– Canopy Capital
Iwokrama stands to receive funding for the next five years through its deal with Canopy Capital to value its climate services, and in addition, 90 per cent of investment returns in the long term will go towards sustainably managing this rainforest.
But the amount of the guaranteed yearly funding has not been disclosed, neither by Canopy Capital nor Iwokrama.
The agreement between Iwokrama and Canopy Capital was made public on March 27 at the world’s first Biodiversity and Finance Conference in New York.
Explaining the arrangement on its website, Canopy Capital said that it is simply buying the licence to measure and then value the ecosystem services provided by the Iwokrama Forest for a period of five years by making a guaranteed yearly payment to IIC.
“Canopy Capital believes that the sovereignty of the forest it invests in should remain with the forest-owning people and the nations that own them,” Canopy Capital said. It said that the agreement is about using income from the ecosystem services to make Iwokrama financially independent from institutional donors by 2010 in accordance with Iwokrama’s business plan.
It said that guaranteed initial income from Canopy Capital will be used by the IIC to continue the sustainable management and conservation of the Iwokrama reserve and to provide livelihoods for the local communities that have depended on the Iwokrama forest for generations. “In the longer term, 90 per cent of any investment upside will go to the ICC for use in this way,” Canopy Capital said.
As to the question of how Canopy Capital will make money, the company said it is exploring various approaches to securing substantial investment in ecosystem services. “In particular, Canopy Capital is looking to market eco-system services through an Ecosystem Service Certificate attached to a ten-year tradable bond, the interest from which will pay for the maintenance of the Iwokrama forest,” Canopy Capital said.
It said that as atmospheric levels of greenhouse gases rise, emissions will carry an ever-mounting cost and the conservation of rainforests and the conservation of rainforests will acquire real value. “In the future, countries that choose to conserve their forests are therefore likely to have global assets worth billions of dollars a year,” Canopy Capital said. “The investment community is beginning to wake up to this opportunity.”
It assured that there is increasing appetite for this type of approach to forest conservation.
In explaining how the deal helps in the fight against climate change, Canopy Capital said that the agreement is a strategic step towards investing in standing forests and the increasingly scarce ecosystem services which are a vital life support system.
Deforestation, Canopy Capital said, contributes an estimated 20 per cent of all carbon emissions – more than the global transport sector. “If we continue to cut down 13 million hectares of tropical forests a year, the odds of containing climate change are virtually nil,” Canopy Capital stated.
The company said that the Ecosystem Services (ESS) provided by tropical forests are vital to maintaining life on earth. “Forests like Iwokrama are the most important mechanism on the planet for transporting heat from the land surface (where we live) up into the atmosphere, cooling the surface on a vast scale. It would take the equivalent of 50,000 times the daily energy output of the world’s largest hydropower station to evaporate the 20 billion tonnes of water coming off the Amazon each day. That’s energy that would otherwise heat the land surface. Replacing this priceless natural air conditioning and moisturising system would be impossible if the forests were lost,” Canopy Capital said.
On the question of whether the harvesting that is taking place in Iwokrama will compromise the forest, Canopy Capital noted that 50% of Iwokrama has to remain untouched in perpetuity and of the remainder “a sustainable and highly selective timber harvesting is limited to an area of 108,000 hectares which allows for a total annual cut of 20,000 (cubic metres) less than 1% of the entire Iwokrama forest”.
If the forest is degraded by natural or human activity Canopy Capital can suspend its payment for ecosystem services as can Iwokrama if it felt the company was not fulfilling its commitments.
Canopy Capital was established in 2007 to drive capital to the rainforest canopy. Its website said that 20 per cent of the company is held by the Global Canopy Programme, a UK charity dedicated to the research and preservation of tropical forests. The remaining 80 per cent is funded by a dozen international investors, including the Waterloo Foundation.
Its website said that the Global Canopy Programme provides advice and technical expertise to Canopy Capital.
Canopy Capital said that all its investments will benefit local communities and conservation efforts in tropical rainforests as well as financial investors.
A NewScientist.com article said the deal was “either a visionary piece of capitalism or throwing money into the wind. A venture capitalist today made a huge environmental bet – that one day the environment services that sustainable forests provide will be worth big money”.
It quoted Hylton Murray-Philipson, director of Canopy Capital as saying that in return for contributing to Iwokrama’s running costs Canopy Capital is given “ownership” of the forest’s ecosystems services “and a claim on any profits that might one day be made from them”.
Murray-Philipson told NewScientist.com he believes the forests are worth about US$20 per hectare and though he admits he may never see a penny of return on his investment “the price tag is considerably less than what some companies are considering paying to store carbon under the sea”.
He added “If I am wrong, we have a write-off, but at least we have tried to do something to change the paradigm of how man relates to nature”.
A report in the UK Telegraph said the Iwokrama deal was drawn up by the London law firm of Stevenson Harwood “defining the `ecosystem services’ of the reserve as the proven ability of rainforests to generate rainfall, cool the atmosphere, store carbon, moderate weather conditions and sustain biodiversity”. (Johann Earle)
