A press statement from Iwokrama said that the deal, announced yesterday at the world’s first Biodiversity and Finance Conference in New York, opens the way for financial markets to price the ‘utility value’ of rainforests.
“For the first time investors will pay for the ecosystem services produced by a rainforest, including rainfall generation, climate regulation, biodiversity maintenance and water storage – utilities with global significance which are vanishing as forests fall,” Iwokrama’s Chairman Edward Glover said in a statement. The deal was first reported in yesterday’s edition of the Independent newspaper in the UK
Iwokrama said that the transaction between it and Canopy Capital pioneers the use of risk capital to safeguard such services within the Iwokrama Reserve in Guyana.
Reuters reported yesterday that Canopy Capital has also bought rights to the carbon stored in the forest’s timber. It said that Hylton Philipson, Canopy Capital’s director and a former investment banker, hopes to sell the carbon storage and other rights at a profit within 18 months.
“It’s a new asset class,” Reuters reported Philipson as saying. “I think there’s a real appetite out there (for this type of investment. If you fly over the forest, you can see there’s no cloud coming off the cleared land.”
Acting CEO of Iwokrama Dane Gobin said that it would be some time before Iwokrama draws down on the valued resources in its rainforest.
He said that teams of scientists would have to visit the grounds to look at the stock levels.
“There is value, but it has to be monetised and a financial model [built],” said Gobin, adding that in a few months the stocking value will be determined. He said until that time, it will be difficult to say how much money Guyana will be receiving.
According to Gobin, with the injection from Carbon Capital, Iwokrama will be focussing on further research and environmental services, including medicinal plants and other non-timber resources, further advancing on the organisation’s business plan.
He said too that a part of the plan is Iwokrama’s sustainable harvesting of selected species of trees.
Iwokrama said that funds already secured from Canopy Capital will be used to continue the management of the Iwokrama forest in accordance with its philosophy of conservation through sustainable best practice, providing livelihoods and business partnerships for the 7,000 people living in the forest and the surrounding area.
Expressing community sentiments, Iwokrama Head Ranger Ron Allicock said “I love this place. This is my home. I want it to be around for my children, my children’s children, forever.”
Glover said that forests do much more for us than just store carbon.
“We should move beyond emissions-based trading to measure and place a value on all the services they provide,” he said.
Iwokrama said that this initiative fits perfectly with its original mandate to demonstrate that conservation, environmental balance and sustainable economic activity can be mutually reinforcing.
“Moreover, this first significant step is in keeping with President [Bharrat] Jagdeo’s visionary approach to safeguarding all the forests of Guyana.
It also ensures, with the Commonwealth’s support for Iwokrama, that the world hears a knowledgeable and persuasive voice on a matter of growing international concern” Iwokrama quoted Glover as saying.
Jagdeo last October had announced that Guyana stands ready with its rainforests to contribute to the fight against climate change.
The deal, drawn up by international law firm Stephenson Harwood, comes in the wake of a pivotal year for standing forests. The release said that the contribution of deforestation to runaway climate change has been recognised internationally and new measures to conserve forests are set to be included in a post-Kyoto framework after 2012.
Iwokrama said that the deal creates an investment template for first-movers in an emerging market for ecosystem services. “Such a market could generate billions of dollars for developing nations, making it more valuable to keep their forests standing than to cut them down,” the release said.
Gobin said that focus is returning to climate change and the environment after a hiatus that began soon after the US terrorist attacks in 2001 and the slew of devastating natural disasters which followed some years later.
He said that this shift in focus augers well for Iwokrama.
The Iwokrama project arose out of an offer in 1989 by then President Desmond Hoyte at the Commonwealth Heads of Government Meeting in Kuala Lumpur, Malaysia to have a million acres of virgin forests in the centre of Guyana set aside for sustainable forestry studies.
