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

Stepping up to Copenhagen Options for Forests Financing the World’s Forests: Integrating Markets and Stakeholders - Imperial College - 3 Aug 2009 Andrew W. Mitchell Founder & Director Global Canopy Programme Research Associate Zoology Dept University of Oxford

Core Areas science finance policy A Crisis of Values

science

“ 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 > 2012 EU ETS > 2013 US Market - Waxman-Markey Bill Australia/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 Markets ODA 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

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

Timing of payments (IWGIFR)

Fund flows Tropical Forests Facility Rainforest Bond Rainforest Nations Direct Funding Private Investors Payments OECD Govts Guarantees/ Repayments Carbon Permit Auctions Special Levies (e.g. fuel) Earmarking Taxes World Bank Technical Support Issuer/ 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 Beyond Copenhagen?

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

Emerging Earnings 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%

+ 80%

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

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

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

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

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

Direct and indirect

Available to the financial community to i nform 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!