We are fishing and eating from our oceans unsustainably, eating down the food chain
Continue Reading...Archives For November 30, 1999
Please watch, this great video from Hong Kong’s Clean Air Network. It really says it all.
- Hong Kong University of Science and Technology/Civic Exchange research has shown that 53 percent of the time, the pollution that affects us most in HK is from transport – trucks, buses and ships
- Last March the government introduced retirement schemes for old Commercial Diesel Vehicles as well as selective catalytic converters for taxis and mini-buses
- And last year, data did show that HK’s air improved slightly
- More good news: The government recently tabled regulation in Legco that mandates ships switch to cleaner from bunker fuel while at berth
- But measures to improve our air have been largely offset by the huge increase in private car ownership in recent years as well as the massive development initiatives that are being undertaken
- The Hedley Environmental Index estimates that in 2014, air pollution caused 2,616 premature deaths, 32.657 billion in lost dollars, 174,926 hospitalizations, and 4.253 million doctor visits
- The so-called “end of pipe” solutions the government has introduced are certainly a beginning but inadequate alone
- Hong Kong needs to follow Singapore and European cities in establishing low emission zones, pedestrian zones, electronic road pricing and intelligent transport solutions
- We urgently need a smarter, cleaner city. This is within our reach.
By Stanley Shea
The European Parliament Fisheries Committee could in the next days quite irresponsibly kill proposed legislation to phase out the use of deep-sea bottom trawls and other destructive fishing gear in the Northeast Atlantic.
Predictably, many of the committee’s 25 members causing the most problem represent districts with deep-sea fishing interests, according to Bloom’s Claire Nouvian and an Oc. 2 New York Times Op-ed written by marine scientists Les Watling and Giles Boeuf.
According to scientists, 90 percent of the ocean is below 200 meters but not much is known about life there, expect that it is home to countless species, many of them as yet undocumented. Research covers only about 1 percent of the vast area.
As fisheries have collapsed in shallow waters, the industry has looked to the deep for new species and have found only a few there that can be sold for human consumption or processed for fish meal. Yet trawls with gear heavy enough to reach 2,000 meters below the ocean’s surface have scooped up everything in their path, palatable or not, and thus reduced fish biomass by 80 percent over an area about the size of Britain.
According to the Op-Ed, in 2011, vessels from eight EU countries landed 15,000 metric tons of four species of marketable deep-sea fish, which represents only 0.4 percent of Europe’s fish haul. Because of the fragile and adverse conditions in the deepest areas of our oceans, the fish are slow reproducers so this sort of fishing causes irreparable harm.
There exist many fragile species in the deep that are simply swept up or smashed by the trawl gear, which can leave the bottom or mid-areas of the ocean completely bereft of life. A declaration by 300 global scientists has urged that this type of destructive fishing be eliminated from the deep sea – now!
The deep sea battle is just part of the ocean tragedy, described well in the latest audit by an international team of marine scientists from the International Programmed on the State of the Ocean (IPSO). Released earlier this month, the report showed that the world’s oceans and marine life face unprecedented threats from industrial pollution, global warming and rampant overfishing.
The IPSO paper calls for “urgent remedies” because the “rate, speed, and impacts of change in the global ocean are greater, faster and more imminent than previously believed.”
The battle over deep sea trawling then is over “a small fishing area that produces a diminishing number of fish for a handful of companies , who despite massive subsidies from the EU and their own states are not profitable – all the while destroying countless organisms that represent the library of life on Earth,” according to the Op-Ed
Clearly, Trawling should be eliminated from the depths of the Northeast Atlantic. Yet legislators, backed by industry, are staging an irresponsible fight in the Fisheries Committee of the European Parliament that is against all of our interests and the real tragedy is that they could win.
An unbelievable and disturbing sight photographed Jan. 2nd in Kennedy Town, Hong Kong by Alex Hofford and Paul Hilton. An estimated 18,000 fins were found drying in the beautiful early January sunshine.
About 50 percent of the global shark fin trade passes through Hong Kong, largely to feed Asian appetites for shark fin soup and other shark-related product. Estimates are that possibly as many as 73 million shark are harvested annually in a lucrative trade estimated in value from US$540 million to US$1.2 billion.
A third of all fins imported to Hong Kong come from Europe, with Spain as the largest supplier, providing between 2,000 and 5,000 metric tons a year. Norway supplies 39 metric tonnes. Britain, France, Portugal and Italy are also major suppliers. Bags of fin labeled from Brazil were found on the Hong Kong rooftop.
As affluence has grown in Asia, particularly China, so too has demand for shark fin soup, which is eaten largely as an expensive delicacy at wedding and other banquets.
One-third of sharks species are threatened or near-threatened with extinction, according to the IUCN Red List.
One of the more important conversations that emerged from June’s Rio+20 Summit was around valuing natural resources and, ultimately, moving our economies beyond GDP as a sole measure of growth.
The concept is not a new one but it did seem gain traction. Included among the side events on one day alone were at least two standing-room-only sessions on the topic: “Measuring the Future We Want” and the Natural Capital Summit.
In Measuring the Future, the panel recognized that over the last 20 years we have seen poverty decline but at the cost of growing environmental challenges. The call was for governments to institute a framework for natural capital accounting.
The Natural Capital Summit, meanwhile, featured speeches from Britain’s Nick Clegg and Norwegian Prime Minister, Jens Stoltenberg, as well as remarks from the presidents of Gabon and Costa Rica, illustrating clearly the level of interest in the topic.
“How to value nature is one of the most important political decisions,” Stoltenberg said, shortly after Clegg had talked over a masked heckler, accusing world leaders and the World Bank of commoditizing nature.
Despite the mask and the point well taken about assigning value to nature, the reality is not so simple. As we have it now, few benefit from our forests, oceans, our extractive industries and water. The costs of pollution are borne by us all rather than the polluter.
This creates a world where we are rapidly depleting our natural resources for the enrichment of a few, and economic growth, as measured by GDP, is vastly inflated.
Both Rio+20 side sessions were short on answers or plans of action, despite some participants stating the desire to help international gatherings move beyond declarations – something that is sorely needed.
As a path toward action, however, also at Rio, the United Nations Environmental Program (UNEP) and the UN Environmental Program, the International Human Dimensions Programme on Global Climate Change (IHDP) introduced the Inclusive Wealth Index.
The idea is to consider a country’s assets to get a better picture of a country’s wealth and the sustainability of its growth. In reporting every two years, IHDP will calculate the IWI for 20 countries that together account for almost three-quarters of global GDP.
Unsurprisingly, the first report showed that despite strong GDP growth, the United States, China, Brazil and South Africa had significantly depleted their natural capital base. This was calculated as the total of renewable and non-renewable resources such as fisheries, forests and fossil fuels.
Again, not surprisingly, China showed the most dramatic difference between GDP and IWI. GDP growth alone was measured at 422 percent between 1990 and 2007 but IWI measured over the time was just 45 percent.
The report also showed that future growth, as measured by IWI, was dependent on the sustainable use of resources since all countries surveyed had a higher share of natural than manufactured capital.
The key factor here is that countries are using their natural resources faster than they can be replenished, thus challenging future economic development.
The strong sense in Rio was that governments need to step in to create a policy framework by which natural capital can be valued in order for real change to happen. The private sector, of course, wants a level playing field.
Meanwhile, some leading companies that are among the biggest beneficiaries of natural resources and free pollution, also stepped into the discussion this week in Rio.
Twenty-four of them, including Cocoa-Cola, Xerox, Dow Chemical and Kimberly-Clark announced a four-step framework for a methodology that would value natural resources.
Two-thirds of our planet’s land and water ecosystems are now significantly degraded thanks to human activity and climate change is only accelerating the damage. The UN estimates that mismanagement of natural assets costs the global economy an estimated $6.6 trillion a year or 11 percent of GDP collectively.
According to the report, these costs are expected to reach $28 trillion by 2050 and threaten core business interests through potential supply chain disruptions or costly substitutions, regulatory or legal risks.
KPMG has estimated that if companies had to pay for their own environmental bills they would lose 41 cents for every $1 in earnings.
The text of Valuing Natural Capital acknowledges that “each year our planet’s land and water systems produce an estimated $72 trillion worth of “free” goods and services essential to a well-functioning world economy.”
Because these are not bartered and sold in the marketplace it is hard to assign them with a value or corporate or government financial statements. “As a result this value has been largely unaccounted for in business decisions and market transactions.”
But this is starting to change, according to the document, with, “business executives recognizing the business imperative of safeguarding them.”
Among the natural goods and services on which the global economy was seen to depend are: Clean water and air; affordable raw materials and commodities; fertile soils; fisheries; buffers to floods, droughts, fires and extreme weather; barriers to the spread of disease; biological information to propel scientific and medical breakthroughs.
Still, the report although strong on the challenges is short on how natural resources will actually be valued.
Puma has been a leader in this field. Last year the company introduced an environmental profit and loss screening that represented an interesting step toward assigning economic value to resources consumed, to emissions and toward determining the true cost of production for the apparel and shoe brand. I have written about this here.
Finally, also this week the leaders of 37 banks, investment funds and insurance companies agreed to take better stock of the stress put on ecosystems by the economic activity they manage, and work towards integrating natural capital into products and services.
The Natural Capital Declaration is once again short on detail, but at least represents an acknowledgement of the issue.
In Rio this week up for discussion and negotiation (mostly negotiation) is a 49-page draft document that aims to establish clear sustainable development goals and action to achieve them.
The United Nations Conference on Sustainable Development, better known as Rio Plus 20, marks 20 years since the Earth Summit, which at the time was the largest gathering of heads of state ever to talk about environmental challenges.
This time, the agenda has been softened to be about sustainable development, with an emphasis on development. Indeed, some people here don’t seem to believe that environment really plays any part in the conference. Earth isn’t anywhere isn’t mentioned – despite that this is clearly supposed to be a follow-on to the earlier event.
Yet it’s hard to imagine how the discussion of sustainable development can take place without careful consideration of our natural environment.
The reality and the urgency is that our world’s population is expected to rise from its current 7 billion to more than 9 billion in 2050. That’s scary in a world where already an estimated 3 billion people don’t have clean water to drink and 14 percent of our planet, to adequate food.
According to the final version of the Rio Plus 20 Common Vision submitted today under the title, The Future We Want, one in five people, over 1 billion people, still live in extreme poverty. By 2050 two-thirds of our world will live in cities.
So where we find food and water for another 2 million people in 38 years is the crux of the challenge and one that really can’t be denied, regardless of political leaning.
And we live in Asia, where most of that future population growth is expected to occur. This places the challenges front and centre for those of us engaged in work to combat environmental challenges and with communities without adequate means to survive.
Despite the enormity of the task at hand, however, few here in Rio are optimistic that real change will come from or be led by the conference.
The Brazil delegation worked hard in recent days to ram through a document that is in essence hollow, fearing more than anything a repeat of the Copenhagen disaster when no one could agree on anything.
I guess the sense is that if they can at least agree on nothing meaningful that’s better than agreeing on nothing at all over the three-day official proceedings, which begin Wednesday?
The conference document finalized today was, “the result of intensive and prolonged negotiations,” according to the press release, and is a “compromise text,” in which, “countries have had to both give and take to achieve progress.”
The text is to be approved by heads of state at the conference conclusion on Friday. Significantly, Barack Obama, David Cameron and Angela Merkel will not be present in Rio.
Still, the text does include a commitment at least to the concept of sustainable development and recognition that eradicating poverty is one of our greatest challenges. It emphasizes the urgency around “freeing humanity from hunger and poverty”.
The text establishes the clear linkages between sustainable development and the environment, between sustainable development and the means to bolster our struggling economies, and emphasizes the value of public-private partnerships.
Sadly, the hope that this translates into government action is absent from the jaded community spending long hours being bused among several distant event locations in fancy and frigid coaches that have nothing to do with sustainable development other than collective transport.
Part of the skepticism also derives from the fact that the earlier Rio conference ended with two treaties aimed at curbing emissions of greenhouse gases and conserving biological diversity that have since languished amid lack of political will.
There is, additionally, a certain exhaustion generally with the promotion of international frameworks to make sweeping change toward environmental progress.
Those just have been too hard to achieve in our economically challenged world that doesn’t yet seem to link better development, protection of our natural world and an improved economic environment.
like the posh buses, the main conference venue itself is a reflection of misunderstanding of the challenges we face. The huge Riocentro is two hours in traffic from Ipanema and Copacabana, where most participants are staying.
There, air conditioning blasts through huge buildings that are no model of efficiency – either in space or energy consumption.
At the same time, Rio Plus 20 is largely white and male – at least this is particularly true of the official and business delegations. Amongst the NGO community, women are better represented.
At the alternative youth summit in Flamengo, three hours from Riocentro in traffic and closer to Rio’s pulsing centre, the situation is considerably different.
Here, the youth and community-connected people are basing themselves, including many of the smaller NGOs – and diversity is evident in the variety of national dress, skin hues and music that accompanies many events.
In a long stretch of tents, people gather for animated discussion or to listen to seminars on topics related to conservation and sustainable development. Here, the environment is very much present although it’s hard to see where, concretely, the discussion will lead.
Official delegations are noticeably lacking these communities – the NGOs and youth. This is despite the final text emphasizing wide agreement among business, NGOs and government.
Perhaps one bright light here in Rio seems to be the talk on many levels of the importance of valuing our natural resources. Companies, NGOs and governments alike seem to recognize the need to bring environmental value into economic decision-making.
And engaging the private sector, governments, communities in this important dialogue, in partnerships to achieve results, is key to real change. As always in large gatherings it’s the back-room learnings and discussion that are the real drivers for change.
Yesterday the Shangri-La took the courageous step of declaring that effective immediately, the group’s 72 hotels and resorts would no longer serve shark fin in any restaurants or at wedding banquets.
The announcement falls under the company’s new sustainable seafood policy, which also includes a decision to phase-out Bluefin tuna and Chilean sea bass in all hotel restaurants within the year.
In a press release, the hotel said that in December 2010 the company initiated the process of becoming shark fin free with the removal of shark fin products from its restaurant menus. “The new policy is a continuation of Shangri-La’s journey towards environmental support,” the release said
This follows the Peninsula Hotel’s decision in November last year to stop serving the soup in its restaurants and at wedding banquets as of January 1st this year.
The hotels should be applauded for their actions, which were not easy in a city that sees 50 percent of the global shark fin trade and where consumption of the soup at special events has been second-nature. Here, shark fin soup is seen as a symbol of wealth and prestige and consumed most often at weddings and corporate banquets.
Yet as the consumption of the soup has increased in recent years with greater affluence in Asia, shark populations have dwindled. In some species. populations have declined by as much as 90 percent. As many as 73 million sharks are caught annually, with millions of these believed caught for their fins alone.
Shark flesh is not a high-value meat, while dried fins can be sold for as much as $300 a pound. A bowl of the soup in Hong Kong can fetch as much as $100. Thus is some cases, shark are finned at sea with the bodies thrown back to drown in a practice that is both wasteful and cruel.
Bloom, the HK Shark Foundation, WWF and other conservation groups have been working hard in Hong Kong over the past few years to educate consumers and the trade about the ramifications of declining shark populations for our oceans.
The work has included research to understand both the cultural attitudes toward consumption of shark fin soup and the trade in shark products; educating the hotels on biodiversity issues related to sharks and learning about the challenges of ceasing sales of shark products; encouraging consumers to consider shark fin free weddings; encouraging companies to sign a pledge not to serve shark fin soup at banquets.
Despite a swell action from local and national governments worldwide to ban consumption of shark fin products, the Hong Kong government (consistent with its course of rarely acting in public or conservation interest) has refused to consider any such action – even a ban on serving at official banquets.
In reality, the assumption is that because of the cost, little shark fin soup is actually served at official banquets in Hong Kong and indeed government officials have alluded to this.
Certainly, however, with the growing awareness around threats faced by our oceans, the sense of inevitability of action as shark populations decline, the government must now be feeling the heat.
Last week the HK Marine Products Association was certainly feeling the heat. The trade group placed half-page ads in leading Chinese publications titled (in English translation) “Is eating Shark Fin Guilty?” and arguing that
- Shark fin is simply a by-product of the shark fishing industry
- CITES bans trade in only four species therefore fishing should be allowed in others
- Any conservation of a species should be based on scientific evidence not emotion
- States the MPA uses resources sustainably and contributes to conservation
Clearly, shark fins, for reasons stated above are not by-products of any shark fishing industry and clearly conservation of a species should be based in scientific fact, which exists and is documented: sharks are in significant decline.We would welcome any communication from the MPA related to their sustainable practices and conservation work.
The CITES issue mentioned in the ads is an interesting one and is raised frequently by the MPA, as well as both the HK and Beijing governments, which hide behind the treaty. The main point here is that CITES is not effective in protecting shark species globally and should not be used, counter-intuitively, as a a justification to fish endangered
CITES was drafted as a result of a resolution adopted in 1963 at an IUCN (The World Conservation Union) meeting and entered into force in 1975 as an international agreement. Today, it has 175 signatories.
Its aim: to ensure that the international trade in wild animals and plants does not threaten their survival. The CITES mechanism to achieve this is by placing trade restrictions on species at risk. The Convention is, therefore, undoubtedly an important wildlife conservation agreement.
Yet CITES only includes three species of shark, despite that according to IUCN 143 species are threatened with extinction, either now or in the near future.
So why should a conservation agreement exclude threatened species? The answer lies in the fact that for a species to be bought under CITES trade restrictions, the signatories must vote.
In 2010, for example, six shark species were proposed for inclusion in CITES. Countries with vested interests in the shark trade, such as Japan, bargained with fellow signatories to ensure that highly lucrative species, albeit critically endangered, were not included in the Convention’s regulatory appendices. Science and sustainability clearly gave way to commercial interests.
In Hong Kong, CITES remains the only mechanism for regulating the shark fin trade and to make matters worse its implementation is unclear.
The Agricultural, Fishery and Conservation Department (AFCD) of the Hong Kong government is responsible for monitoring the trade in endangered plant and animal species.
Currently, visual identification is a commonly used to identify imported plants or animal species. While this may be appropriate for many species, it is extremely difficult, in practice, to determine the shark species from a fin without the carcass, and even more difficult if the fin has been bleached or processed. It is understood that AFCD do not carry out any DNA analysis.
Thus, CITES clearly is not an effective mechanism to monitor the shark fin trade in Hong Kong.
Scientific research based on DNA testing shows that in 2006 approximately 40% of the auctioned fin weight in the Hong Kong market came from 14 shark species listed on the IUCN Redlist of Threatened species.
So bravo to the Shangri-La and the Peninsula hotels for taking action, the 112 companies in Hong Kong that have signed the WWF pledge not to sell or buy shark fin as part of their corporate activities.
Going shark free is a groundswell here and abroad that we certainly hope will continue in time to save the apex predators and our oceans.
We have been thinking a lot about Social Impact bonds and how the concept might apply to conservation finance, which is something about which we ponder a great deal.
Why not a Forest Impact Bond, issued against promised aid streams from sovereign development banks wanting to mitigate climate change and/or promote forest conservation?
These could work in circumstances where communities are key to protecting High Conservation Value forest.
FIBs would be focused on impact-driven community development (schools, livelihoods, health, education) but linked also to real conservation outcomes.
Time is slipping as we try to establish the best way to protect ourselves at scale from climate change, manage and protect our forests for future generations.
The multiple challenges around forest conservation is something we’ve written about previously in this blog here and here.
In essence, the problem is how to compensate governments and landholders for the huge rewards they reap cutting trees from native tropical forests; how to balance development with conservation.
Since 57 percent of the world’s forests are located in developing countries, it is hard to make the economic argument that these areas should not be developed for the benefit of the national population. Indeed, timber revenues represent the major, sometimes only, export commodity of a country.
The Commission on Climate and Tropical Forests has estimated that 17 percent of greenhouse gas emissions – an amount equal to the transportation sector – are from deforestation.
At the same time, the scale of financing required to halve deforestation will reach US$30 billion annually by 2020, the U.S.-based commission estimated in the same report.
Only turning to the global capital markets will provide sufficient funding to meet the challenge deforestation presents today. That strategy could include the use of bonds, which would allow the desperately needed investment at scale.
Communities and Livelihoods the Key to Conservation
Key to this discussion is that not only do governments and landholders need to be compensated for not chopping forests for timber, but local livelihoods are also often linked to forests.
Nearly 90 percent of the 1.2 billion people living in extreme poverty worldwide depend on forests, which provide them with building materials, food, coffee, cocoa, medicinal plants and income from other sources.
Without access to the forests not only do many of these people lose livelihoods but they also may lose their crops to droughts or floods as climates change with deforestation.
Thus communities living in and around forested areas are key to their protection.
Still, even with access to forests, local populations who face the immediate need of supporting their families often don’t recognize the value of conserving forests for the longer term because they cannot meet their immediate needs for food, housing, clothing and education, among others.
Thus, local communities need both education on the value of long-term forest conservation to their own lives (livelihoods, water etc) and help establishing alternative and sustainable income sources.
At the same time, battling to defeat poverty, poor nations argue they cannot be expected to forfeit income from economic activities that lead to deforestation, particularly since there are global benefits from developing world forest services – carbon, water etc.
They have argued collectively that if global powers want to preserve the rainforests and their natural services provided then those must be paid for.
Rainforest Bonds Not a New Conversation
Indeed, for many years now there has been talk of rainforest bonds, which would help pay the large upfront capital expenditure required to invest in development, livelihoods, conservation to maintain the forests.
Under conventional thought, either forest carbon revenue or other sources of income such those generated by sustainable timber, agriculture or ecosystem service markets (water, biodiversity for example,) would repay investors.
But the conversation around REDD carbon has stalled with regulatory uncertainty. Additionally, in Asia certainly, we are a long way from any scalable ecosystem markets, while the significant upfront investment needed to promote agriculture as an alternative or to build local livelihoods to protect forests is just not available philanthropically.
And that’s just it…the bond conversation has gone on for years with significant players like the Prince’s Rainforest Trust and others eventually pulling back given the difficulties in identifying revenue streams that would work.
Turning to Forest Impact Bonds
So why not step back entirely from the conversation around how to make forests pay and look instead to the large sums promised by sovereign development banks at Copenhagen (US$4.5 billion) and other aid that has yet to find a home for want of knowledge of how to invest those funds with surety and with impact.
And that’s not surprising. Over the past two decades, substantial funds have flooded into Indonesian conservation (usually to secure national parks or protect wildlife and its habitat) without corresponding transformational change. Over the same period, deforestation has only accelerated, fueled by burgeoning consumption, population explosion and massive urbanization.
So the problem remains, how to ensure that limited funding for conservation is spent with measurable and significant impact? How to balance development and conservation and raise the funds from global capital markets to pay for both?
Indeed, we must increase the availability of performance-linked finance to protect forests for local communities and local governments, in order to maintain them for global biodiversity and as carbon sinks.
In 2007, a similar discussion emerged in the UK around improving social outcomes and reducing uncertainty of funding for social services.
Shortly thereafter, London-based Social Finance introduced the concept of social impact bonds, which target funds to specific projects with measurable results.
If the identified targets are reached, the UK government saves on social programs and those savings are used to repay bond investors, in certain cases with interest. If targets are not reached, bond investors lose out as they would in any junk bond investment.
Turning to the U.S, in last year’s budget speech, President Obama announced that he had set aside US$100 million for social impact bonds and at the same time two Boston-based companies have recently been established to apply the UK social impact bond concept to the U.S. context.
Why could this innovative approach to generating social impact in the UK and the U.S. not work also to protect forests in Indonesia, targeting communities and livelihoods but at the same time generating extra and measurable impact in conservation?
Given the argument above, and the lack of current appetite for REDD+ and other forms of eco-securitisation backed by forest assets or credits, might we then apply the social impact bond example to community development initiatives in a country like Indonesia?
In this scenario, international government funds, funds from multi-laterals with an interest in combating climate change and conserving forests for future generations pool funds in an SPV that are then allocated to community development initiatives with specific parameters and measures of impact.
The key would be to persuade the local government to join what would essentially be billed as a development initiative but with additional conservation benefits.
The SPV funds would be available to repay investors in the event that the community development programs, livelihood initiatives, the conservation targets achieve desired results. In this way, the pooled funds are used only if they have been effective and only after impact has been achieved and quantified.
Country funds would likely have to be established separately, with their own fund administrators (local country officials?) and project monitors.
An initial pilot would likely include just one country – Indonesia perhaps – and one specific target: perhaps livelihoods and education around several conservation areas.
For in-country implementing partners we could draw on local NGOs to support conservation (research and protection) and identify appropriate targets. Microfinance institutions could support business initiatives where appropriate and rural development organizations would help build agricultural businesses that local communities in Indonesia want to generate income.
Legal organisations would need to be employed to help sort out land-titling to establish a legal basis to land ownership. Education NGOs could be employed to boost local knowledge around conservation, while healthcare providers could support rural health development.
This would then be associated by local communities, along with improved education, for example, with conservation of their local forests.
So rather than trying to pry an uncertain financial return out of forest services or REDD+ (although if these markets develop in the future, certainly these could be added to SPV funds) we are trying to achieve only effective allocation of government/multilateral resources and measurable impact.
At the same time, however, there could be a return on investor depending on the effectiveness of the programs., while a tranche structure with different risk/return profiles could be used to simultaneously appeal to both groups.
The difference with the UK Social Impact Bond, of course, would be the potential for shared savings. Although it would be important to have local governments as key participants, it is unlikely their own development investments would make this worthwhile.
Who would buy Forest Impact Bonds?
There is growing interest on the part of institutional investors in markets where there are environmental and social as well as financial returns or where there are at least screens for negative impact.
According to Eurosif, total SRI assets under management increased dramatically from €2.7 trillion to €5 trillion, as of December 31, 2009. This represents spectacular growth of about 87% since 2007.
The sense is that when environmental social and governance issues start to affect share price or impact bottom lines boardrooms will take note.
Increasingly, SRI is a mainstream criterion in equity analysis and several stock exchanges have launched tradable indices that track SRI companies or ESG alongside financial performance. And ratings agencies are emerging to rank companies on their ESG performance.
At the same time, part of the consideration around forests is that they have long carried appeal to institutional investors.
According to an article in The Banker from 2007, more than US$30 billion globally is invested in forest assets, although mostly through funds and largely in the US.
These investments generally offer competitive returns with low or negative correlation to traditional asset classes making them a counter-cyclical hedge.
In Summary…
- A FIB is a contract with the public sector in which it commits to pay for improved environmental and social outcomes
- On the back of this contract, investment is raised from investors motivated perhaps not only by commercial but also by environmental and social returns.
- This investment is used to pay for a range of social outcomes such as poverty alleviation of local communities, improved health and education, all tied to and contingent on conservation of an area of high-conservation value local forest
- The financial returns investors receive are dependent on the degree to which outcomes improve i.e, they may receive part or all of the initial investment back, and in some cases additional financial returns.
- A FIB shifts emphasis from paying for inputs and outputs to paying for impacts
- In its purest form, a FIB has a risk profile more similar to an equity investment than a debt investment
I’ve been thinking recently about Fiduciary responsibility and what that has come to mean over the past two decades of rapid growth.
I’ve been thinking about how and why the interpretation that has crept into investment culture over that period – simply to maximize rates of return – has slowed an appreciation of investment that doesn’t cause social or environmental harm.
It goes without saying that this has also slowed investment that promotes social good as well as generating returns.
I’ve also been thinking that by itself this narrow interpretation ignores both business risk and opportunity – neither of which should be ignored considering the dictionary definition of fiduciary duty: to act prudently.
Writing in a Capital Institute blog, Stephen Viederman, former president of the US-based Jessie Smith Noyes Foundation, argues that foundations should align program work with investment strategy – something that is all too rare.
“Foundation fiduciaries have an obligation to seek ‘good’ and ‘competitive’ returns, not necessarily to maximize them,” he says.
Part of the problem has been the accompanying “myth of financial underperformance from ‘social investing,’ a myth that still lies at the heart of the problem for finance committees who conveniently forget that two-thirds of traditional active managers underperform their benchmarks every year,” Viederman says.
“Yet the profit-maximizing argument–that you will underperform if you do sustainable investing–comes up time and time again in conversations and is never examined by the people who are making it.”
Indeed, most investors are not considering the business risk associated with investing, for example, in a power company, a textile operation or mining business in a region that is water scarce.
Most ignore the reputational risks associated with investing in factories or plants that are polluting, overly consumptive of resources, or engaged in bad labor practices.
“All investments are about the future, but most investment decisions are made on retrospective data, which as fund offerings make clear, are not predictors of future earnings,” says Viederman.
“We need to ask about … ‘predictable surprises,’ which include climate change, the BP Gulf disaster and the financial bubble among others. …Any institutional investor who ignores them is in breach of their fiduciary duty. To be prudent, as in the prudent person, is in its original meaning, to be farseeing.”
The ADM Capital Foundation launched a web portal, China Water Risk, in October to provide investors and companies with information about water scarcity and pollution in China.
Part of the thesis behind the initiative is that better investment decisions produce better returns in the long run and these usually come with more information – and not the information investors traditionally have sought.
But, certainly, few could disagree that the regulatory environment is changing to reflect resource consumption and that water pricing in the near future will reflect scarcity.
Few could disagree that NGOs are increasingly sophisticated in exposing pollution incidents (see my blog posts on IPE’s Ma Jun and Apple, on Greenpeace’s Dirty Laundry and other reports) and that local protests in China are growing around pollution incidents.
Workers are no longer content to suffer exposure to hazardous chemicals silently, or work extraordinarily long hours without proper compensation.
All are, potentially, a drag on profits. Would it not then make sense for fiduciary duty to include analysis of such risk?
Fully Risk-Adjusted Returns (FRR), as they might be called, should certainly not be lower as a result, indeed given the current and future challenges the world faces, they could even be enhanced by additional information.
For those who missed this, one company that is looking to consider the impact of production is PUMA, which earlier this year announced the results of an unprecedented environmental profit and loss screening.
This was a big step toward assigning economic value to resources consumed and to emissions. The value assigned was also a step toward determining the true cost of production of PUMA apparel and shoes.
Results from PUMA's Environmental Profit and Loss Analysis
The analysis showed that raw material production accounted for the highest relative impact of Greenhouse Gas Emissions and water consumption within PUMA’s operations and supply chain.
According to PUMA’s report, the direct ecological impact of company operations translated to the equivalent of 7.2 million euros of the overall impact valuation. An additional 87.2 million euros was distributed along the four-tier supply chain.
Thus, the overall environmental impact of GHG and water consumption amounted to 94.4 million euros. That compares to a third-quarter net profit of 82 million euros.
“By putting a monetary value on the environmental impacts, PUMA is preparing for potential future legislation such as disclosure requirements,” the company said.
“By identifying the most significant environmental impacts, PUMA will develop solutions to address these issues, consequently minimizing both business risks and environmental effects.”
Finally, a new and important report from IESE Business school, “In Search of Gama, an Unconventional Perspective on Impact Investing,” steps into the discussion with questions such as:
- By focusing exclusively on the creation of financial wealth for individuals are financial markets destroying value for society?
- Is social responsibility a component of investment that is necessarily detrimental to financial return?
- Should changes be made in the taxation and supervision of financial transactions to account for financial markets’ responsibility to society?
Clearly, business as usual is no longer smart business and change is imminent. Considering the impact of investments and reconsidering how we make investment decisions will be the way forward.
Let’s start by redefining fiduciary responsibility, considering Fully Risked Returns. Clearly, returns may actually be enhanced either when viewed through the lens of an appropriate risk framework/weighting or in reality as a result of a superior business environment.
Hong Kong vegetables, mostly imported from the mainland, contain high levels of lead and traces of other metals, including cadmium, according to research released last week by the Hong Kong Baptist University. This followed last month’s revelation by Chinese government scientists that 12 million tons of Chinese rice are contaminated with heavy metals.
The Baptist University tests were of 93 vegetables imported from the mainland and bought at local Hong Kong street markets or supermarkets, as well as of produce grown on Hong Kong farms, between September and December last year.
The most contaminated vegetable was apparently mainland-grown choy sum, which is also one of Hong Kong’s most consumed vegetables.
An article in the South China Morning Post on Friday showed that although the levels of lead in the study were 2.8 times higher than the global standard, they were acceptable under Hong Kong regulations. Traces of Cadmium also were found in some vegetables.
According to the SCMP, Hong Kong’s standards are shockingly 20 times less stringent than those of the World Health Organization, the European Union or Australia.
Author of the study, Professor Jonathan Wong Woon-Chung of Baptist University’s Hong Kong Organic Resource Centre told the Standard that ninety percent of vegetables in Hong Kong were imported from the mainland.
“The result demonstrates that lead pollution in mainland farm produce is serious,” he was quoted as saying.
In China, heavy metal pollution in crops comes mostly from contaminated irrigation water, pesticides or excessive application of chemical fertilizers and hormones as well as direct heavy metal contamination of the soil as a result of emissions from nearby factories.
Long-term consumption of vegetables polluted with heavy metals can contribute to cancers as well as damage the nervous system. Excess cadmium can also cause kidney stones, while excess lead can affect brain activity in children.
Wong pointed out in the SCMP article that leaf vegetables such as choy sum and spinach were more likely to absorb heavy metals. He suggested people alternate between these and fruit vegetables such as tomatoes and eggplants.
China has recognized that food security is a real issue for the country, following scandals over melamine in baby milk and many others that have caused unrest in many parts of China following discovery of contamination.
In February the SCMP reported that government scientists revealed millions of acres of Chinese agricultural land and 12 million tons of grain, or about 10 percent of the country’s rice crop, were contaminated by heavy metals. China’s southwestern provinces, where much of the country’s export manufacturing is concentrated, were particularly contaminated, according to the article.
Potential economic losses from the contaminated rice, which is enough to feed more than 40 million people, hit 20 billion yuan or HK$23.66 billion a year, the China Economic Weekly said, citing 2007 statistics from the Ministry of Land and Resources.
China is also confronting a serious and potentially costly health crisis, with clusters of “cancer villages” springing up downstream from factories and near mines.
At the annual plenary session of China’s parliament this past week, soil contamination was a topic of urgent discussion. In a news report on China.org Jia Kang, a CPPCC National Committee member and head of fiscal science at the Ministry of Finance, called for legislators to begin drafting a soil protection law.
Jia was quoted as saying that land pollution already threatens the sustainability of economic growth and social stability.
Meanwhile, the same site quoted Health Minister Chen Zhu as saying that comprehensive evaluations of health risks from soil pollution are underway. Environment Minister Zhou Shengxian in recent months has said he will work to curb soil pollution during the period of the current, or 12th, Five-Year Plan – a framework for China’s economic development over the period.
The most recent plan, introduced at the parliamentary session this past week, calls for China to step away from exclusive focus on rapid economic growth to a more balanced development model that includes more benefit sharing and recognizes the environmental challenges the country faces.
The annual parliamentary gathering generally sets the country’s political tone and government priorities.
Let’s hope that food security stays at the forefront of China’s agenda and that we see action from officials both on the mainland and in Hong Kong to protect public health.
Recently we were in Northern Sulawesi visiting Willie Smits, an evangelist for sugar palm. I had seen his Ted talk and met him in Hong Kong on a previous visit and we wanted to see his work for ourselves.
We were keen to understand more about both sugar palm as a source of livelihoods for local populations and also his program of ecological restoration built around the trees, which are native to Sulawesi.
ADM Capital Foundation has been working with the Nantu conservation effort, also in Northern Sulawesi, and are looking at ways to help Nantu generate alternative local livelihoods. Clearly we can’t talk about forest conservation without working on the development/education piece for communities, as I have discussed in previous blogs.
Smits, a biologist/forester, has lived in Indonesia for three decades and is married to an Indonesian tribal princess who is also a local politician. Having worked previously for years for the ministry of forestry in Jakarta he has a good understanding of both Indonesia and its political/corruption challenges.
Over the past decade writing about, researching and working with sugar palm, Willie has built a unique store of data on everything about the tropical plant, as well as on deforestation, its causes and consequences.
He spends much of his time working through how to restore land for people and forest-dwelling animals alike, create livelihoods for local populations so they no longer must poach, log or otherwise log to support their families.
Understandably, Indonesia’s Forestry Ministry is focused not so much on conservation in Indonesia, but on how to support development that will sustain a rapidly growing population currently at around 230 million. This was made patently clear in a recent conversation with Jakarta MOF officials.
Understanding this, Willie Smits instead of talking about saving Orangutans from palm oil plantations, talks about community livelihoods, about Samboja Lestari, which is the restoration initiative discussed in his TED talk, about his sugar palm cooperative of 6,285 shareholders in Northern Sulawesi.
Although he now is not directly involved with Samboja, which is administered by the organization he founded but no longer leads, Borneo Orangutan Survival Foundation, Willie is still a board member of BOS. The principles around which Samboja was built stand regardless of its management: diversified secondary forest that includes sugar palm and at each layer provides income for communities as well as habitat for animals.
Secondary forest that produces income of course also takes the pressure off native forests.
To achieve this, Willie has developed a franchise process and system to sign up local holders of degraded land, provide the palms and training at a cost of approximately US$1000 per hectare.
The idea is that each cluster of about 150 farmers form a “Village Hub” or a cooperative that acts to build the social fabric, as a bank and to consolidate the product. The mini sugar processing plant, the core of the village hub, which is primarily solar driven, concentrates the raw sugar juice from about 20% to above 60% where it is nonreactive and easier to transport.
Each farmer has an account with the hub and this is credited with each container of juice brought in. They can then use the credit to buy goods and services in the village. This removes the use of actual money and the potential for corruption or theft.
The concentrate is delivered to a regional hub that processes the concentrate to various products, including raw sugar, rum, bio ethanol, among many others. Village Hubs are estimated to cost around 350,000 Euros.
Now to the numbers:
Willie claims to be able to plant 70 producing sugar palms per hectare in among other vegetation, with each tree producing 13 liters of sugar syrup, equivalent to 3 kilos of sugar per day. That’s roughly 36.5 tons of sugar or 19 tons of ethanol per hectare per year – according to Willie the equivalent of 82 barrels of oil per hectare per year.
Sugar palm, he says, requires little water, no chemical fertilizers or pesticides (they have their own built-in defenses), creates local jobs for tappers (trees must be tapped twice a day and this keep local people occupied and away from natural forest). They also enhance food security since sugar palms produce sago, sugar (better for you apparently than cane sugar) and fruit.
Sugar palm, Willie emphasizes, is not a crop but a forest and there are already an estimated 10 million existing sugar palms, many of these in Indonesia. Furthermore, there are tens of millions of hectares of grassland or wasteland that could be restored to include sugar palm that would provide local livelihoods, sequester carbon, while producing fuel and food. He is looking at where else in the world sugar palm might be used to generate income.
Some interesting concepts and hard to verify since most of the work around sugar palm has been done by Willie himself.
Certainly, we would be keen to be pointed in the direction of other numbers/thinking connected to community livelihoods and sugar palm.
The world’s problems are too vast for philanthropy or governments alone to solve. The US$300 billion spent by U.S. philanthropists last year is just not enough to make a significant dent, while foreign aid represents less than 1 percent of global gross domestic product.
The reality is that only by harnessing the markets, large-scale private and institutional capital, will we even begin to meet the challenges posed by massive population growth, meet our many needs, address issues around water scarcity, our depleted resources as well as our polluted air and water.
Philanthropy can help spur innovation, it can be used as risk capital, to develop models for social benefit that can then be scaled. Governments can help take that innovation to scale but they can’t do it all. Only markets have the potential to bring about real change at the scale and speed we need that to happen.
In other words, we urgently need to take social investments out of the realm of just doing good and plant them firmly in business models in order to make our world fit for our children and grandchildren.
But how does that happen?
A new report released last week by J.P. Morgan and the Rockefeller Foundation in partnership with the Global Impact Investing Network (GIIN) attempts to advance this discussion.
The report argues that impact investments are emerging as an alternative asset class, thus allowing the sector to be considered alongside any other as part of an investment portfolio. Impact investments in this instance are defined as investments intended to create positive impact beyond, although not to the exclusion of, a financial return.
“With increasing numbers of investors rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donating for social purpose, the impact investment market is now at a significant turning point as it enters the mainstream, ” the report states.
It addresses questions such as what defines and differentiates impact investments, who is involved in the market and how they allocate capital. Also considered is what makes impact investment an emerging asset class, how much return investors are expecting and receiving, how large is the potential opportunity for investment in this market and what does risk management and social monitoring involve?
The report analyzes five sectors that serve bottom-of-the-pyramid populations (the global population earning less than US$3,000 annually): Urban affordable housing, rural access to clean water, maternal health, primary education, and microfinance.
For just these segments of the impact investing universe, the report identifies a potential profit opportunity of between $183 and $667 billion as well as investment opportunity between $400 billion and $1 trillion over the next decade.
Many impact investments will take the form of private equity or debt investments, the report says, while other instruments can include guarantees or deposits. Publicly listed impact investments do exist, although as a small proportion of transactions.
B-Lab differentiates Impact Investing and Socially Responsible Investing, which has been around for some time, defining SRI (estimated at $2.7 trillion in 2007) as primarily negative screening, or investment in screened public equity funds that avoid so-called ‘sin stocks’ or seek to influence corporate behavior.
The core of the II asset class is that the model of the business (which could be a fund management firm or a company) into which the investment is made should be designed with the intent to achieve positive social or environmental impact, and this should be explicitly specified in company documents.
There are a handful of investment funds established to finance businesses that address social problems, especially in the developing world. Examples of funds working in these space include Acumen Fund, Root Capital, E+Co and IGNIA, among others.
A significant challenge identified in making impact investments is sourcing transactions. Many impact investment recipients are small companies and the majority of deal sizes analyzed from our investor survey are less than US$1m.
Particularly for investors based in different regions, the costs of due diligence on these investments can often challenge the economics of making such small investments.
Another, of course, would be setting the reporting standards needed to establish just what constitutes a social or environmental return on an investment. This is something on which GIIN and B-Lab are working hard.
It’s great to see a mainstream financial institution dipping into this discussion.
Last week, I participated in a panel discussion at INSEAD, Singapore on impact investing and many of the points above were discussed at length. In particular, we spoke of the challenges of II in a developing world context where this is urgently needed.
We recently hosted a forum with the Asia Foundation on Philanthropy and Climate change. We hoped to encourage Asian funders to draw the lines between climate change (something that seems often hard for the individual to grasp) and the more tangible and immediate air pollution, forestry degradation, water scarcity etc.
We also hoped to then get them to think beyond the environment to a wider philanthropic portfolio and to consider the impact of climate change on livelihoods, health, education – even how funders in the arts might get involved to build awareness around the need to act.
Why? We feel that given the enormity of the problem, it’s often hard for the individual funder, the family office foundation, to see how they might act in any way that is impactful.
But what we found was remarkable energy in the room. Rather than despair, we felt that participants left informed and energized by our panelists and keynote speaker, Stephen Heintz of Rockefeller Brothers Fund, which has an excellent environment and health, southern China program, managed by Shenyu Belsky.
Dr. James Hansen, one of the world’s leading climate scientists and head of the New York’s NASA Goddard Institute for Space Studies, provided an overview of climate science – setting the scene for discussion. Dr. Hansen, an advocate for a carbon tax, spoke of our inertia in the face of an emergency, the possible extermination of species, receding glaciers, bleaching of coral reefs, acidification of the ocean, basically that we are a planet out of balance.
Heintz also spoke about urgency, describing climate change as a “planetary threat that knows no bounds.” He emphasized the particular threat in Asia – that of 16 countries facing extreme risk, five are in in this region and they are among the most impacted, low-lying Bangladesh for example.
In all, he said, global warming could cost southeast Asia 6-7 percent of GDP. Clearly, Asia is squarely at the intersection of climate and development and he emphasized the need for new ideas and new ways of thinking, something that accurately reflects current realities and anticipates new needs.
It is easy, Heintz pointed out, to be discouraged by the science, yet philanthropy, government, civil society and the private sector all have roles to play. In reality , it is imperative that we act because, inevitably, climate change will impact every other issue that we are working on.
Global grant-making, Heintz said, has increased dramatically over the past decade yet environmental issues are way behind, receiving only 5 percent of funding. Resources targeting climate change specifically, of course, are far less.
The philanthropy sector, Heintz said, can play a crucial catalytic role, take risk, experiment, support advocacy to change public policy and trigger larger systemic change. Important will be innovative public-private partnerships, helping to develop emerging models of low-carbon prosperity. His was an excellent speech.
Our three panelists, Runa Kahn of Bangladesh’s Friendship, Dorjee Sun of Carbon Conservation and John Liu, an environmental filmmaker and journalist based in Beijing, spoke of the practicalities of working effectively within this context – and they also were inspiring.
Runa spoke about making life possible for the 4 million people living in impossible circumstances in Bangladesh’s northern chars, John Liu on a massive ecological restoration project in China and showed the results, Dorjee on carbon, community and market solutions for saving forests.
The entire session was expertly moderated by the Asia Business Council’s Mark Clifford who managed to draw together the discussion, keeping an often amorphous and difficult topic moving toward practical solutions and away from fear.
The forum was a private side event to the C40 Climate change conference early this month organized by the Civic Exchange and supported by the Hong Kong government and Jockey Club Charities Trust.
It would be great to hear about other experiences linking climate change with a wider philanthropic portfolio, about nudging funders into action in this arena.
In Hong Kong we rightly complain about the state of the air we are forced to breathe and the government’s apparent lack of interest in addressing the pollution challenges – despite HK$ half-trillion in fiscal reserves this year.
The moribund HK government seems incapable of taking action to protect its citizen’s health despite having the financial resources to do so. Clean Air Network is working hard and successfully to educate the public and stir the government to act, providing the tools and support to do so – hand-holding of sorts.
But perhaps part of the challenge is that in Beijing, from where I am working for three weeks, Hong Kong’s pollution pales by comparison – not that this city should set any standard!
Here, my eyes are a constant rimmed-red, a smog headache challenges concentration and my sinuses are in revolt. Here, the clouds are but a memory and weather is either cold or hot but never sunny, it seems, but there is only a steady grey. The near distance fades into a smog that anywhere else would be unbelievable.
This is the price of China’s progress, and, to be fair, of pulling an estimated 600 million people out of poverty over the past two decades by fulfilling our Western need to consume ever-more products. According to the ADB, over the past 20 years, China’s poverty rate fell from 85% to 15.9% – a huge challenge for any government and unmatched anywhere, anytime.
Still, what we hear more about in the West is the fantastic progress machine that is China, the well-oiled production centre for the world’s consumers.
The flip side of that for China’s citizens is the polluted rivers, the smog-filled air, the cancer villages in evidence countrywide, the drained aquifers, the contaminated land. All of these will be the Beijing government’s newest challenges if it is to keep its population healthy and maintain social stability, which is the utmost goal.
Highly polluted areas near factories have shown increasing cases of cancer. Southern China is replete with communities that recycle electronic waste and here people are exposed to toxic heavy metals such as cadmium and mercury. The country’s myriad chemical factories produce carcinogens that enter the water and soil, also contaminating food grown on the land.
According to a recent Guardian article, in 2007, cancer was responsible for one in five deaths, and Chinese farmers are more likely to die of liver and stomach cancer than the world average.
Water supplies are polluted and aquifers significantly drained, something leading environmental activist Ma Jun warned about ten year’s ago in his book, China’s Water Crisis, which considered the local equivalent of Rachel Carson’s Silent Spring.
The Qinghai-Tibet plateau area suffers from environmental degradation that is threatening three major rivers: the Yangtze, Yellow and Mekong. Melting permafrost and glaciers in the surrounding mountains are also eroding the grasslands and wetlands, causing the ground to lose its capacity to absorb water, according to AFP.
Xin Yuanhong, a government scientist quoted by the news agency says that at the current rate, 30 percent of the region’s glaciers could disappear within 10 years.
Climate change is also affecting the 580 million people living in these river basins. This crisis also affects food security; drought and drying up water sources are severely lowering crop yields in the area.
By all accounts, the government increasingly understands the severity of the challenge. Careful Chinese environmentalists are being allowed to speak out. Indeed, many seem to be encouraged by the government to highlight bad practice by companies breaking local laws by emitting pollutants into the water, air and ground. Information disclosure has taken leaps forward in recent months.
Ma Jun and his Institute of Public and Environmental Affairs over the past several years have divulged information in online databases of air and water violations by factories throughout China. He has created a groundbreaking “blacklist” of polluters. At last count, IPE databases listed more than 60,000 air and water violations.
To be removed from the list, companies must take corrective action and accept IPE-supervised environmental audits of their Chinese factories. Ma is also a champion of increasing access to environmental information, which he believes will bring public pressure on companies to operate more responsibly.
In Yunan Province, Yu Xiaogang, another courageous environmentalist I met with recently, is also using information disclosure, to gain bank data. He and his group, Green Watershed, along with a network of nine other NGOs, are compiling information on loans granted to development projects that are damaging to local populations.
The group recently published the environmental record of 14 Chinese banks, looking at their policies, regulations, investments and loan portfolios, noting which were connected with environmentally damaging projects.
Yu is also working with communities to help them open channels with local financial institutions to discuss social and environmental impact ahead of any loan being granted to a large development initiative.
That Beijing seems to be backing the sort of discussion underway in China is certainly encouraging. It seems Hong Kong should be setting standards in the environmental arena not lagging behind its severely challenged neighbour.
Most of us agree that deforestation on the scale we have seen in recent decades is undesirable and unsustainable.
Our tropical forests are in dramatic decline, pumping tons of carbon into our atmosphere and causing changes in temperature and rainfall worldwide with potentially devastating consequences for our planet.
The problem remains, how to tackle this critical problem in developing regions, where corruption is endemic, how to pay the enormous costs of protecting forests and engaging the local communities that depend on them for their livelihoods.
Reversing global deforestation will require industrialized countries to invest billions annually in forest protection. It is worth remembering, however, that last year U.S. government put aside $700 billion for banks, insurers and automakers during the financial crisis as part of the Troubled Asset Relief Program.
By now, we know the story: Rainforests soak up huge amounts of planet-warming carbon dioxide. Deforestation releases retained CO2 released into the atmosphere. Forest destruction contributes about 20 percent of mankind’s greenhouse gas emissions annually, according to the U.N. climate panel. Indeed, tropical deforestation is more damaging to our planet than the transport sector or factories, with one day of logging equivalent to the carbon footprint of eight million people flying to New York.
And why do we care? Our rainforests form a vital cooling band around the earth’s equator, generating a large part of our rainfall and acting as a thermostat. We perhaps also aren’t aware that 50 per cent of life on earth exists in these humid forests, which cover less than 7 per cent of the planet’s surface. We are far from understanding the real consequences of losing the biodiversity we seem to take for granted.
Yet our governments, and indeed most of us, continue to act as though our tropical forests are expendable, that there is no impending climate crisis, biodiversity is a given, perhaps unimportant, and anticipate little, if any alteration in our lives of consumption and energy use.
Clearly, December’s global climate powwow in Copenhagen was the best reflection of this, with no real sense of urgency conveyed by governments gathered there. Country delegations arrived by private jet, were ferried around town in gas-guzzling limos – not exactly the right tone for a crisis meeting on climate.
There had been hope to gain a legally binding international treaty committing nations to mandatory cuts in greenhouse gases but none was forthcoming, lost once more in the all too familiar regional bickering. And chances are slim of any agreement from the next round of U.N. climate talks in Cancun, Mexico, particularly following the resignation last week of Yvo de Boer, who has led the process for four years.
The pledges that de Boer did manage to eke out of Copenhagen will merely stabilize emissions by 2020. By most accounts, we need to achieve reductions of at least 50 percent by midcentury – something that can’t be achieved without big cuts from the major emitters, which are the U.S., China, India and Brazil.
Part of the problem lies in ascertaining, at the international level, who should pay to conserve our forests. Developing nations want the right to develop unimpeded, while the United States wants to see significant emissions cuts from China and India that would be on par with its own and doesn’t want to be held accountable for cost. Fundamentally, the U.S. has no effective national strategy of its own and thus is really not in a position to take the lead.
The assumption is that at some point, nations will get it together to achieve meaningful emissions reduction and carbon will become a real part of the solution. In the meantime, regional initiatives such as the U.S. Climate Change legislation currently stalled in the U.S. senate are evolving and could bring some movement in the carbon picture, generating resources for forestry conservation.
But will this be too little too late for our forests and what is the solution for them while we wait?
The bottom line is that in an attempt to protect what is left of our precious stores of tropical timber and the estimated 1.6 billion people who live amongst them, environmental groups have poured tens of millions of dollars into conservation over the last two decades without any real gains.
Global Witness co-founder Patrick Alley, said in a worth-quoting speech last year :
Virtually every intervention by the international donor community into the forests sector over the past few decades costing hundreds of millions of dollars has essentially been to patch up the holes in enforcement to stop the haemorrhaging of illegal timber and corruptly looted revenues. And these interventions have ranged from certification, chain of custody systems, governance, capacity building, law enforcement and there has been precious little success in that litany. And on top of this, we have the increasing threats of conversion to plantations and agricultural encroachment http://bit.ly/fiCvz
The U.N.’s Food and Agricultural Organization says about 13 million hectares, or an area the size of England, are still destroyed annually. In all, half the world’s tropical and temperate forests are now gone.
Author and environmental advocate, Gus Speth, ( http://bit.ly/bSBjOR) pointed out in a recent speech that species are disappearing at rates about 1,000 times faster than normal in a spasm of extinction not seen in 65 million years, since the dinosaurs disappeared.
Changes in our rainfall patterns have meant that over half the agricultural land in drier regions suffers from some degree of deterioration and desertification.
A key concern, if we are to reverse this trend, is either how to pay for conservation or, alternatively, how to make conservation pay; at a national level, how to justify the loss of revenue for developing countries that need the income.
The sad reality is that logging in the tropics generates enormous profit, but not for local communities and mostly not for governments in the form of taxes. Instead, much of the profit finds its way into corporate coffers and the offshore accounts of connected local individuals through corruption and illegal practices. The profit pressures on forests are huge from these interests. Biodiesel and palm oil have now also entered the equation, adding to the strains.
One initiative that tries to address the question of how to generate profit for conservation and formalized at the Copenhagen talks was a U.N.-backed forest protection scheme called Reduced Emissions from Deforestation and Degradation or REDD.
This would include forests in the global carbon markets, allowing polluters to earn tradable carbon credits by paying developing nations billions not to chop down their trees. Local communities are supposed to earn a share of REDD credit sales to pay for better health, education and alternative livelihoods that persuade them to protect rather than cut down their forests.
But the revenue-sharing arrangements will differ for each country. Some NGOs worry that once again little support will filter down to the communities, with central and provincial governments demanding control of the money.
Another problem is that carbon measurement and accounting as part of any REDD design is complex and time-consuming, requiring laws to be enacted, officials to be trained and investors to be assured that the scheme won’t be undermined by corruption.
And finally, ensuring the forests aren’t simply cut down later, or that deforestation is displaced to another region or country, is another concern. REDD’s final technical design will have to address these issues.
Still, the well-regarded Eliasch Review (http://bit.ly/d99kM3) suggests that including REDD in a well-designed carbon trading system could provide the finance and incentives to reduce deforestation rates by up to 75 per cent in 2030
Still, in Indonesia, where the REDD discussion is quite advanced, there have been warnings that billions of dollars clearly are at risk from graft unless the country puts strong oversight mechanisms in place, according to a recent report released by CIFOR. (http://bit.ly/cfld28)
“Investors should be looking very carefully at the financial governance conditions in the countries where they will be investing their funds. Like Indonesia, many tropical forest countries have long track records of mismanaging public financial resources, particularly in the forestry sector,” said the report’s co-author, Christopher Barr.
Indonesia, which is one country in which ADMCF works on forestry issues, is the world’s third-largest area of tropical forest and the world’s third-largest emitter of carbon after the United States and China because of the massive destruction there of rainforest and peatlands.
Last year, Indonesia set up a legal framework for REDD. Several pilot projects are under way and the governments of Norway, Australia, Germany and the U.S. have promised millions of dollars in funding.
What we have seen everywhere forests are protected however, are the sad unintended consequences of the scramble for carbon: environmental groups that have been conserving forests are backing away from protecting them, fearing that as protected forest they won’t qualify under the REDD additionality clause.
It is uncertain whether already protected forests would qualify for REDD credits. This means that while we wait for REDD, for any sort of global or regional framework that will push forward the mechanisms that will allow large-scale protection, our forests are potentially more vulnerable than ever.
emilybotsford
sleclue
Rethinking Philanthropy (Lisa Genasci) 
