Thursday, 11 September 2008

Prince believes City can save rainforests

Prince believes City can save rainforests

By Fiona Harvey, Environment Correspondent

Published: September 10 2008

The Prince of Wales will seek tonight to harness City muscle in the fight to preserve the world's rainforests - presenting his initiative as a hard-headed business proposition, not philanthropy.

City grandees including Lord Levene, chairman of Lloyd's of London, Chris Gibson-Smith, chairman of the London Stock Exchange, Robert Swannell, vice-president of Citi Europe, and Stanley Fink, former chief executive of Man Group, will be among 250 attending a Mansion House dinner intended to produce new ideas to generate billions of pounds for conservation efforts.

Prince Charles hopes to convince London's financial community that a healthy return can be made from protecting environmental assets.
The carbon market is supposed to achieve this, but the prince's advisers are concerned that it is not providing enough incentives to invest in protecting the rainforests, which are being destroyed at the rate of an area the size of greater London every day.

In his first big foray into the environmental agenda since his widely dismissed tirade against the evils of GM food last month, he will urge bankers to come up with new ideas to bring market forces to bear on the problem. He will say: "The City of London is famous throughout the world for its inventiveness and its ability to seize opportunities early, and it is these skills that we desperately need now. London's financial institutions have the power to make the whole difference in the battle against climate change."

The carbon market, through which companies are awarded carbon credits for projects that cut emissions, is supposed to provide a financial rationale to invest, as the credits can be sold to companies which are obliged to cut their emissions.

But under current rules it is difficult to obtain credits for preserving existing forests, rather than planting new trees.

This partly reflects fears that the market would be flooded with cheap credits if existing forests were eligible, giving investors little incentive to cut emissions in other ways.

The prince feels that the City is best placed to find ways round these problems, potentially unleashing tens of billions of investment in forests. His charity, the Prince's Rainforests Project, will present the resulting ideas to negotiators working on a treaty to replace the Kyoto protocol by the end of 2009.

According to Mr Fink, if the true worth of tropical forests were reflected in their price no one would cut them down. Deforestation accounts for about a fifth of the world's annual greenhouse gas emissions.

Tropical forests are essential to regulating the world's climate, soaking up carbon and providing oxygen, but they also generate rainfall, providing the water to surrounding regions that makes agriculture possible.

Mr Fink told the Financial Times that services provided by tropical forests ran into trillions of pounds, with each hectare of forest worth about $15,000 (£8,500).

By contrast, such land is worth only about $200 to $400 a hectare when converted to agricultural use.

Financial businesses such as Goldman Sachs, UBS, Jupiter Asset Management and RBS will be represented, joined by industry figures such as James Smith, chairman of Shell; Tom Albanese, chief executive of Rio Tinto; Jeremy Darroch, chief executive of BSkyB; and Steve Easterbrook, chief executive of McDonald's.

Copyright The Financial Times Limited 2008