Combining ‘charitable giving with investing’

Like bundling up waste and shipping it to China, the State’s habit of purchasing carbon credits to make up for missing emissions’ targets doesn’t really solve environmental problems, it simply moves them about.

Not alone do we spend millions purchasing such credits but leave ourselves open to penalties for missing our renewable energy targets too.

Unless you’re a government, or a major organisation, there hasn’t been much more you can do about such matters other than fret, and reduce your own carbon footprint.

A new initiative from Vita, a non-governmental organisation, has the power to change that, however. It is bringing individual investors here into the world of carbon credits trading, thanks to the successful piloting of a radical new investment fund.

The Vita Green Impact Fund is a ground-breaking social impact investment that combines climate action with delivery on the UN Sustainable Development Goals. It offers investors a unique “triple bottom line” of financial returns alongside measurable and independently verified social and climate impact, says John Weakliam, its chief executive.

In a pilot phase launched in 2016, the fund raised €2 million, made up of €1.5 million in interest-bearing loans and €0.5 million in grants, which it used to provide sustainable and affordable water and energy to 400,000 rural people in Eritrea and Ethiopia.

In the process, 420,000 tons of carbon emission savings have been generated and these emissions sold on voluntary carbon markets, with the income used to repay investors.

Now, Vita is working with Cantor Fitzgerald, a global financial services and wealth management firm, to scale up the Green Impact Fund to €20 million. This will provide four million people in five countries in Africa with sustainable and affordable water, energy and forestry.

It will also generate up to four million tons of annual carbon emission savings, a highly significant climate change mitigation programme.

Saving carbon emissions and trading carbon credits in this way is “joined-up thinking”, says Weakliam.

The carbon credit projects Vita undertakes are fully audited, and structured under the international Gold Standard (GS) accreditation system as projects that each save 10,000 tonnes of CO2 emission per annum.

They are based around practical initiatives such as providing more fuel-efficient cooking stoves that require less wood to be chopped, and burned, and water points that are clean enough not to require boiling. These two steps alone generate hundreds of thousands of tonnes of carbon offset each year.

The carbon offset are then traded on the Voluntary Carbon Market, primarily on the Gold Standard market, which is the premier voluntary market for projects.

Ethical decision

Market demand for voluntary carbon credits comes from organisations and individuals who have taken an ethical decision to take responsibility for neutralising carbon emissions.

This is unlike the compliance carbon markets which provide carbon credits for large emitters of carbon and is a huge market valued at billions of euro annually.

The price range for Gold Standard voluntary carbon credits is higher than in other voluntary or compliance markets. The differential is based on the additional social impact that the credit provides above the CO2 emissions savings. A credit from a wind turbine project has low social impact and trades at the low end of the scale. A cooking stove credit from Africa with very high social impact trades at a greater value, according to Vita.

“We see it as a whole new way of investing which combines the best elements of charitable giving with investing,” says Ian Halstead, associate director, L&P division at Cantor Fitzgerald, which is working with Vita to develop the fund.

“It’s a win-win for investors and a real piece of innovation. I don’t think there is anything like it in the world so there is a lot of interest internationally in what Vita is doing. It’s something quite special, we think.”

Ethical investments are often characterised as being light green – or relatively relaxed – and dark green – adhering to more rigid environmental impact standards. “The Vita Fund is really at the cutting edge, and the darkest of dark green,” he says.