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IFC launches US$152 million REDD greenwashing bond for mining corporation BHP Billiton. With help from Conservation International

Yesterday, the World Bank’s private sector arm, the International Financial Corporation launched a US$152 million bond aimed at supporting REDD and carbon trading. The deal demonstrates just about everything that’s wrong with REDD.

In a press release, Jingdong Hua, IFC Vice President and Treasurer, says,

“Halting deforestation is essential to meet the global community’s climate goals. To do that, we need to mobilize $75 billion to $300 billion in the next decade. Much of this needs to come from the private sector. IFC’s Forests Bond demonstrates the power of innovative capital-market mechanisms to unlock private sector funds for forest protection.”

Of course Hua didn’t mention that unless we leave fossil fuels in the ground, we’ll be facing runaway climate change and the world’s forests will go up in smoke.

IFC’s five-year bond will be listed on the London Stock Exchange. It has been sold to major global institutional investors, such as CalSTRS, Treehouse Investments LLC, TIAA-CREF, and QBE.

The profits will support IFC’s “private sector lending in emerging markets”. That sounds reasonable. Until we look at what the IFC’s lending entails. A few years ago, IFC made a US$7 million equity investment in Agri-Vie Agribusiness Fund. One of the companies in Agri-Vie’s portfolio was a UK-based firm called New Forests Company.

To make way for New Forest Company’s industrial tree plantations in Uganda, about 22,500 people were brutally evicted. Houses were burned and a young boy who was ill was burned alive in his home.

Cash or carbon credits?

Investors in IFC’s Bond were offered either cash or carbon credits. Investors taking the carbon credit option could retire the credits to “offset” their corporate greenhouse gas emissions, or sell them. Investors will receive voluntary carbon credits at a fixed price of US$5.00.

It’s probably worth pointing out (since the IFC doesn’t mention this in its press release) that clean development mechanism carbon credits are currently selling on the EU Emissions Trading System for €0.38. And there currently is no secondary market for voluntary carbon credits.

So what happens if investors want money, rather than carbon credits? Well, IFC developed its Forest Bond together with BHP Billiton, the world’s largest mining company.

If investors want cash, BHP Billiton has agreed to buy the carbon credits in a blatant attempt to greenwash its dirty operations. In 2014, the Heinrich Böll Foundation ranked BHP Billiton as the world’s 20th largest carbon emitter.

Fiona Wild, BHP Billiton Vice President Sustainability and Climate Change, says:

“BHP Billiton is committed to operating sustainably and reducing our environmental footprint. IFC has been one of the pioneers in the green bond market as well as in climate financing. The innovative IFC Forests Bond provides us a new way to offer economic incentives to reduce deforestation and invest in low-carbon growth.”

BHP Billiton committed to sustainability? Yeah right

A year ago, almost to the day, a dam burst at the Samarco mine in Minas Gerais and a wave of 40 million cubic metres of mineral waste poured down the Doce River. At least 19 people died. Hundreds were left homeless. A year later, the river still runs red from the iron ore in the water. It was Brazil’s worst environmental disaster.

The Samarco mine is co-owned by BHP Billiton and Brazil’s Vale SA.

In June 2016, an investigation by Brazil’s federal police revealed that before the collapse, the companies knew that the dam was at risk.

When BHP Billiton held its annual meeting in London on 20 October 2016, protestors from Brazil, Colombia and Indonesia were outside. This year, BHP Billiton sold its 75% share of IndoMet coal mine in Indonesia, without accepting responsibility for the environmental destruction caused by the project, including a recent tailings spill.

Arie Rompas of WAHLI (Friends of the Earth Indonesia) told Blue & Green Tomorrow:

“BHP Billiton is leaving a terrible legacy at the IndoMet coal project in Central Kalimantan, where my family comes from. The company is destroying what is left of the rainforest where the indigenous Dayak Murung people live and which they rely on for their livelihoods and traditions. BHP paid criminally-low compensation for the lands they have taken and now they are polluting our rivers and attempting to walk away from the mess they have made. They must be held accountable for all this.”

The source of the carbon credits: The Kasigau Corridor REDD project in Kenya

Under its Forest Bonds deal, IFC will buy carbon credits from the Kasigau Corridor REDD project in Kenya.

The project developer, Wildlife Works argues that the project is “equitable and fair” and that the majority of benefits go to local communities. But in research published earlier this year in Land Use Policy, Susan Chomba, Juliet Kariuki, Jens Friis Lund and Fergus Sinclair found that,

[T]he initial flow of benefits were concentrated in the hands of a few. This was because developments in land tenure since pre-colonial times had involved processes of dispossession and elite capture, enabled by colonial and post-colonial land policies that left the majority of local people with little or no land entitlement.

Conservation International was IFC’s other partner in setting up this collasal greenwashing exercise. BHP Billiton has also committed US$5 million to Conservation International’s Alto Mayo project in Peru.

Proof, as if it were needed, that Conservation International will accept money from any corporation, no matter what its record of destruction.

REDD is not a mechanism for addressing climate change. Neither is it a mechanism for addressing deforestation. REDD is a means for the world’s wealthiest investors to extract value from rainforests, at the expense of some of the poorest people on the planet. Meanwhile, REDD allows the planet’s worst polluters to continue polluting.

PHOTO credit: Senado Federal, Bento Rodrigues, Mariana, Minas Gerais.

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  2. The IFC has promised to buy the credits from Kasigau at USD 5. BHP Billiton is only the ‘liquidity back stop’ who agree to buy them from IFC only if investors don’t. So they know they will get the floor price of carbon of the bond payout interest rate of 1.546% fixed income coupon (above which you would expect investors to buy them). In short it is unlikely company will ever have to commit it’s liquidity backstop since carbon normally trades over this price. Green wash for no cost.

  3. Hi Chris and others – aside from all concerns about rights and tenure associated with delivering any REDD+, I am concerned about how this is marketed by the IFC as it raises false assumptions in the business sector and wider world about successful climate projects.

    My instinct is that it is not a ‘forest bond’ – is it actually a ploy to get (cheap?) capital by the IFC by calling something green. The IFC is going to use the $150m for normal IFC projects (correct me if wrong…), not at all related to forests or agriculture, but to investments in private sector development as it does normally. Instead of paying back $150m + interest in cash (let’s call it $5m, I’ve not looked), they buy $5m in carbon emissions instead (or people want the cash, BHP Billiton buys it from them).

    But the underlying principle is that this is not a $150m forest bond. It is a CSR (or ‘greenwash’, your words…) exercise worth only $5m to green projects. IFC spends $150m on loans to private sector, gets $150m + some extra money back from them, and spends the extra on buying VCS credits. Even if the REDD+ element could be successful and do no harm, which your articles challenge, the investment is orders of magnitudes lower than the headlines.

  4. @will_mcf – Thanks for this. You’re right. I sent some questions to IFC, which they replied to, without answering the questions.

    My take after that failed interview process pretty much reflects what you’re saying:

    So it’s not a “forest bond” in anything but name. It’s just a bog standard IFC bond issue with a bit of REDD green froth on top, thanks to an agreement from BHP Billiton, one of the world’s most polluting mining corporations, to pay up to US$12 million to Wildlife Works to bail out its Kasigau Corridor REDD project in Kenya – a project that a recent study found was failing to address inequity.