13.3.1.2 Malua Bio Bank

Deforestation can be addressed in various ways. Another initiative commenced by New Forests, in combination with the company, Equator LLC, is an innovative project which is currently at the development stage. The partners wish to offer a commercial approach to nature conservation.1 It concerns a voluntary biodiversity offset PES model that combines sustainable forestry with vegetation conservation eligible for carbon trading and conservation certificates.

In 2007, the Sabah Government in Malaysia signed a memorandum of understanding' with New Forests to set up the "Malua Wildlife Habitat Conservation Bank" (Malua Bio Bank). The project aims at restoring and protecting the Malua Forest Reserve. This Reserve is home to the rarest species of animals, birds and plants. However, in the same area severe logging has taken place and many palm oil plantations exist.

Subsequently, New Forests and the Sabah Government have established a private equity fund, ECO Products Fund LP.2 The fund launched Malua Bio Bank as a partnership between private and public entities (Figure 1).3 Malua Bio Bank received its start capital from ECO Products Fund LP to restore and to protect an area of 34,000 hectares of previously logged forest in the Malua Forest Reserve.

Malua Bio Bank's business plan is as follows: (i) in 2007, the company that holds the concession licences to the Malua Forest Reserve (owned by the Sabah Government) ceased all logging operations; (ii) ECO Products Fund LP invested up to USD 10 million in Malua Bio Bank to rehabilitate the Malua Forest Reserve; (iii) Malua Bio Bank is to manage the conservation of the forest over the remaining 44-year period of the license issued by the Malaysian government; (iv) Malua Bio Bank has obtained the right to create and to market so-called Biodiversity Conservation Certificates' to interested parties;4 each

Certificate represents 100 square meters of rainforest restoration and protection; and (v) the Malua Trust,established by Malua Bio Bank, is to finance the conservation of the Malua Forest Reserve. The revenues from the sale of Biodiversity Conservation Certificates will be shared between the parties and serve the project in three ways: (1) an endowment will be made to the Malua Trust in order to fund the long-term conservation management by Malua Bio Bank; (2) part of the funds will be invested in a foundation, established by the Sabah Government, to improve the livelihood of local people; and (3) Malua Bio Bank investors. According to David Brand, Managing Director of New Forests, the innovative business model of this venture is that Malua Bio Bank will 'translate' rainforest protection into a market product so that biodiversity conservation can compete with other land uses on a commercial basis.