The Althelia Climate Fund made its first direct investment last month, pledging $10 million toward the Taita Hills project in Kenya. Mike Korchinsky, CEO and founder of project developer Wildlife Works, tells Gloria Gonzalez how the deal came together, and why the Taita Hills project is a new frontier for carbon-conscious land management.
Mike Korchinsky goes way back with Christian del Valle and Sylvain Goupille, now the heads of the Althelia Climate Fund. During del Valle and Goupille’sdays on the carbon desk at BNP Paribas, Wildlife Works, a developer of reduced emissions from deforestation and degradation (REDD) projects, had an agreement with the French bank to provide development services for up to $50 million worth of projects.
When the two left BNP Paribas and launched the Althelia Climate Fund in 2011, Korchinsky continued to engage with del Valle and Goupille in hopes of becoming the first developer to receive financing for a sustainable land use and conservation project from the new fund. Those conversations culminated in last month’s announcement that Althelia will make a $10 million investment over eight years in the Taita Hills project, which is located in the same region as Wildlife Work’s Kasigau Corridor REDD+ projects. The project area includes most of the remaining wilderness outside of Tsavo National Park, one of the largest national parks in the world, and home to elephants, rhinos, lions, leopards, and hippos. While the Kasigau projects focus on forest conservation, Taita Hills will also account for avoided conversion of grasslands—a major milestone for carbon developers and local grasslands owners.
Gloria Gonzalez: How is the project similar to or different from your previous projects in Kenya?
Mike Korchinsky: The program will generate REDD+ carbon offsets from protection of the forest and savannah. The one difference between this project and our current Kasigau project is that Wildlife Works has developed an avoided conversion of grasslands system methodology in the last year, and that allows us to look at a landscape in its entirety, not just at forests.
The other focus for Althelia is to really magnify the influence of alternative revenue streams in the development of the conservation program. They’re interested in more aggressively pursuing commercialization of agricultural intensification programs or sustainable charcoal programs in the area so that the program can benefit from parallel revenue streams to the carbon revenue stream. That’s always been part of Wildlife Works’ approach, but Althelia is interested in accelerating those activities with specific investments.
GG: How does it work in terms of starting these activities that can bring in additional revenue streams aside from the carbon?
MK: It will be just like any business startup. There will be a business plan written for each opportunity and there will be local shareholders or local involvement, depending on what the nature of the activity is. If it’s a nursery and there’s a local person who wants to own and operate the nursery, then Wildlife Works will act as an intermediary to provide technical skills and finance and management expertise.
The other avenue will be potentially Wildlife Works forming companies with local participation in the event that there isn’t a local champion of a particular business concept that we think is important for the project, such as the sustainable charcoal for example. We would invest in building a local company to operate that business opportunity. Each of these little opportunities would have a separate business plan and would be invested in separately by the Althelia Climate Fund.
GG: What does Althelia bring to the table that is helpful from your perspective?
MK: The main thing is their willingness and interest in taking a long-term view of these projects. They are putting money upfront, but the main involvement is in these off-take agreements, these guarantees to provide funding to the project over a number of years to ensure that the projects are sustainable—at least for the first five or so years of operation.
GG: This project is being developed under the Verified Carbon Standard’s revised Methodology for Avoided Deforestation (VM0009). In addition to avoiding deforestation, the revision allows the methodology to be used by projects that seek to avoid conversion of grasslands and shrublands into common anthropogenic land uses, right?
MK: We’ve revised that methodology to allow for accounting areas that don’t meet the forest definition. The methodology always allowed for multiple accounting areas within a project so you could have different kinds of accounting for [different] project types. But they all had to be forests. So we’ve added new accounting types for grassland so you can quantify grassland carbon and create separate models for emissions in the business-as-usual case for conversion of grasslands to farming and other development activities.
One of the reasons why there are some land units in the area that were not part of the REDD project was because they did not meet the forest definition. Those community landowners that see their neighbors benefiting from carbon finance because their neighbors’ land happens to have forests are wondering why they can’t benefit from conserving their savannah ecosystems. This new methodology allows us to capture the value of protecting savannah ecosystems.
GG: What specific on-the-ground activities will be conducted for the project under this revised methodology that weren’t conducted for the previous projects?
MK: In the literature, it’s often hypothesized that grassland ecosystems store more carbon than forest ecosystems in the soil. In order to test that, we’re going to have to do a lot more sampling of soil. I think we’re going to have to go to a new level for these soil ecosystems just to ensure that we’re getting accurate soil carbon measurements inside the conservation areas and then outside in converted lands so we can identify the loss of carbon over time when these grassland ecosystems are converted.
GG: Could this type of project and financing arrangement work with other partners or in other countries?
MK: The Althelia model, the broad financing for landscape-level projects that have a forest component but could also have grassland components, is certainly applicable to other projects. We’re in discussions with Althelia on a number of other programs in other countries. We hope that there will be others. We certainly won’t be the only player that receives funding from Althelia.
GG: Given that you have this structure in place and you have local relationships in Kenya, how quickly do you think this new project could scale up and address the alternate programs that the fund is really targeting?
MK: I think pretty quickly. We know for sure that some landowners or landowner groups within the community feel that they missed out on the REDD project previously, either because they weren’t ready to jump in or they didn’t have enough forests. Some of those groups have been on our doorstep for a year asking to be part of the program. It certainly simplifies FPIC (Free, Prior and Informed Consent) to be doing this in an environment where everyone knows the REDD project already and everyone has seen money flowing from the REDD project into the community.
GG: Any other thoughts about the Althelia investment?
MK: It’s a milestone. Althelia is really the first fund of its kind that is dedicated to conservation land use or to reducing emissions from agriculture, forest and other land uses, or ‘AFOLU’ as we like to say in the acronym-laden world that we live in. To get up and running at scale and now to see them actually deploying their capital is very exciting. I think this is the first of many announcements you’ll see over the next 12 months from Althelia [as they put] a substantial amount of money to work in projects like this around the world. I think it’s quite an exciting development for the marketplace as a whole.
To respond to Ecosystem Marketplace’s carbon survey informing our State of the Voluntary Carbon Markets and State of the Forest Carbon Markets 2014 reports, please click on the following links:
Previous respondents: http://survey.ecosystemmarketplace.com/carbon2014
New respondents: http://survey.ecosystemmarketplace.com/carbon2014/users/users/add