Investor buys Guyana forest's rain and carbon

Thu Mar 27, 2008 4:32pm GMT
LONDON (Reuters) - The British-based investment firm Canopy Capital said on Thursday it had bought a share in the rain-making potential of a chunk of Guyanan rainforest bigger than the Mediterranean island of Mallorca.

The move is a novel twist in an investor frenzy to make money from the prospect of climate change that has also seen businesses snap up permits to emit greenhouse gases and invest in low carbon-emitting technologies.

Perhaps more lucratively, the company has also bought rights to the carbon -- a heat-trapping gas when released into the atmosphere -- stored in the forest's timber.

Canopy Capital is betting that global climate talks due to end next year in Copenhagen will agree a successor to the Kyoto Protocol that includes a legal format for paying developing countries to preserve their forests.

Deforestation contributes 20 percent of total greenhouse gas emissions. Scientists say the effects of global warming could reduce rainfall, and make it more irregular.

"It's a new asset class," said Hylton Philipson, Canopy Capital's director and a former investment banker.

"If you fly over the forest, you can see there's no cloud coming off the cleared land."
"I think there's a real appetite out there (for this type of investment)," he said.
The company said it would fund a "meaningful" chunk of the $1.2 million annual management budget for the 371,000 hectare (917,000 acre) Iwokrama reserve.

Pressure is growing for tropical countries such as Indonesia to be able to sell carbon offsets to rich countries in return for not destroying their remaining forests and so prevent more carbon entering the atmosphere. The concept is known as "avoided deforestation".

Philipson hopes to sell the carbon storage and other rights at a profit within 18 months.
"I would seriously hope to put something together of real value between now and Copenhagen with appeal to the wider investment community," he said, adding that the reserve would receive 80 percent of any profit.

"There is a road planned from Manaus to Georgetown that goes slap through the reserve. If you can generate income from standing trees, maybe people won't chop them down."
(Reporting by Gerard Wynn; Editing by Kevin Liffey)