> You're invited to hear Judith Stewart, CEO of the Great Barrier Reef Foundation, speak about Reef Bonds on Tues 27 Sept, 4pm London time. Location: central London; dial-in available.
Climate Change investment usually means 'mitigation' – clean energy to reduce power sector emissions, transport to shift away from oil, etc.
But global GHG levels are already so high so that we’re no longer in a race to avert climate change – we’re too late for that – but rather to avoid the catastrophic climate change that would come from 6-7C temperature increases at the higher projections made by the IPCC. That's where we’re currently headed.
Wherever we end up, we will require huge adaptation effort to deal with the changes already in the planet’s climate system, which will see, among other things, warmer ocean temperatures and increased ocean acidification. Say hello to a lot more acid-loving jellyfish.
Over the last two years Australia’s Great Barrier Reef Foundation (GBRF) has been developing a new program of research into how the Great Barrier Reef (the Reef) might adapt to these changes. 10 months ago it launched a new portfolio of projects called Resilient Coral Reefs Successfully Adapting to Climate Change.
Yes, you read right, concrete proposals to help reefs adapt in the face of climate change.
However, time is pressing. GBRF’s Board of Directors and International Scientific Advisory Committee are now convinced that forecast changes in critical conditions leave as few as ten years in which to assist the Reef’s adaptation to climate change. Already, the Reef is experiencing the damaging first wave of climate impacts, yet there is almost nothing practical to hand with which to combat their effects.
GBRF needs funding as quickly as possible to fund its R&D program, to roll out pilots and to then scale up successful trials. It needs $AUD100m with 60% of that required upfront.
For the past 18 months the GBRF, working with pro-bono partners Goldman Sachs and KPMG, has been exploring the idea of raising that money from the domestic and international capital markets with a five-year “Great Barrier Reef Bond”.
The bond would be serviced with a revenue stream assembled from those who use the Reef and others who benefit most directly from having a healthy Reef (i.e. those who have the most to lose from a catastrophic climate-induced event on the Reef ). KPMG has looked at a revenue stream based on collecting very small increases in existing levies and charges relating to Reef use or benefit (effectively hypothecated tax revenue), and to see if it could be brought to scale. The political palatability of any such charge or levy is the main issue; it will rely on support from Reef-dependent business.
The user-pays revenue stream is central to the model’s success in the longer term; it will provide long-term, sustainable funding for climate adaptation research over the years to come and it is absolutely key to its replicability to a host of other valuable public and private applications.
GBRF will allocate the funds so raised by the Bond, in priority order, to its Portfolio of Reef adaptation research projects, a process directly overseen by GBRF’s own governance and compliance processes.
The Climate Bonds Initiative sees this asset-backed or asset-linked approach as essential to assure investors, governments and other stakeholders that funds intended for climate change solutions are going to the right places.
Judith Stewart, CEO of the GBRF, says that “Preservation of the Reef is fundamentally important to Australia’s economy, its reputation and its international brand. We are very confident that if we can do make this bond work for the Great Barrier Reef, many other high public good activities, both philanthropic and otherwise, can be financed using this model.”
Join the talk and find out just how far this proposal has gone.
