It's not often you see 'investment opportunities' and 'climate change solutions' mentioned in the same sentence.
But as part of BHP’s commitment to help tackle the global challenge, a unique investment bond that supports forest protection is exactly what is underway.
“The Forests Bond attracts smart investors who, instead of taking cash as the interest on their investment, can take carbon credits instead,” Dr Fiona Wild, Vice President Sustainability and Climate Change for BHP said.
The Forests Bond, issued by the International Finance Corporation (a member of the World Bank) and listed on the London Stock Exchange, raised US$152 million from institutional investors, some of whom may want to access carbon offsets.
The Forests Bond supports Wildlife Works’ Kasigau Corridor Project in Kenya.
The community surrounding the Kasigau Corridor region used to rely on deforestation for survival. Cattle had grazed the fields into dust and much of the dryland forest had been cut for firewood and farmland. Today, Wildlife Works’ project has resulted in the return of wildlife and flora, and the sanctuary provides income to the local community for protecting the land.
“BHP got involved because, for a project like the Kasigau Corridor Project, creating carbon credits is one thing, but knowing how many you will be able to sell is another,” Fiona explained.
“BHP gives the project certainty that it will be able to receive a minimum of US$12 million dollars of conservation funding, by selling nearly half a million carbon credits every year for five years,” she said.
It’s estimated that well over half the world’s primary energy needs will continue to be met by fossil fuels until at least 2040.
Given that greenhouse gas production will be around for some time, helping to develop and support unique opportunities like the Forests Bond fits perfectly with BHP’s climate change position, most recently put forward in our “Views after Paris” portfolio analysis.
Fiona said the Bond was a “global first” and provided emissions reduction opportunities as well as environmental and social benefits.
“Our support of the Forests Bond is another example of the action we are taking to address climate change and work in partnership to enhance the global response,” she said.
In addition to the Bond, BHP has helped develop the Finance for Forests Initiative, in partnership with Conservation International and Baker McKenzie, to encourage similar investments.
“The Finance for Forests Initiative aims to build a global community of practice among project developers, governments, donors and the private sector to explore how to overcome key market, governance and financial bottlenecks to replicate investment products like the Forests Bond," Fiona explained.
“There are trillions of dollars potentially available for climate change related investment globally," she said.
“Through its support for the Forest Fund, BHP is helping to attract more of those dollars to climate positive investments by showing they can be simple and commercially viable and can also change people’s lives for the better.”