in Kenya

Some questions for the IFC about its “Forest bonds”

On 1 November 2016, I wrote about the International Finance Corporation’s launch of a US$152 million bond. According to the IFC’s press release, the bond will “protect forests and deepen carbon-credit markets”. The reality is that the IFC is bailing out Wildlife Works’ Kasigau Corridor REDD project in Kenya, a project that had failed to raise enough money from sales of carbon credits. The carbon credits provide some green REDD froth on IFC’s business as usual.

I sent a series of questions to Alexandra Klopfer, Communications Lead, Office of the IFC Vice President and Treasurer – her name is given on IFC’s press release. A week later, I sent some more questions to Vikram Widge, Head of Climate and Carbon Finance at the IFC, in a further attempt to understand how this bond works.

UPDATE – 29 November 2016: On 28 November 2016, REDD-Monitor received a reply from Alexandra Klopfer at the IFC. You can read the response (for what it’s worth) here:

As I haven’t received any response from the IFC I resent my questions today and requested a response as soon as possible. REDD-Monitor looks forward to posting IFC’s response in full when it arrives.

From: Chris Lang
Date: 1 November 2016
Subject: IFC’s Forest Bond

Dear Alexandra,

Greetings. My name is Chris Lang and I run a website called REDD-Monitor.

I read yesterday’s press release about IFC’s Forest Bond with interest, particularly the fact that IFC will buy carbon credits from the Kasigau REDD project in Kenya.

I would be grateful if you could answer a few questions about this deal:

1. How did the IFC decide to support the Kasigau project?

2. What process of due diligence was carried out before reaching this decision? Are any reports of this due diligence process available to the public?

3. Did this process involve obtaining the free, prior and informed consent of the communities living in and around the Kasigau REDD project?

4. What is the IFC’s response to this paper published in Land Use Policy earlier this year about the Kasigau project: “Roots of inequity: How the implementation of REDD+ reinforces past injustices”. The authors found that the benefits from the project went to few people, and the project reinforced historical inequities. Has the IFC put in place any mechanism to ensure that the money from its Forest Bond will be equitably distributed?

5. I know that the carbon credits have a fixed price of US$5 for investors. Will IFC buy the carbon credits directly from the Kasigau project? If so, how much is the IFC paying for each REDD credit? And how many carbon credits has the IFC agreed to buy? How much money will the Kasigau Corridor REDD project received under this deal?

6. I understand that investors could choose to take their return as either cash or carbon-credits. What proportion of investors chose to take carbon credits rather than cash? How many carbon credits does IFC anticipate giving to investors?

7. IFC’s press release states that, “Investors choosing the carbon credit coupon can retire the credits to offset corporate greenhouse gas emissions, or sell them on the carbon market.” But there is no secondary market for voluntary carbon credits, such as those issued by the Kasigau project. What “carbon market” is IFC referring to?

8. What will happen to the carbon credits if Kenya decides it wants to include REDD credits as part of its Nationally Determined Contribution under the UNFCCC?

9. For investors that chose cash, BHP Billiton will take the carbon credits, presumably buying them from the IFC. How much will BHP Billiton pay the IFC for the carbon credits?

10. As I’m sure you are aware, BHP Billiton is one of the most polluting companies on the planet. A 2014 report by the Heinrich Böll Foundation ranked BHP as the world’s 20th largest carbon emitter. The Samarco mine dam collapse last year was Brazil biggest environmental disaster. Isn’t this whole deal just helping BHP to greenwash its operations, while allowing greenhouse gas pollution, and the other impacts from large scale mining projects to continue?

11. In setting up the Forest Bond, did the IFC carry out a process of free, prior and informed consent with the communities affected by BHP Billiton’s mining operations?

Thank you for your time and I look forward to hearing from you. Please consider your response to be on the record.


Chris Lang


From: Chris Lang
Date: 8 November 2016
Subject: IFC Forest Bond

Dear Vikram,

Greetings. My name is Chris Lang and I run a website called REDD-Monitor.

I read last week’s press release about IFC’s Forest Bond. I’m trying to understand how the bond works, why it’s called a “Forest Bond”, and what REDD has to do with it. (I’ve also sent some questions to your colleague Alexandra Klopfer – I’ve copied this email to her.)

First could you please confirm that I’ve understood this bond correctly:

    IFC issued a US$152 million five year bond. Various investors have handed over the money to IFC. IFC will invest the money
    in “private sector lending in emerging markets”.

    In five years time the investors that bought the bonds will get their money back plus 1.546% per year interest.

    Investors can choose to get their interest payments in either cash or in carbon credits.

    Not all investors want carbon credits. That’s where BHP Billiton comes in. BHP has agreed to buy up to US$12 million worth of carbon credits from Wildlife Works’ Kasigau Corridor REDD project in Kenya.

Then I have a few questions for you:

1. In which projects will IFC invest the US$152 million raised by the bond issue?

2. Whose projects are they, and what will they do?

3. How will IFC select these projects? Are there any special criteria associated with this being called a “Forest Bond”?

4. Is there any way of following where this US$152 million ends up?

5. If there was no link to REDD (i.e. if investors just received cash) would this bond issue be any different to IFC’s other bond issues?

Thank you for your time and I look forward to hearing from you. Please consider your response to be on the record.


Chris Lang


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