With the countdown on the global environment under way, one venture capitalist is hoping that people will see value in the ecosystem services which the Iwokrama rainforest offers and which can be used to raise capital for its upkeep as a “giant utility.”
This is according to Hylton Murray-Philipson, Canopy Capital’s director, who was explaining to Mongabay.com why he was investing in Guyana.
Iwokrama stands to receive funding for the next five years through its deal with Canopy Capital, and should in the long term get 90 per cent of the investment returns that will go towards sustainably managing this area of rainforest.
“I feel we are at a crossroads. I think that this is the last moment we have as a species to take remedial action because we are very soon on a path that is committed to significant climate change,” Murray-Philipson told Mongabay.com.
According to the businessman, he has been reading about the destruction of the Amazon forest and it is still happening. “What’s the problem? Frankly [it is the] lack of money. Philanthropy is too small, governments are too slow, so it’s going to be up to the market. Our firm is bringing capital to the canopy. The only way we are going to turn this thing around is through a profit motive. This is what is needed to harness the power of markets. But it doesn’t stop with making a profit,” he said.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.
According to Murray-Philipson, he originally tried to do something in Brazil when living there 20 years ago, and attempted to set up a bank. However his efforts there failed.
“So when I came across Iwokrama in Guyana, I thought, this is the answer to all my prayers – it’s really a jewel in the crown,” he said, noting President Bharrat Jagdeo’s commitment to make Guyana’s forests available in the battle against climate change.
“In Iwokrama you have the Head of State who is supportive, you have 12 years international governance, you have the partnership with the Commonwealth, you have the patronage of the Prince of Wales, you have the English language, you have the rule of law, and you’ve got a country basically halfway between Brazil and the United States that has very dense, very rich and very beautiful forests. If you can’t make something work in Guyana, I’m not sure you are going to make it work anywhere. So it’s a longwinded way of saying why it has to be Guyana,” he said.
Asked whether he expected the market to move beyond carbon to value other ecosystem services like water, Murray Philipson said that for countries like Brazil which was 70 per cent hydro electric and had a US$58 billion agriculture export industry, if it didn’t rain, it would affect power and agriculture production. “Another way of looking at it is to compare the rainforests to a giant utility – if you do not pay your utility bill, your power and water are going to get cut off,” he said.
He explained that what his company might get into is a weighting scheme for forests, “so we can develop a real asset class to appeal to a fund manager who has never seen a rainforest in his life but decides that rainforests are a good thing to invest in. An index is the perfect vehicle for this,” he said.
The investor explained further that the index would include blocks of forests all over the world and would be based on an established set of criteria which would apply to all forests.
“For example, say you have ten different elements and each element can score 10 for a maximum score of 100. If the forest is preserving indigenous culture, that would be one element. Others might include degree of threat, the presence of endemic or endangered species, the potential for eco-tourism or sustainable harvesting of forest products, whether the forest is a corridor for biodiversity migration or rainfall generation, quality of governance, and whether local people benefit from the conservation arrangement,” he said.
According to Murray-Philipson, the index will incorporate all of the characteristics to create a yardstick by which forests around the world could be measured to give a degree of uniformity for the investor and also maintain diversity within the asset class. “Iwokrama could score pretty highly. It has indigenous people, good governance, and crucially, local beneficiary arrangements,” he said.
