Blake Lapthorn Green Breakfast with guest speaker Andrew Mitchell, founder and director of Global Canopy Programme

Finance & Forests

A 21st Century Intelligence Test?

Finance & Forests Finance & Forests

A 21st Century Intelligence Test?A 21st Century Intelligence Test?

Andrew W. MitchellFounder and Director

Global Canopy Programmewww.globalcanopy.org

Green Breakfast Blake Lapthorn - 12 OCT 2011

Andrew W. MitchellAndrew W. MitchellFounder and Director Founder and Director

Global Canopy Global Canopy ProgrammeProgrammewww.globalcanopy.orgwww.globalcanopy.org

Green Breakfast Green Breakfast Blake Lapthorn Blake Lapthorn -- 12 OCT 201112 OCT 2011

Research / ActionResearch / Action

sciencesciencescience

financefinancepolicypolicy

Where are greatest losses?Where are greatest losses?

Drivers of deforestationDrivers of deforestation

ATMOSPHERE EVOLUTIONATMOSPHERE EVOLUTION

New Value for Forests -

Where Life Meets the Atmosphere?

Regional to Global Ecosystem Services

• 3 trillion tonnes of water stored • 8 trillion tonnes of water vapour

evaporated each year? • $1 trillion of industry share this eco-

dependency • Deforestation may mean declining

service provision • Rising temperatures may compound

the effects

Regional to Global Regional to Global Ecosystem ServicesEcosystem Services

•• 3 trillion 3 trillion tonnestonnes of water stored of water stored •• 8 trillion8 trillion tonnestonnes of water of water vapourvapour

evaporated each year?evaporated each year?•• $1 trillion$1 trillion of industry share this ecoof industry share this eco--

dependencydependency•• Deforestation may mean declining Deforestation may mean declining

service provision service provision •• Rising temperaturesRising temperatures may compound may compound

the effectsthe effects

The Amazon’s Rainfall Service? After J. Marengo, INPE

The Amazon as an EcoThe Amazon as an Eco--UtilityUtility

Roadmap to a ‘Green Economy’?Roadmap to a Roadmap to a ‘‘Green EconomyGreen Economy’’??

Food SecurityEnergy SecurityClimate Security

Food SecurityFood SecurityEnergy SecurityEnergy SecurityClimate SecurityClimate Security

Amazon Eco-Utility draft framework

Ecosystem Services(regional-global)

EcosystemServices (local)

Benefit sharing

Stewardship

Community Forest

Economy

Forests as Natural Capital?Forests as Natural Capital?Forests as Natural Capital?Forest Owning Nations as Providers of global Eco-Services? Eg: Natural CCS Worth $ billions/yr - and FREE

Forest Owning Nations Forest Owning Nations aas s Providers of global EcoProviders of global Eco--Services?Services?EgEg: : Natural CCS Natural CCS Worth $ billions/yr Worth $ billions/yr -- and FREEand FREE

SOURCE: Pathways to a Low Carbon Economy, McKinsey report, Feb 2009

““20% of Problem Now < 40% of the Solution by 203020% of Problem Now < 40% of the Solution by 2030””

1. Valuing Forest Carbon?

Compliance or Cul-de-sac?

1. Valuing Forest Carbon?1. Valuing Forest Carbon?

Compliance or CulCompliance or Cul--dede--sac?sac?

“Little Book” Guides““Little BookLittle Book”” GuidesGuides

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.

2. Reducing Drivers of Deforestation

Emerging Risks

-Reputational -Environmental -Regulatory -Earnings

2. Reducing 2. Reducing Drivers of Drivers of DeforestationDeforestation

Emerging Risks

-Reputational -Environmental -Regulatory -Earnings

Building BridgesBuilding BridgesBuilding BridgesAlong the length of a supply chainBetween corporates, NGOs and ResearchersBetween companies and their investors

Along the Along the length of a length of a supply chainsupply chainBetween Between corporatescorporates, , NGOs and NGOs and ResearchersResearchersBetween Between companies companies and their and their investorsinvestors

Business drivers of Business drivers of deforestationdeforestation

BeefSoyPalm OilTimberOilMining

BeefBeefSoySoyPalm OilPalm OilTimberTimberOilOilMiningMining

13 Million hectares converted annually13 Million hectares 13 Million hectares converted annuallyconverted annually

The FFD Disclosure RequestThe FFD Disclosure RequestThe FFD Disclosure Request4 main sections –

Deforestation Risk AssessmentManagement of FRC IssuesCoverage of FRCsReporting, Governance, Risks and Opportunities.

Participation/recognition of all activity - Mature (timber) or emergent (beef / leather)Aim to engage first, then drive improvement

4 main sections 4 main sections ––Deforestation Risk AssessmentDeforestation Risk AssessmentManagement of FRC IssuesManagement of FRC IssuesCoverage of Coverage of FRCsFRCsReporting, Governance, Risks and Reporting, Governance, Risks and

Opportunities.Opportunities.Participation/rParticipation/recognition of all activity ecognition of all activity -- Mature Mature (timber) or emergent (beef / leather)(timber) or emergent (beef / leather)Aim to engage first, then drive improvementAim to engage first, then drive improvement

Milestones reached in two Years?Milestones reached in two Years?Milestones reached in two Years?

Companies up 31% - 285 vs 217 in 2009Engagement more than doubled - 78 vs 35 in 2009Response rate increased to 27% vs 16% All 2009 respondents retained (excepting Cadbury, now under Kraft ownership) Global launch in Sao Paulo with SantanderExpanded from EU to US2011 > 65 Endorsers AUM = US$ 6 trillion +

Companies up 31% Companies up 31% -- 285 285 vsvs 217 in 2009217 in 2009Engagement more than doubled Engagement more than doubled -- 78 78 vsvs 35 in 200935 in 2009Response rate increased to 27% Response rate increased to 27% vsvs 16% 16% All 2009 respondents retained (excepting Cadbury, now All 2009 respondents retained (excepting Cadbury, now under Kraft ownership) under Kraft ownership) Global launch in Sao Paulo with SantanderGlobal launch in Sao Paulo with SantanderExpanded from EU to USExpanded from EU to US2011 > 65 Endorsers AUM = US$ 6 trillion +2011 > 65 Endorsers AUM = US$ 6 trillion +

3. Raising Finance - An Emergency Plan 3. Raising Finance 3. Raising Finance -- An Emergency PlanAn Emergency Plan

HRH Prince of Wales hosted historic meeting of world leaders in London alongside G20 2009

Paris-Oslo > COP 2010

REDD+ Partnership

2011 Offer = USD $4.2 Bn

Need = US$ 17 - 33 Bn!

HRH Prince of Wales HRH Prince of Wales hosted historic meeting of hosted historic meeting of world leaders in London world leaders in London alongside G20 2009alongside G20 2009

ParisParis--Oslo > COP 2010Oslo > COP 2010

REDD+ PartnershipREDD+ Partnership

2011 Offer = USD $4.2 2011 Offer = USD $4.2 BnBn

Need = Need = US$ 17 US$ 17 -- 33 33 BnBn!!

Meeting at St James’s Palace, 1 April’09

How to Bridge the Financing Gap? How to Bridge the Financing Gap?

GLOBAL CANOPY PROGRAMME

17 Mechanisms to  raise funds from 

$36 Bn

/yr to $141 Bn/ yearin 2020

A guide to Proactive  Investment in Natural 

Capital (PINC)

Bonds = Public / Private Finance?Bonds = Public / Private Finance?

• Global Bond Market = USD$ 100 T• Regulatory and Country Risk• Lack of Market Demand• Multiple Revenue Streams• Combine Carbon/Forestry/Food• Safeguards

“Are we creating wealth that’s worth having?”

“Are we creating wealth that’s worth having?”

Clinton Global Initiative, New York, October 2007Clinton Global Initiative, New York, Clinton Global Initiative, New York, October 2007October 2007

The Challenge…

GDP + NCD

Include Natural Capital in the 21st Century Economy

The “Natural Capital Declaration”The “Natural Capital Declaration”

Major global FIsLaunch in Washington UNEP GTRGovernments - World Bank ‘WAVES’Corporations - AVIVA Annual Accounts2015 - International Integrated Reporting2020 - Accounting Standard for Natural Capital

Major global Major global FIsFIsLaunch in Washington Launch in Washington UNEP GTRUNEP GTRGovernments Governments -- World World Bank Bank ‘‘WAVESWAVES’’Corporations Corporations -- AVIVA AVIVA Annual AccountsAnnual Accounts2015 2015 -- International International Integrated ReportingIntegrated Reporting2020 2020 -- Accounting Accounting Standard for Natural Standard for Natural CapitalCapital

Thank You!Thank You!

www.globalcanopy.org

www.forestdisclosure.com

www.theREDDdesk.org

www.globalcanopy.orgwww.globalcanopy.org

www.forestdisclosure.comwww.forestdisclosure.com

www.theREDDdesk.orgwww.theREDDdesk.org

Calls in the DeclarationCalls in the Declaration1. Work towards the integration of Natural Capital criteria into financial products and services – including loans, investment and insurance products– thereby demonstrating a leadership role in the finance sector. Specifically we aim to build on:

a)The UN Principles for Responsible Investment and apply a holistic approach in evaluating bonds and equities by integrating Natural Capital criteria through ESG risk analysis – with a focus on both the risk and opportunity management of investee companies;b)The Equator Principles to systematically consider and value and where possible price Natural Capital in project, corporate, and trade finance;c) The UN Principles for Sustainable Insurance and work with the insurance sector to develop methods for systematically considering and valuing Natural Capital in risk management underwriting, product development and claims management;

2. Collaborate with the International Integrated Reporting Committee and other stakeholders to bolster a global consensus around integrated reporting which includes Natural Capital as part of wider sustainability criteria [by 2015] and work towards developing methodologies that enable the use of Natural Capital to be accounted in the provision of all goods and services [by 2020].

1. Work towards the integration of Natural Capital criteria into financial products and services – including loans, investment and insurance products– thereby demonstrating a leadership role in the finance sector. Specifically we aim to build on:

a)The UN Principles for Responsible Investment and apply a holistic approach in evaluating bonds and equities by integrating Natural Capital criteria through ESG risk analysis – with a focus on both the risk and opportunity management of investee companies;b)The Equator Principles to systematically consider and value and where possible price Natural Capital in project, corporate, and trade finance;c) The UN Principles for Sustainable Insurance and work with the insurance sector to develop methods for systematically considering and valuing Natural Capital in risk management underwriting, product development and claims management;

2. Collaborate with the International Integrated Reporting Committee and other stakeholders to bolster a global consensus around integrated reporting which includes Natural Capital as part of wider sustainability criteria [by 2015] and work towards developing methodologies that enable the use of Natural Capital to be accounted in the provision of all goods and services [by 2020].

Calls on GovernmentsCalls on Governmentsa) Requiring publicly-listed companies to disclose

the nature of their dependence and impact on Natural Capital through quantitative reporting using audited performance indicators;

b) Using fiscal measures to discourage business from eroding Natural Capital unabated, while at the same time offering incentives to companies that integrate, value and account for Natural Capital in their business model;

c) Endorsing and implementing international agreements, including but not limited to, those agreed through the Convention on Biological Diversity.

d) By setting an example through requiring public spending and procurement to report and eventually account for its use of Natural Capital.

a) Requiring publicly-listed companies to disclose the nature of their dependence and impact on Natural Capital through quantitative reporting using audited performance indicators;

b) Using fiscal measures to discourage business from eroding Natural Capital unabated, while at the same time offering incentives to companies that integrate, value and account for Natural Capital in their business model;

c) Endorsing and implementing international agreements, including but not limited to, those agreed through the Convention on Biological Diversity.

d) By setting an example through requiring public spending and procurement to report and eventually account for its use of Natural Capital.