BHP Billiton Co-develops First-of-its-kind Bond to Boost Climate Finance and Prevent Deforestation
Premier global law firm Baker & McKenzie has supported BHP Billiton, one of the world’s top producers of major commodities including iron ore, metallurgical coal, copper and uranium on the development of a Forests Bond co-developed in conjunction with, and issued by, the International Finance Corporation (IFC), a member of the World Bank Group. The Bond aims to achieve emission reductions through a combination of forest protection and community development activities which support alternative livelihoods associated with the Wildlife Work's Kasigau Corridor REDD Project in East Kenya.
BHP Billiton supported the Bond's development by providing a price support mechanism that ensures the Kasigau Corridor REDD Project can sell a predefined minimum quantity of carbon credits until the Bond matures. REDD projects must usually sell a certain amount of VCUs each year to be sustainable.
This initiative is part of BHP Billiton's broader commitment to demonstrating the validity of the REDD+ strategy, a legal and policy framework under the UN Framework Convention on Climate Change (UNFCCC), by focusing on three aspects: governance, project support and market stimulation. The REDD+ framework provides economic, social and environmental incentives for developing countries to reduce Greenhouse Gas emissions from deforestation and related activities through the creation of carbon credits.
BHP Billiton Vice President Sustainability and Climate Change, Dr Fiona Wild, said the Bond was a “global first” and provided emissions reduction opportunities as well as environmental and social benefits. “Our support of the Forests Bond is another example of the action we are taking to address climate change and work in partnership to enhance the global response,” Dr Wild added.
As part of its commitment to support the scale-up of private sector investment into REDD+, BHP Billiton, Conservation International and Baker & McKenzie, through its Law for Development Initiative, have developed a Knowledge Sharing Platform (KSP) which aims to spark innovation and opportunities that further promote and strengthen the market for REDD+ credits. The KSP is a platform for collaborative knowledge exchange that will showcase the recently launched Forest Bond, and use those learnings to build a global community of practice among project developers, governments, donors and the private sector on the value of investment in REDD+ initiatives and how to achieve replication by overcoming key market, governance and financial bottlenecks. The platform will complement the Bond issuance and will share lessons through the production of reference materials and organized roundtable events, provide thought leadership, and build greater knowledge and expertise that will seek to drive more significant flows of investment towards REDD+.
Baker & McKenzie, with a team led by Martijn Wilder AM, has been advising BHP Billiton on this project including providing strategic and legal advice in respect of the Bond's development. The project also builds on BHP Billiton’s support of the development and launch of the Guide to the REDD+ Rules under the UNFCCC, in conjunction with Baker & McKenzie's Law for Development Initiative. It is the first of its kind to be published anywhere in the world and consolidates key UNFCCC rules on REDD+ into a simple yet comprehensive document that governments and other interested parties can use in international negotiations or when implementing REDD+ domestically.
Martijn Wilder AM, head of Baker & McKenzie's Climate Change and Finance practice said, "We are thrilled to have worked with BHP Billiton and IFC on this critical Forests Bond which will leverage private sector capital into REDD+, an area that is critically important to meet global efforts to achieve the goals set under the Paris Agreement. Financing sustainable economic development that has the preservation of forests at its heart, not only ensures a more focused commitment to forest conservation, it also creates different revenue opportunities for local communities, to support these investments. This project highlights BHP Billiton's commitment to conservation."