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REDD inequity writ large: €4.4 million for Althelia Climate Fund in “management fees”, while villagers in Kenya ask “How is the carbon benefiting me?”

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A new report by Re:Common and Counter Balance investigates the Althelia Climate Fund and its investment in a REDD project in Kenya. The report highlights the findings of a July 2016 visit to the Kasigau Corridor REDD+ project area in Kenya.

Re:Common and Counter Balance’s report is titled “The Kasigau Corridore REDD+ Project in Kenya: A crash dive for Althelia Climate Fund”, and is written by Jutta Kill.

The report is particularly critical of the European Investment Bank’s funding to Althelia:

Re:Common and Counter Balance call on the EIB to carry out a comprehensive evaluation and public discussion on the effectiveness and compatibility with its development mandate of the bank’s investment into the fund. Further disbursements to Althelia and new financing commitments to REDD+ and similar initiatives should be halted while an evaluation is carried out.

The European Investment Bank funded the Althelia Climate Fund to the tune of €15 million. In addition, in its 2015 Annual Report, the EIB writes that,

Like in 2014, the EIB has in 2015 purchased the equivalent tonnage of carbon credits from the Kasigau Corridor REDD+ Project to fully offset the corporate carbon footprint of the previous year.

Other investors in Althelia include: FinnFund, the Dutch development bank FMO, AXA Investment Managers, Credit Suisse Group and the Church of Sweden. In 2014, USAID extended a US$133.8 million loan guarantee to the Althelia Climate Fund. The loan guarantee covers 50% of potential losses for Althelia’s projects.

Althelia’s shrinking portfolio

The Althelia Climate Fund aimed to raise €150 million. By June 2014 the Fund had secured investments totalling €101 million.

The Althelia Climate Fund will last eight years. In a September 2013 presentation, Althelia stated that its target portfolio was “20 to 25 investments within 3 years”.

But Althelia’s 2015 Audited Annual Report shows a “gross commitment” of almost €49 million to five projects. The “estimated present value” of the five projects is €25 million. A further €5 million went to “other investments”.

By 31 December 2015, investors had disbursed €18.36 million of the €101 million committed to Althelia.

In September 2016, EIB told Re:Common and Counter Balance that Althelia was scaling down its investment plans:

“with EUR 105m raised instead of EUR 150m initially targeted, the Fund will target 12-14 projects.”

Returns in double digits

Gunnela Hahn is head of responsible investment for the Church of Sweden. In 2013, the Church of Sweden invested €10 million in Althelia. In a 2016 interview with Institutional Investor, Hahn is quoted as saying that, “the return has been in double digits”.

Kill writes that,

[Hahn’s] comment raises questions about how the Althelia Climate Fund has been able to generate such returns given the small published project portfolio, the deflated carbon credit price and the figures shown in its 2015 Audited Annual Report.



Meanwhile, Althelia Climate Fund charges its investors management fees, based on a percentage of the investment. Kill writes that in 2014 and 2015, the fund charged a total of €4.4 million in management fees.

The two men behind Althelia Climate Fund, Sylvain Goupille and Christian del Valle, previously worked at BNP Paribas Corporate and Investment Banking. While at BNP Paribas, del Valle worked on a US$50 million financial package for Wildlife Works Carbon LLC, that led to the creation of the Kasigau Corridor REDD project in Kenya.

Althelia’s first financial deal unravels

In February 2014, Althelia announced its first financial deal: US$10 million to launch Wildlife Works Taita Hills Conservation and Sustainable Land Use Project, adjacent to the Kasigau Corridor project. This was intended to be an investment through an Emission Reductions Purchase Agreement. The Taita Hills project would add another 2,000 square kilometres to Wildlife Works’ carbon project area in Kenya.

But in July 2016, the Emissions Reduction Purchase Agreement between Althelia and Wildlife Works fell through, “reportedly over the details of the financial arrangements and repayment terms”, Kill writes. In November 2016, Althelia Climate Fund told Re:Common and Counter Balance that the financing had been converted to a loan.

IFC to the rescue

In November 2016, the Kasigau Corridor project received a financial lifeline when the World Bank’s International Finance Corporation launched a US$152 “Forest Bond”. Under the deal, investor can choose to receive their returns in either cash or carbon credits from the Kasigau Corridor project.

For those investors that prefer cash, mining giant BHP Billiton has agreed to by up to US$12 million carbon credits from Wildlife Works at a fixed price of US$5 each. IFC’s Alexandra Klopfer told REDD-Monitor that,

BHP Billiton provides a price-support mechanism for the Forests Bond. If investors elect the cash coupon instead of the carbon coupon, BHP Billiton offtakes the carbon credits generated and delivered by the project.

Klopfer did not answer REDD-Monitor’s question about how many investors in IFC’s “Forest Bond” chose to take carbon credits rather than cash. Or why IFC decided to bail out the Kasigau Corridor project. Or what due diligence IFC carried before making its decision.

Conservation International partnered with IFC to set up this deal. Conservation International was one of Althelia’s first funders, providing US$1.35 million. Conservation International sits on Althelia Climate Fund’s Expert Board.

Inequity on the ground

In July 2016, Re:Common and Counter Balance visited the Kasigau Corridor project. They found that,

Pastoralists and local residents without land title documents are hardest hit by restrictions the REDD+ project puts on land access, grazing and collection even of dry branches for firewood. Pastoralists and Taita and Duruma communities without land title documents on the one side and ranch shareholders on the other are both laying claim to land that has become part of the REDD+ project. The conflicts date back to historic injustices over land allocation as recent as the 1970s. The REDD+ project upholds or even exacerbates these injustices. Those most disadvantaged in ‘the community’ also have next to no say in the selection and execution of so-called community projects. The revenue from REDD+ credit sales that is allocated to communities, funds these community projects. Worse, the REDD+ project might have dramatic consequences during periods of severe drought because land access restrictions also close off access to water holes.

One of the villagers in the project area said,

“How is the carbon benefiting me? We hear ‘carbon, carbon’, but to me, this carbon business is a riddle.”

 


PHOTO Credits: Predominantly savannah and open forest landscape within which the Kasigau Corridor REDD+ project is located. Taita Hills, Kenya, © Jutta Kill.
 

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  1. While I appreciate the role of healthy dialogue that the REDD-Monitor promotes, this piece raises some serious questions over the integrity of the source reporting. From the outset Ms. Kill’s report is based on hearsay and speculation. For example, quoting “one of the villagers”, as Ms.Kill does in her report to support her negative assertion, is not only ambiguous, it is conveniently devoid of factual evidence. Furthermore, from the content of the pictures in her report, including the hills and topography, it is evident that she is inserting distinct bias in her report. These photos are from an adjacent area to the project accounting area, recognizable by the hills in the background. This adds to the speculation that Ms. Kill may or may not have even visited the project. This renders her speculation largely unsupported. For example, she doubts the numbers of bursaries distributed through Wildlife Works saying “This claim, and in particular the number of bursaries provided,seems outlandishly exaggerated considering the low population density in the REDD+ project area”. Considering that it is unlikely that Ms. Kill spent any significant time on the ground in the project area, (similar to other detractors such as Chomba et al.,) her assertions and assumptions about what is “outlandish” or not carry very little weight. In short, she has very little insight on which to base her rather outlandish claim.

    Again, let me end with the re-assertion that I appreciate the role that REDD-Monitor plays in fostering dialogue around REDD+. However, if that dialogue is to be productive it needs to be based on more than poorly executed pseudo-science pieces and poor field data collection techniques.

  2. @Bryan Adkins – Jutta Kill is travelling at the moment. She’s aware of your comment and will reply when she gets the back to the office.

    Meanwhile, Althelia has responded to the Re:Common and Counter Balance report, on its website. Perhaps not surprisingly, the company’s response does not mention the word equity, or anything about €4.4 million in management fees.

  3. @Bryan Adkins – before responding to your specific assertions below let me assure readers of this exchange that I did visit the Kasigau Corridor REDD+ project region in July 2017, together with two colleagues from the NGOs Counter Balance and Re:Common who commissioned the report. We were joined by two Kenyan colleagues who are very familiar with the Kasigau Corridor REDD+ project area, one being a resident of the area. As the report states, our visit in July 2017 also included a visit to the Wildlife Works Carbon office, where we met with Rob Dodson, the recently deceased Wildlife Works Vice President of field operations in Africa. Wildlife Works as well as Althelia were also provided with a draft of the report and given the opportunity to comment on the draft before the report was published. Wildlife Works chose not to make use of this opportunity for comment and correction of factual errors should there be any.

    Let me also state here that the report does not aspire to pass as a peer-reviewed piece of academic research based on extensive field research, and nowhere does the report pretend to meet the requirements of peer-reviewed academic research. Rather, the research was commissioned with the objective to critically assess the claims made by the European Investment Bank, Althelia Climate Fund and Wildlife Works about the supposed benefits of the project for local communities. This critical assessment included the July 2017 field visit as well as extensive desk research and assessment of academic and grey literature reports and official project documentation on the Kasigau Corridor REDD+ project. The objective was thus not to present a comprehensive critique of the REDD+ project that would meet academic standards but to present an investigative NGO report that highlights how claims made by project proponents do not square with how residents affected by the project perceive the reality of the REDD+ project.

    Regarding your specific assertions – from the presentation here (http://www.un.org/esa/forests/wp-content/uploads/2014/12/AHEG2_WG1_Kenya.pdf ) which mentions a Bryan Adkins and the logo of Wildlife Works, I take it that you are familiar with the Kasigau Corridor REDD+ project run by Wildlife Works in the Taita Hills area in Kenya. You will thus also be aware that the planned expansion of the REDD+ project (Phase III of the project) includes land to the North of the Taita Hills. You will also be aware that the landscape shown on the photos includes areas in which projects financed as part of the Wildlife Works REDD+ project – such as the construction of water tanks or wells or guttering and piping to collect water – have been constructed, at least in one case without the consent of the occupant of the land. The photos are taken from villages housing families affected by the REDD+ project, and at least one of the photos also shows part of the land included in the REDD+ project accounting area.

    You may also have noticed that the question of accounting is not at the center of the report – though much could be written about that issue, too – in particular about the question of how representative the area chosen as reference area really is. As noted briefly in the report, other NGO and academic reports have taken up that issue and raised questions about the comparability of the reference and actual project area. They have raised questions about whether the area chosen for reference has the effect of maximizing the manufacture of offset credits. The thing with offset projects is that because their calculations are based on someone pretending to know down to the tonne of CO2 what would have happened in the future had it not been for the offset project, much imagination is possible, and no number of audits can truly verify the imagination as “right” or “wrong” because the basis for all offset credit calculation is a hypothetical story of what would have been.

    Many academic and consultancy reports have attested to the tendency of offset projects imagining high emission futures without their projects as the side-effect of such a bleak look into the future that never was because the offset project occurred is that the project can generate high volumes of offset credit. And who could prove the future wouldn’t have been as bleak as it is painted in offset project documents? Trouble for the climate is, no one can prove either, that emissions would have been as high as projected and as a result, many “non-additional” offset credits are on the market, both voluntary and regulated by the CDM, as this recent study attests: https://ec.europa.eu/clima/sites/clima/files/ets/docs/clean_dev_mechanism_en.pdf. Each non-additional credit sold means additional emissions to the atmosphere, despite the claim of compensation.

    Let me finish this response to your comment with a straightforward question: Do you consider the image presented of the Kasigau Corridor REDD+ project in this presentation http://www.un.org/esa/forests/wp-content/uploads/2014/12/AHEG2_WG1_Kenya.pdf an unbiased and truthful reflection of the reality? I do not. Would villagers who have to endure access restrictions to the land they depend on, whose contribution to global greenhouse gas emissions is negligible and who receive next to no benefits from the Kasigau Corridor REDD+ project in compensation consider this image of the REDD+ project that you present there as unbiased, truthful and objective?

    It’s the role and objective of reports such as the one commissioned by Re:Common and Counter Balance to expose the manufacture of REDD+ as ‘win-win-win’ when the reality of REDD+ leaves peasant communities worse off than they were before. And to point out that REDD+ offsets divert attention from the real cause of climate change – the burning of petroleum and coal as fossil fuel.

    Jutta Kill

  4. @Bryan Adkins – On behalf of Counter Balance, I confirm the organization’s participation to the field visit to the Kasigau Corridor REDD+ project region in July 2017, together with Re:Common and Jutta Kill, whose above-expressed view we fully endorse.

    AP – Counter Balance