21 November 2008 | 2008 has been a banner year for David Brand and his environmental investment and advisory firm, New Forests Pty Limited.
In August, New Forests launched the groundbreaking Malua BioBank in Sabah, Malaysia, a project which uses biodiversity conservation certificates, to protect a host of threatened species and the rainforests in which they reside; in May 2008 the company announced the sale of a minority stake to Generation Investment Management, co-founded by former US Vice President Al Gore.
With the BioBank, Brand says, "There's an opportunity, ultimately, to create a growing network of these biodiversity banks around critical ecosystems all around the world."
The trick, he says, is to move from a marquee initial project like the one in Malaysia to a standardized approach, molding an emerging market in the same way that the carbon market began to shape itself around the rules coming out of Kyoto and the Voluntary Carbon Standard (VCS).
Brand, whose work has spanned on-the-ground forestry, forest policymaking, international negotiations, and investing, can't help imagining the possibilities.
"I like to be creative," he says. "I like to think about what we can do in a way that actually creates value around these ecosystems which have been un-priced, and because they've been un-priced, they've effectively been wasted."
A veteran of lengthy canoe trips in Canada, Brand began studying forestry in university, taking summer jobs in remote spots like northern Saskatchewan and Longlac, Ontario.
But when his classmates signed on for traditional elective classes (what Brand dubs "Road Construction 302"), he leaned toward environmental science. Once he graduated, he sought new experiences, hitchhiking to British Columbia for a silviculture job on Vancouver Island, then working with Weldwood in the province's fjords, where forests teem with grizzly bears.
"Amusing," he recalls, "wearing cowbells in the bush…"
Brand went on to get his forestry doctorate, and moved up through the Canadian forestry world to become the director-general of science and sustainable development for the Canadian Forest Service.
He and his colleagues developed a national forest model for Canadian forests; at the Rio Earth Summit in 1992, the prime minister announced the international expansion of this model forest program. Brand also delved into international negotiations on forest conservation and sustainable forest management, and served as both secretary to the Montreal Process group and chair of the international group's technical advisory committee.
But he and his wife wanted their school-age children to live abroad for a few years, and had considered a move to Italy. In 1995, he was offered a job with State Forests of New South Wales (NSW), Australia, where he'd be supporting existing regulations and exploring how to reduce timber harvests and expand the protected areas network.
Brand recalls a dinner-table conversation in which he asked his kids, then eight and nine years old, if they wanted to move down under.
"There was this chorus of 'Yeah!'"
He arrived to find a troubled network of forests.
"There was a huge amount of conflict over environmental issues," Brand says, recalling that his work in Canada involved looking at forests from the wide-angle lens of landscape - a perspective that was new to Australia.
Reframing the view meant more ways to address forest problems.
"You don't have to protect everything on every hectare," Brand says. "What you have to have is functional landscape that provides water and biodiversity and carbon and potentially timber and other things over time. So you have to look at long-term strategies to sustain all of those values in the landscape."
In the process, Brand started to feel the value of many of these environmental assets – from water to biodiversity – was greater than that of traditional timber, which had driven forest management. So, he wondered, "why are we managing it for the timber?"
That's when Brand decided to move into the carbon trading world.
His timing was perfect. It was 1997, just after the first carbon deal between Costa Rica and Norway. Brand met with the CEO of Australia's largest energy company and convinced him to commit to a carbon trade (along with explaining what a "carbon trade" was in the first place).
The deal between State Forests of NSW and Pacific Power — Australia's first forestry-based carbon trade – encompassed 1000 hectares of new forests.
The trade, made a week after the signing of the Kyoto Protocol, started a domino effect of forestry carbon work in Australia. New South Wales passed the Carbon Rights Legislation Amendment Act that defined carbon sequestration as a forestry right and smoothed the path for trading. State Forests of NSW negotiated deals with Tokyo Electric Power to plant more forests for carbon storage.
Brand and his colleagues also started pushing into other ecosystem services, selling transpiration services and forging a deal with Integral Energy to restore native species in south-western Sydney's Cumberland woodlands. "It all became really exciting in that era," Brand says.
Martijn Wilder, a partner in the Sydney office of law firm Baker & McKenzie, first got to know Brand when the latter moved to Australia for the State Forests job. Brand took a leadership role starting in the early days of forestry carbon — and fought the battles that came up, then and now.
"Dave was a real believer from day one that this could work," Wilder recalls.
Brand realized that to really develop forestry carbon and other ecosystem services as a new way of investing, he'd have to ratchet up the scale — and bring in more capital, both from institutions and from private equity. In 2000, he joined Hancock Timber Resource Group to direct the New Forests program for the world's largest timber investment management organization.
Each stop along his career path — from forestry to policy development — had let Brand develop new skills. Hancock was no exception. Here, he learned the investment business, tapping into how investors think and how deals were structured.
After five years with Hancock, he branched out on his own, buying out the New Forests division to start New Forests in 2005, with three people in a Sydney office. Now, the firm has a staff of 27 and additional offices in Washington, DC, San Francisco, and Kota Kinabalu, Malaysia. (Brand is also on the board of directors of Forest Trends, the organization that publishes the Ecosystem Marketplace).
Marisa Meizlish was one of the first people he brought on board after the buyout from Hancock; now, she's the San Francisco-based director of New Forests Advisory. The environmental markets community, she says, "knows (Brand) to be a bit of a visionary and a creative mind, but also very adept at business."
Some of Brand's ideas may have been ahead of their time, she says. "Now, markets have caught up with what he's been talking about for a decade."
One of the innovative deals already under the company's belt is the Malua BioBank, which will sell biodiversity conservation certificates that each represent 100 square meters of restored and protected rainforests.
The project began when Forest Trends' business development team and US-based NGO urged him to look at the island of Borneo and its northeastern tip, Sabah, where habitat loss threatens charismatic — and critical — species including the orangutan and the Sumatran rhino.
"It's just a spectacular area," Brand says. "To lose those ecosystems would be a horrible shame for the world."
When Brand met with Sabah government officials, they wanted a proposal that could help them protect wildlife without putting them in the poorhouse.
"They were prepared to put aside some of the critical habitat, but what they needed was to figure out a way to commercially sustain that decision because they can't effectively afford to just make their entire forest into a protected area," he says.
Brand had an idea: why not import the concept of species banking from the United States, where it had proven so successful? The voluntary bank could sell credits with the potential to both generate return for the government and fund forest conservation.
The government bit. Eighteen months later, the EcoProducts Fund — jointly managed by New Forests and US-based Equator Environmental — has committed up to $10 million over the next six years to rehabilitate the project's forest area.
The bank's potential investors include palm oil producers who want to demonstrate to consumers that they're contributing to forest conservation, Brand says. He envisions that someday, a whole set of tradable ecosystem products could be linked to supply chains for key products, from oil and gas to beef to mining.
Along with the project in Malaysia, New Forests is working on a showcase forestry carbon project in Papua, Indonesia.
The firm has signed a memorandum of understanding with Papua's government that will select one or two areas between 100,000 and 300,000 hectares on which to develop a REDD project.
Brand is also pondering a water quality bank to create a trifecta of ecosystem services projects. One idea that the firm has been exploring is the creation of a bank for Australia's Great Barrier Reef. The project might take the form of investing in a particular river system, such as the Burdekin, which feeds the waters surrounding the reef. Credits could then be generated through riparian restoration and protection, reduced nutrient and sediment flow, with downstream water users like sugar cane plantations as possible buyers.
With all of these ideas, Brand says, "our interest as a company is to establish business models, determine if they're successful; if they're successful, then try to scale them up and replicate them so that we can start to apply the capital to growing this area of business."
Brand and his work are extremely well-respected internationally, says Wilder. Generation's involvement, in particular, is "an endorsement of Dave and the business he's created."
He describes Brand as low-key with a dry sense of humor, a rarity in a field that can bring out big egos and plenty of hot air. "Dave just gets on with it," he says.
While being visionary seems to come naturally for Brand, charting new territory sometimes means taking a path that no one else wants to follow. One of Brand's proposals, for a life insurance plan that would invest in assets that would not only appreciate, but would balance out an individual's impact on the planet during the course of his lifetime. Innovative? Yes. Picked up? Not yet.
"It seemed a bit before its time, I think," Brand says.
Even in markets that are gaining traction, the process can still be difficult.
"What's challenging is that when you're out trying to do these transactions, there isn't a road map there," Brand says. "There's a lot of work, and you can't cut any corners, and you've got to often back up and do it another way."
Whatever the obstacles, the results sustain Brand. "It's painstaking work, but at the end of the day when the project succeeds, it's a tremendously satisfying feeling."
And, with patience — which Brand seems to have in abundance — naysayers start turning into cheerleaders. "A lot of these ideas that before people would say to you, 'You must be nuts to think that somebody would buy that,' — well, all of a sudden people are buying it."
Cameron Walker is a regular contributor to the Ecosystem Marketplace. She may be reached at cwalker(at)nasw.org.
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