60% of the global total in 2020. Although CPO is Indonesia’s largest export commodity, supply chains are fragmented and inefficient which negatively impacts smallholders. These challenges lead to reduced prices for smallholders, limiting their ability to invest in crop productivity and often resulting in encroachment on forested areas.

The HDL model serves as a valuable blueprint by providing small producers with access to an efficient and sustainable supply chain, along with technical support to enhance their production processes. This not only improves livelihoods but also reduces pressure on forests through strict sustainability requirements at the mill gate. Additionally, the model helps improve the land tenure situation for smallholders and establishes legal forest protection areas managed by the community.

&Green believes that HDL’s approach can be replicated across Indonesia, shifting producers towards efficient, sustainable palm oil production.

HDL’s Landscape Protection Plan targets, developed together with &Green:

Improved productivity for smallholders: HDL will implement a smallholder capacity building programme which includes gap assessment against relevant standards (NDPE, and the Roundtable on Sustainable Palm Oil, RSPO), improved land tenure and training on good agricultural practices.

RSPO certification: HDL’s operations will be fully certified against the RSPO standard by 2025. This will be implemented gradually, hand in hand with their compliance with the IFC Performance Standards . The first steps are the development of a robust Environmental & Social (E&S) Management System and the protection of HCV areas, as well as greenhouse gas monitoring and management.

Forest conservation: HDL is committed to conserve all remaining forest within their estate, as well as in protected areas bordering their estate. Through the implementation of their sustainable sourcing strategy, HDL expects to conserve up to 7,000 hectares of forest in the landscape.

Sustainable Sourcing Strategy: Through its Landscape Protection Plan and partnership with &Green, HDL commits to adopting and implementing an NDPE policy that aims for 100% compliance at the start of the mill operation. The key principles of HDL’s policy align with &Green’s NDPE requirements and with international guidance on NDPE , such as RSPO and the AFi .

A YEAR IN REVIEW

HDL had a busy year in 2022. Following &Green’s investment in March, the company has worked to build a team of sustainability professionals internally, as well as a team of external experts to help develop the frameworks and capacity to implement the Landscape Protection Plan.

HDL commissioned support to develop their Environmental & Social Management System, a Biodiversity Action Plan and Community Conservation Management Plan. They adopted a well-known software system to map their supply chain and build a robust monitoring framework.

ESMS Development

HDL is developing their ESMS with an expert in the region. Using a structured approach guided by IFC Performance Standards , existing systems and processes were mapped, recorded and integrated into the ESMS as necessary. Through this evaluation, areas lacking established processes were identified as gaps, and HDL have committed to close them. The projected timeline for the completion of the ESMS is within the first half of 2023.

Conservation Management Plan

HDL committed to ambitious conservation and restoration targets, both in- and outside their estate, as well as in their supply chain. To realize these targets, HDL joined forces with a biodiversity expert to develop a comprehensive Conservation Management Plan. This Plan will include guidelines for the conservation management of HDL’s own HCV areas and the two protected ‘bukit’, or hills, that fall part in- and part outside of the concession. To manage these hills, HDL partners with the communities bordering these forest areas, to create a legal ‘hutan adat’, or community land title, and develop a land use plan for these areas.

Sustainable Sourcing Strategy

Prior to the CPO scheduled for 2023, a sustainable sourcing strategy must be in place to ensure a deforestation-free supply of FFB from the smallholders. HDL has developed a Sustainable Sourcing Strategy with support from Daemeter Consulting, which identifies priority areas in the landscape based on risk and proximity to the new mill. HDL has recruited a smallholder team to start mapping their supply chain, using the Koltiva management information system.

With Hilton Duta Lestari, we have the opportunity to set the standard for sustainable palm oil here in Landak, where deforestation rates are among the highest in the province. Working closely with small producers, local governments and the Dayak communities around us, we are establishing a fully deforestation-free, nature-positive supply chain of fresh fruit bunches, FFB, to feed our palm oil mill. In partnership with &Green, we engaged a team of local and international experts that help us realize our ambitions for a deforestation-free landscape in Landak.

BANDULA NISSANKA

General Manager at HDL

HDL