Leaders in Sabah, a Malaysian state on the island of Borneo, have signed a profit-sharing deal to market carbon and other natural capital from more than 2 million hectares (4.9 million acres) of the state’s forests for at least the next 100 years. But the communities living in and around those forests know next to nothing about it.

The “nature conservation agreement,” brokered by an Australian consultancy called Tierra Australia, is aimed at the restoration of ecosystems. That would allow the sale of credits for carbon and other ecosystem services to companies seeking to meet sustainability goals, such as reducing their carbon footprints by offsetting their emissions.

Under the terms of the deal, Tierra Australia and its partners will receive 30% of the profits from the credits for natural capital sold for the next 100-200 years, according to Peter Burgess, the company’s CEO. He said the remaining 70% would go to the Sabah state government to fund economic development for people living in and around the forests.

“We’re going to employ [community members] — gainfully employ them — back into restoring jungles,” Burgess told Mongabay. But, he said, “They actually don’t know that their jungles have been conserved, have been signed up and are going to be conserved for 200 years.”

He added that “It is only the leaders at this point that have been acting on their behalf trying to actually enact and deliver some transformational change.”

In a subsequent conversation, Burgess amended his previous statement to say that the project had involved “the absolute consultation” with Indigenous communities through “let’s say 100” elders from the Kadazan-Dusun, Murut and Rungus ethnic groups in Sabah. He would not specify who these leaders are or what mandate they have to speak on behalf of these communities.

Burgess said Tierra Australia, along with its Singapore-based subsidiary, Global Nature Capital Sdn. Bhd., and the companies’ private equity-backed funder, Hoch Standard Pte. Ltd., finalized the nature conservation agreement with the chief minister, deputy chief minister, and other cabinet members of Sabah on Oct. 30.

Hoch Standard is run by Singaporean Ho Choon Hou, the managing director of the private equity firm Southern Capital Group. Singapore’s government has a $74 billion fund for climate change-related projects, and Hoch Standard provides a link to a portion of that money, according to investor presentations by Tierra Australia obtained by Mongabay.

At the time of publication, the deal had not been made public, and sources said negotiations included neither civil society nor substantive participation of communities living within the targeted area.

Two million hectares, an area about the size of Slovenia, is more than half the size of Sabah’s permanent forest estate, within which forests are classified for commercial exploitation, community use or full protection. Burgess declined to share the locations of the forests in this initial tranche of land covered by the agreement. Malaysian law gives the Sabah government authority over what happens to the state’s forests. But civil society organizations there have pushed to have more input in such decisions for decades, and a tug-of-war over conservation, land rights and commercial interests, primarily focused on timber and palm oil production, has ensued.

According to production statistics from the Malaysian Palm Oil Board, an industry group, Sabah produced nearly 7% of the world’s crude palm oil in 2019. But data from the University of Maryland and Global Forest Watch reveal the state also lost a quarter of its tree cover, amounting to 1.67 million hectares (4.13 million acres), between 2001 and 2020.

In addition to supporting ecosystem restoration, the agreement would protect these forests from mining and logging, Burgess said, adding that communities would be allowed to fish, hunt and establish timber plantations to feed into the paper pulp industry.

Diving into the global natural capital market

The agreement comes as governments worldwide are promising cuts to their carbon emissions, and companies are pledging to purchase carbon offsets around the United Nations climate conference, known as COP26, in Glasgow, Scotland. Sabah is also hosting (virtually) the annual Heart of Borneo conference Nov. 9-10, where Burgess is scheduled to speak on the subject of conserving and monetizing natural capital.

“Natural capital,” sometimes called “nature capital,” is an umbrella term for carbon sequestration and other services, such as water regulation, provided by ecosystems. Burgess said Tierra Australia plans to facilitate the sale of credits for carbon and, eventually, other services on global markets. The restoration of Sabah’s forests would effectively result in more climate-warming carbon being siphoned from the air by healthier, more robust forests, so the thinking goes.

“There is no chance that an individual or communities would be able to do this on their own. It’s just not possible,” Burgess said. “We’re giving them access to global funding basically to help them along the way.”

He said digital payments using financial technology, or “fintech,” such as blockchain, would eliminate the possibility that the funds would be siphoned off as a result of corruption or otherwise diverted away from the communities. The World Economic Forum says blockchain allows encrypted records detailing how funds are allocated and spent to be open and available to the public, civil society and watchdog organizations.

Offsets themselves are a controversial climate solution. Many observers and scientists question whether their sale will actually reduce the amount of carbon entering the atmosphere because it allows emissions — from fossil fuels, for example — to continue.

Increasingly, rights groups also argue that companies and governments must involve Indigenous peoples and local communities in these discussions. New research published by the Rights and Resources Initiative, a global coalition of human and Indigenous rights organizations, found that Indigenous communities manage nearly 1 billion hectares (2.5 billion acres) of land globally and most of the world’s threatened tropical forests. And a growing compendium of research points to the superlative protection Indigenous groups provide to forests and other ecosystems.

Indeed, Burgess referred to them as the “Indigenous custodians of the jungle.”

“Everything we do must be … under the framework of the United Nations [Sustainable Development Goals] convention,” he said, noting that adherence to the standards laid out in the SDGs will make natural capital, such as carbon credits, more valuable in the global marketplace. “It’s going to uplift these people out of poverty and bring them back into normal society.”

The SDGs buttress the sustainable development agenda negotiated by U.N. member countries in 2015 to tackle both poverty and environmental crises in tandem. To date, the SDGs do not include provisions for the widely accepted principle that affected people should have free, prior and informed consent, known by the acronym FPIC.

However, the U.N. Declaration on the Rights of Indigenous Peoples says, “States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources.”

Burgess said every “Indigenous person that needs to be consulted” was consulted in the five years it took to negotiate the deal in Sabah. It is “a clear, transparent, open agreement,” he said.

“If we had to go and sit around every campfire,” he said, “it would never happen. The Indigenous people and their lot will stay as is, and they will never, never see any benefits.”

Whether the level of consultation and prior consent complies with the FPIC standard, or if those tasks are the responsibility of the companies or the state, isn’t clear, as the details of the signed accord have not yet been made public.

Indigenous rights organizations have lobbied for the inclusion of the FPIC standard in the SDGs. In 2015, a report by the U.N.’s Indigenous Peoples Major Group recommended the inclusion of indicators for FPIC in five of the 17 SDG targets.

Burgess said his business partner, Stan Lassa Golokin, a native Sabahan of Dusun descent, was involved in the negotiations. Kadazan-Dusuns are traditionally farmers and account for around 18% of the state’s population. It is unclear whether Golokin is a leader who has the authority to speak for people in his community. Burgess declined to make Golokin available to Mongabay for comment before publication, in part because he was at COP26 raising capital for the project.

However, Golokin does have ties to Sabah’s current leadership. In the 1990s, Golokin was the general manager of Innoprise Corporation Sdn. Bhd., an investment holding company for the state-owned Yayasan Sabah Group, also known as the Sabah Foundation. At the same time, Jeffrey G. Kitingan, the current state agriculture and fisheries minister and the second deputy chief minister, was the director of Yayasan Sabah, a state body with the stated goal of promoting educational and economic opportunities for Sabahans. Yayasan Sabah has its own 100-year lease of some 850,000 hectares (2.1 million acres) of forest in the state that began in the 1970s, and the foundation’s reputation has been tainted by accusations of scandal.

Kitingan and Golokin also co-authored a travel book on Sabah published in 1988. How those connections may have affected negotiations is not clear.

In a WhatsApp message, Kitingan said the agreement would protect forests in the state and that the proceeds of natural capital sales would alleviate poverty among Indigenous communities. He also said it “will not affect them and their way of lives.”

“If it does, surely we will be talking to them,” he added.

Community participation and ‘free, prior and informed consent’

The deal itself has raised concerns among experts on the rights of Indigenous peoples and communities.

“The Indigenous people in this generally have a right to a free prior and informed consent, which means that they should be involved at an early stage, right?” Torbjørn Gjefsen, a senior policy adviser with Rainforest Foundation Norway, told Mongabay. “It shouldn’t be like, basically, the project is a more or less done deal. We just need your signature here, and we’ll make sure that a lot of money comes your way.”

Gjefsen said he wasn’t aware of this specific agreement. But these types of projects have been set in motion without consulting communities “many times” around the world, he said. They carry with them the potential to spark conflict if the promised money doesn’t materialize or if the terms of the deal restrict people’s access to their lands. Forests are often a source of food, shelter and medicine for communities. As a result, engaging with them early on in the process can help them prepare for different livelihoods or allow them to decide for themselves whether the tradeoffs that may bring them more money for economic development are worth pursuing.

According to the NGO Forest Trends, without the buy-in of these communities, carbon projects may be less successful. Communities aren’t as apt to be careful stewards of their surroundings if their rights are cast aside, or they feel excluded from these projects, potentially leading to more degradation of the environment, the report’s authors found.

Burgess denied that the agreement amounted to a “land grab.”

“We don’t own the land. We don’t have a right to the land,” he said. “We have a right to the nature capital and carbon, of which we have the capability, capacity and ability to monetize.”

Peter Veit, director of the Land and Resource Rights Initiative at the World Resources Institute, said it should be clear whether community activities such as gathering medicinal plants and hunting would be allowed as part of the agreement. However, he also didn’t know about the deal.

Veit wrote a report published in October examining the intersection of land rights and climate mitigation. On Nov. 1, a group of governments and companies announced plans to provide $1.7 billion to recognize community land rights as a strategy for confronting climate change.

“Generally speaking, I think Indigenous people and local communities … ought to be paid for the ecosystem services that come off those lands,” Veit said. “The idea of an ecosystems service payment scheme is a good start.”

But he questioned the apparent lack of consultation with the people most likely affected by the arrangement. He also said that sorting out the priorities of different communities and even within the same community is a complex task.

“It involves getting agreement from a whole lot of people, and that’s probably not just the leaders of the various communities,” he said. “It’s trying to get some community engagement so there’s full community participation.”

That upfront consultation work can help avoid conflicts over the long term, he said. Today, he added, many companies involved in conservation agreements elsewhere are shifting away from “crisis management” in dealing with land conflicts. Instead, they are taking “a more strategic policy level approach” that incorporates community viewpoints early and aims to avoid land disputes that could affect the success of a project and its goals.

Veit said Indigenous communities should also have legal and technical help to make sure they understand the terms of the agreement so that they’re not sidelined in decisions governing how they use the land on which they live.

“One thing that does scare me about this [agreement] is that it’s so large,” he said.

Tierra Australia, Hoch Standard and Sabah’s state leaders might be better off starting with a pilot project rather than with the millions of hectares covered under the initial deal, Veit added.

“These people may be legit. These people may be trying to do the right thing,” he said. “But you just need to be really careful given the long-term nature and the amount of land that’s covered.”

Banner image of primary forest in Danum Valley Conservation Area, Sabah, by John C. Cannon/Mongabay.

John Cannon is a staff features writer with Mongabay. Find him on Twitter: @johnccannon

Editor’s note: Mongabay has a funding partnership with the World Resources Institute (WRI) via the Forest Trackers project, which leverages Global Forest Watch data to quickly identify concerning forest loss around the world and catalyze further investigation of these areas. Mongabay maintains complete editorial independence over the stories reported using this data, and WRI has no editorial input on Mongabay content.

Correction: The name of a Bornean ethnic group was misspelled in a previous version of this article. It is Rungus, not Rungu.

Citation:

Dawson, N. M., Coolsaet, B., Sterling, E. J., Loveridge, R., Gross-Camp, N. D., Wongbusarakum, S., … Rosado-May, F. J. (2021). The role of Indigenous peoples and local communities in effective and equitable conservation. Ecology and Society, 26(3). doi:10.5751/es-12625-26031

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