MAC: Mines and Communities

BHP Billiton in world-first 'Forest Bond'

Published by MAC on 2016-11-01
Source:, The Australian

German thinktank ranked the company as the world’s 20th largest carbon emitter in 2014

The Heinrich Böll Foundation ranks BHP No 20 on its list of 81 major carbon emitters in its annual Carbon Majors Funding, Loss and Damage report. Australian mining giant accounts for more than half of 1% of all global greenhouse gas emissions, the report has found.

See previous on MAC: BHP Billiton AGM met by global calls for justice and accountability (25/10/2016)

IFC launches US$152 million REDD greenwashing bond for mining corporation BHP Billiton

Chris Lang

1 November 2016

Yesterday, the World Bank’s private sector arm, the International Financial Corporation launched a US$152 million bond aimed at supporting REDD and carbon trading. The deal demonstrates just about everything that’s wrong with REDD.

In a press release, Jingdong Hua, IFC Vice President and Treasurer, says,

“Halting deforestation is essential to meet the global community’s climate goals. To do that, we need to mobilize $75 billion to $300 billion in the next decade. Much of this needs to come from the private sector. IFC’s Forests Bond demonstrates the power of innovative capital-market mechanisms to unlock private sector funds for forest protection.”

Of course Hua didn’t mention that unless we leave fossil fuels in the ground, we’ll be facing runaway climate change and the world’s forests will go up in smoke.

IFC’s five-year bond will be listed on the London Stock Exchange. It has been sold to major global institutional investors, such as CalSTRS, Treehouse Investments LLC, TIAA-CREF, and QBE.

The profits will support IFC’s “private sector lending in emerging markets”. That sounds reasonable. Until we look at what the IFC’s lending entails. A few years ago, IFC made a US$7 million equity investment in Agri-Vie Agribusiness Fund. One of the companies in Agri-Vie’s portfolio was a UK-based firm called New Forests Company.

To make way for New Forest Company’s industrial tree plantations in Uganda, about 22,500 people were brutally evicted. Houses were burned and a young boy who was ill was burned alive in his home.

Cash or carbon credits?

Investors in IFC’s Bond were offered either cash or carbon credits. Investors taking the carbon credit option could retire the credits to “offset” their corporate greenhouse gas emissions, or sell them. Investors will receive voluntary carbon credits at a fixed price of US$5.00.

It’s probably worth pointing out (since the IFC doesn’t mention this in its press release) that clean development mechanism carbon credits are currently selling on the EU Emissions Trading System for €0.38. And there currently is no secondary market for voluntary carbon credits.

So what happens if investors want money, rather than carbon credits? Well, IFC developed its Forest Bond together with BHP Billiton, the world’s largest mining company.

If investors want cash, BHP Billiton has agreed to buy the carbon credits in a blatant attempt to greenwash its dirty operations. In 2014, the Heinrich Böll Foundation ranked BHP Billiton as the world’s 20th largest carbon emitter.

Fiona Wild, BHP Billiton Vice President Sustainability and Climate Change, says:

“BHP Billiton is committed to operating sustainably and reducing our environmental footprint. IFC has been one of the pioneers in the green bond market as well as in climate financing. The innovative IFC Forests Bond provides us a new way to offer economic incentives to reduce deforestation and invest in low-carbon growth.”

BHP Billiton committed to sustainability? Yeah right

A year ago, almost to the day, a dam burst at the Samarco mine in Minas Gerais and a wave of 40 million cubic metres of mineral waste poured down the Doce River. At least 19 people died. Hundreds were left homeless. A year later, the river still runs red from the iron ore in the water. It was Brazil’s worst environmental disaster.

The Samarco mine is co-owned by BHP Billiton and Brazil’s Vale SA.

In June 2016, an investigation by Brazil’s federal police revealed that before the collapse, the companies knew that the dam was at risk.

When BHP Billiton held its annual meeting in London on 20 October 2016, protestors from Brazil, Colombia and Indonesia were outside. This year, BHP Billiton sold its 75% share of IndoMet coal mine in Indonesia, without accepting responsibility for the environmental destruction caused by the project, including a recent tailings spill.

Arie Rompas of WAHLI (Friends of the Earth Indonesia) told Blue & Green Tomorrow:

“BHP Billiton is leaving a terrible legacy at the IndoMet coal project in Central Kalimantan, where my family comes from. The company is destroying what is left of the rainforest where the indigenous Dayak Murung people live and which they rely on for their livelihoods and traditions. BHP paid criminally-low compensation for the lands they have taken and now they are polluting our rivers and attempting to walk away from the mess they have made. They must be held accountable for all this.”

The source of the carbon credits: The Kasigau Corridor REDD project in Kenya

Under its Forest Bonds deal, IFC will buy carbon credits from the Kasigau Corridor REDD project in Kenya.

The project developer, Wildlife Works argues that the project is “equitable and fair” and that the majority of benefits go to local communities. But in research published earlier this year in Land Use Policy, Susan Chomba, Juliet Kariuki, Jens Friis Lund and Fergus Sinclair found that,

[T]he initial flow of benefits were concentrated in the hands of a few. This was because developments in land tenure since pre-colonial times had involved processes of dispossession and elite capture, enabled by colonial and post-colonial land policies that left the majority of local people with little or no land entitlement.

Conservation International was IFC’s other partner in setting up this collasal greenwashing exercise. BHP Billiton has also committed US$5 million to Conservation International’s Alto Mayo project in Peru.

Proof, as if it were needed, that Conservation International will accept money from any corporation, no matter what its record of destruction.

BHP in World-First 'Forest Bond'

The Australian

1 November 2016

BHP Billiton will underwrite cash repayments on what the International Finance Corporation is calling a world-first $US152 million bond that will help limit deforestation, while providing competitive returns.

The unique feature of the bond is that its 1.546 per cent coupon can be paid in either cash or carbon credits.

BHP will chip in up to $US12m to provide a cash coupon to investors that do not want to take the carbon credits that the IFC-issued bond offers.

In exchange for the cash, BHP will take investors’ carbon credits.

The bond, which will trade on the London Stock Exchange, is being taken up by heavyweight institutional investors like TIAA-CREF, Australian insurer QBE and investment bank JPMorgan.

Funds will support the UN’s Kasigau Corridor Reducing Emissions from Deforestation and Forest Degradation (REDD) scheme by buying carbon credits from the project.

“It is exciting and extremely encouraging to see the climate finance market continue to move forward with a steady stream of unique deals that offer attractive valuations for investors, while at the same time, delivering a positive environmental impact,” zTIAA’s head of ESG fixed income strategies, Stephen Liberatore said.

IFC vice president Jingdong Hua said 5.5 million hectares of tropical forest — an area the size of Costa Rica — was disappearing every year, making protecting forests critical to hitting targets to limit global warming.

“IFC’s Forests Bond demonstrates the power of innovative capital-market mechanisms to unlock private sector funds for forest protections,” he said, adding that $US75bn to $US300bn of funds need to be mobilised in the next ten years in fighting deforestation, to meet goals of limiting warming to 2C.

BHP sustainability and climate change president Fiona Wild said the miner’s support of the bond was part of its commitment to addressing climate change.

“While low-emissions technology is becoming more effective and commercially viable, it is important to identify robust and cost-effective offsets to help meet future reduction commitments,” Dr Wild said.

She said deforestation and forest degradation were responsible for up to 20 per cent of global greenhouse gas emissions and the most significant source of emissions in many developing countries.

“Our support for the bond is part of our commitment to scale-up private sector investment in REDD, stimulate demand for REDD credits and demonstrate the value of reducing deforestation as one of the most cost-effective climate change solutions,” Dr Wild said.

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