The Asian Development Bank (ADB) signed a $15 million loan with PT Dharma Satya Nusantara Tbk (DSNG) to help the company scale up sustainable wood processing, rural livelihood development and climate-resilient agroforestry in Java, Indonesia.
The ADB funds will finance the capital expenditures required to implement energy-efficient and water-saving processes, as well as the acquisition of cultivated indigenous Indonesian Sengon and Jabon trees.
Cultivated indigenous trees can be a sustainable alternative to natural wood, avoiding deforestation and supporting biodiversity.
The DSNG sources timber from Central, East and West Java. Most of the Sengon and Jabon trees are grown by small farmers and are intercropped with other crops such as coffee, maize and rice.
In addition to allowing otherwise unproductive land to be used, intercropping trees with food crops can reduce erosion, improve soil health and, in many cases, increase crop yields.
“The region is facing increasing climate shocks affecting the livelihoods, food, water and health of millions of people, with women bearing the brunt,” said Carine Donges, Senior Investment Specialist at the Department of Operations. of the ADB Private Sector.
“ADB assistance will promote sustainable and inclusive agroforestry, avoiding deforestation and supporting biodiversity, while demonstrating how the private sector can improve rural livelihoods and climate resilience through innovative sourcing models and providing training to the farmers.”
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A $500,000 technical assistance grant administered by ADB will provide training in climate-resilient agricultural practices for complex agroforestry systems and financial literacy to some 4,000 farmers, of whom at least 1,200 will be women.
As a sustainability-linked loan, this funding demonstrates ADB’s and DSNG’s commitment to a low-carbon, climate-resilient future.
This is DSNG’s first sustainability-linked financing, with price adjustments based on the achievement of pre-defined annual sustainability targets, including training farmers to obtain Forest Stewardship Council forest management certification.
The Sustainability Linked Loan has received an independent second party opinion, in line with industry principles.
“Sustainability is embedded in the way DSNG runs its business, and we constantly strive for value and positive impacts. This ADB sustainability-linked loan fits with our vision to be a company responsible for our people, our planet and our common prosperity,” said Jenti Widjaja, director of DSNG.
“By incorporating sustainability metrics across key aspects of our business, from our supply chain and operations to financing, we aim to strengthen the alignment between creating value and delivering positive impacts for all stakeholders. in our lumber business.”
Founded in 1980, DSNG is listed on the Indonesian Stock Exchange. In the wood segment of its business, the company operates two wood processing plants in Central Java with an installed capacity of 150,000 square meters per month for engineered flooring and 9,000 cubic meters per month for panels.
DSNG is one of Indonesia’s leading forestry companies and its largest exporter of wood products to Japan.
