Financing the World’s Forests: Integrating Markets and Stakeholders

Imperial College - 3 Aug 2009

Stepping up to CopenhagenOptions for Forests

Financing the World’s Forests: Integrating Markets and Stakeholders - Imperial College - 3 Aug 2009

Andrew W. MitchellFounder & Director

Global Canopy ProgrammeResearch Associate

Zoology Dept University of Oxford

Core Areas

science

financepolicy

A Crisis of Values

“There will be no solution to climate change, without a solution to deforestation” (Nobel Laureates Symposium, 2009)

Aircraft Emissions = 2%Energy Emissions = 25 %Forest Emissions = 18%

Forest emissions are equivalent to flying 12.5 million people from London to New York

every day!

SOURCE: Pathways to a Low Carbon Economy, McKinsey report, Feb 2009

20% of the Problem - 40% of the Solution

Emerging Frameworks for Forests

UNFCCC - CDM > REDD > 2012EU ETS > 2013

US Market - Waxman-Markey BillAustralia/Others

Voluntary Markets - CCX

CBD - PINC?CBD - Green Development Mechanism

CDM > REDD > REDD+ > PINC?(Pro-active Investment in Natural Capital)

Tradable Currency = 1t/CO2 > 1 ha/forest?

Figure 2: Three complementary and reinforcing mechanisms for conserving and restoring forest and mitigating and

adapting to climate change

Sources of $US$ 17-33 Billion /yr

International Auctioning (AAUs) National Auctioning of Allowances

REDD MarketsODA

Interim Financing Mechanism

Interim Funding for REDD HRH Prince of Wales

hosted historic meeting of world leaders in London alongside April’09 G20

35 Countries G8 Statement Norway Wking Gp Report mid Sept’09

Meeting at St James’s Palace, 1 April’09

Timing of payments (IWGIFR)

Fund flows

Tropical ForestsFacility

Rainforest

Bond

RainforestNations

DirectFunding

Private

Investors Payments

OECDGovts

Guarantees/Repayments

Carbon Permit

Auctions

Special Levies

(e.g. fuel)

Earmarking

Taxes

WorldBank Technical

SupportIssuer/Advisor

Business Drives Deforestation 60% of globally traded beef is from Brazil 40% of exports are to Europe 80% of the growth in Brazilian beef production is in the Amazon EU is also the world’s largest import market for soybeans Palm oil plantations are driving deforestation in Malaysia and

Indonesia 84% of UK companies importing palm oil have done little to

ensure it is not from a destructive source

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Beyond

Copenhagen?

EmergingEarnings Risks

- Reputational- Regulatory- Environmental

“Are we creating wealth that’s worth having?”

Clinton Global Initiative, New York, October 2007

Natural Capital &Financial Capital

A Tale of Two Economies?

Could Water become the new Oil?

Valuing Forest as Global Eco-Utilities?

+ 80%

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Utility to Business

The Amazon

• 3 trillion tonnes of water stored • 20 billion tonnes of water vapour

transferred daily• $1 trillion of industry share this

eco-dependency• Deforestation means declining

service provision • Rising temperatures will compound

the effects

The Amazon’s

Rainfall Service

Natural Capital - A New Asset Class?

Don’t Bank on Copenhagen

Forests - Natural CCS we can’t afford to do without….

GDP > Gross Destructive Potential!

TEEB - will drive recognition of Natural Capital values.

www.globalcanopy.org

www.littlereddbook.org

www.forestdisclosure.org

Why should Forests matter to Investors?

Forests are ‘Eco-utilities’ of immense value

Opportunity 45% of terrestrial carbon is stored in the world’s forests 1.2 billion tonnes of carbon sequestered worth $35-89 billion per

year. Underpin Food, Energy and Health security globally.

Risk 18-25% of total global carbon emissions from deforestation $1.7-4 trillion annual cost of forest ecosystem service loss Poltical and Regulatory famework likely to change fast

“Are we creating wealth that’s worth having?”

Clinton Global Initiative, New York, October 2007

Forest Footprint Disclosure

A ‘Toolkit’ to enable business to report on operational and consumption related impacts on deforestation

Direct and indirect Available to the financial community to inform investor

decision making Promoting transparency and awareness Preparing for future risks and opportunities Ministerial launch 15th June 1st Report - January 2010

We can’t do this without you!

We cant’ afford to wait!