Green bond planned for New Zealand’s forests

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A new project in New Zealand has begun to build the business case for a proposed green bond which would be leveraged to fund the planting of new forests around the country.

The project, led by consultant Sam Lindsay and the Auckland University of Technology (AUT)’s policy researcher Dr David Hall, will determine whether impact investing delivered through a bond could provide up-front capital for planting permanent forests.

Initially the project will look at sites in Auckland’s Hauraki Gulf and other vulnerable areas of land that are prone to erosion, as well as other waterway margins around New Zealand.

Two potential planning locations have been identified to start with, both located in the Gulf, with Auckland Council and Sustainable Coastlines signed on to help by bringing together community groups to run each project.

The researchers have already been given a $50,000 (£38,000) grant from Foundation North’s Gulf Innovation Fund (GIFT) to examine how the green funding vehicle might work in the country.

If successfully launched, New Zealand’s green bond would only be the world’s second so-called ‘forest bond’ after the World Bank’s International Financial Corporation (IFC) and mining firm BHP Billiton backed a fund that would protect 200,000 hectares of dryland forest in southeastern Kenya.

After three years in the making, the IFC’s bond raised $152 million from institutional investors – such as pension funds and banks – to combat deforestation caused by “slash and burn” agriculture in the region.

Under this first bond’s structure, investors can opt to be paid in carbon credits – which can be redeemed to permit the emission of one tonne of greenhouse gas, or sold onto others – or cash.

Speaking about New Zealand’s proposed bond, Lindsay said that hey hoped a proposal could now be written and sent to various groups that might become involved.

“At a government level, there is a lot of motivation to progress the concept, but neither the mechanism or channel to innovate at this early stage,” he said.

“If we can gather a better understanding on the concept execution and key benefits, we will have a much better chance of success.”

In 2016 Dr Hall published a report that argued that New Zealand needed to plant around 1.3 million new hectares of woodland in order to help the country’s environment and economy.

In it, researchers argued that planting blocks of permanent, native forest and fresh high-carbon commercial forests could avoid damage to land that was prone to erosion, help offset agricultural emissions and put the country on the right path to achieving a zero greenhouse gas emission future.

The report also recommends new forests could also be planted along waterway margins where other environmental benefits of trees, such as the protection they can lend riverside ecosystems, might be amplified.

James Barrett, spokesman for GWD Canada, welcomed the news.: “Efforts in New Zealand show that proper investment in forests and land management can not only give investors strong returns, but make such a profound impact on the country’s environment and infrastructure.”

The news comes as New Zealand’s coalition government, made up of the Labour, New Zealand First and Green parties, has outlined how climate change and other portfolios will be handled going forward.

With the Green Party taking control of the country’s climate change and conservation offices, several funding projects have received a green light, including a $100 million green infrastructure fund. The Greens have previously said they hope that the project can evolve into an eventual $1 billion spend on new investment in green technologies.

As well as this, an NZ Forestry Service will be re-established, although the Greens’ policy of planting one billion trees is not specifically mentioned.

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