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Carbon credit forestry project seeks capital

Wildlife Works Carbon is raising $15m in its second round of financing for a Reducing Emissions from Deforestation and Degradation project in the Democratic Republic of Congo.

Wildlife Works Carbon is raising $15 million in its second round of financing for a Reducing Emissions from Deforestation and Degradation (REDD) project in the Democratic Republic of Congo.

The organisation is in the business of securing forestry concessions from the DRC government, regenerating and protecting them by providing economic benefits to the local community to help them make better use of the forest land away from logging.

Through its work the organisation is eligible for carbon credits, which it then sells into the voluntary carbon credit market — to companies that are not obliged to offset their carbon footprint under any regulation but choose to do so according to their own internal environmental, social and governance (ESG) principles, according to Mike Korchinsky, founder and chief executive of Wildlife Works.

“These forestry concessions were used for commercial purposes before. Some companies were misbehaving by cutting down more timber than they were authorised to do so, and by not paying their taxes,” he said. “We replace the local community’s economic need to destroy the forest by pursuing a few strategies including provision of food, water, shelter, education and job creation. We reach a pact; we will bring in investment if they reduce deforestation.”

The carbon credits are awarded on the basis of the forest’s value. This is calculated by finding the weight of the trees — by size and height —and dividing it by two to produce its carbon stock. Satellite imagery will determine how much it shrunk over the past 10 years, producing the average annual threat to the forest and therefore its carbon value.

The international standard is the Verified Carbon Standard and involves a visit by auditors for validation before the project is launched. Projects are usually around 30 years in length, according to Korchinsky, and the auditors will return around five years into the project for verification and to issue carbon credits, or REDD Voluntary Carbon Units (VCUs), according to the Wildlife Works website.

The carbon credits are traded on the Markit Registry, and the local community receives an amount for every credit sold, according to Korchinsky.

“The communities do understand that protecting the forest is of greater value than destroying it but we have to find out what it is that they need to stop them cutting it down,” said Korchinsky. “We then put together a programme to help them achieve these things.”

The project is targeting internal rates of return of 18 percent to 20 percent on an annualised basis; the returns increase substantially after year three, according to Korchinsky.

Allianz Climate Solutions and Kering, the parent company of luxury consumer companies such as Puma, Gucci and Saint Laurent, were investors in the first round of fundraising in 2011. Investors receive membership units in the limited liability company which they can sell on based on the value determined by the annual cash flows.

There are six key elements to Wildlife Work’s version of REDD that all help to create jobs, according to its website: education, eco-friendly products, wildlife protection, project management, farming and growing trees.

Wildlife Works has already successful established a REDD project in Kenya.