Making sense of the ‘green grabbing’ debate

Hello from London, where we’re looking forward to seeing many of you at this week’s Moral Money Summit Europe, featuring hard-hitting debate and invaluable insights on what responsible business and finance looks like in 2024. As a newsletter subscriber you can enjoy a discount on your in-person pass or join us online for free — click here to register.

One of the key issues we’ll be discussing on Wednesday and Thursday is the interplay of environmental and social impacts — and the trade-offs that can arise between them. As I discuss in today’s newsletter, the potential for tensions here is real — but that doesn’t mean it can’t be managed.

sociaL INVESTMENT FACTORS

Going beyond ‘green’

A growing number of landscapes around the developing world are being transformed by green projects from wind farms to reforestation. Such investments are a vital part of global efforts to tackle the climate crisis. But they are also raising concerns from some researchers about “green grabbing” — that is, large-scale acquisition of land for seemingly environmentally friendly purposes, with negative impacts on local communities.

While this research shouldn’t be used to make sweeping arguments against renewable energy or forestry projects, it does highlight risks and challenges that developers — and their customers and investors — need to take seriously.

Two papers on this theme were published last week, the first of which looked at green grabbing around renewable energy investments in Brazil. The paper, published in the journal Nature Sustainability, noted that land is held and used in Brazil with various degrees of legal formality. Many communities do not have formalised legal rights to land that they have used for decades, often to graze their animals. The authors noted instances where outside parties have gained legal rights to the land without proper compensation for the local communities.

Michael Klingler of Vienna’s University of Natural Resources and Life Sciences, who co-authored the paper, told me his field research in Brazil had taken him to several communities that had lost rights or access to land they had used for generations. “We don’t question the necessity of the energy transition,” Klingler said. “But within this imperative of climate change mitigation, there is policy change happening at the expense of traditional communities’ rights to use common lands.”

The paper raised broader concerns about the extent to which overseas companies and investors were gaining control of land in Brazil. Foreign entities control Brazilian wind farms covering 2,148 square kilometres, either directly or though Brazilian subsidiaries, the paper found.

But such investment can be done in a socially responsible way, said Shami Nissan, head of sustainability at UK-based Actis, which is a large investor in Brazilian renewable energy. Actis leases all the Brazilian land it uses for renewable energy projects, with a share of revenue going to the land owners, Nissan said. She added that Actis does extensive due diligence around such investment, going beyond national law and using World Bank/IFC guidance to respect the interests of “those who may not be landowners but nevertheless rely on the land or access to land, even if transiently”.

Concerns about “green grabbing” go beyond the renewable energy sector. A report published last week by the International Panel of Experts on Sustainable Food Systems warned that “governments and large corporations are appropriating huge swathes of land through top-down conservation schemes that exclude local land users and small-scale food producers”.

It found that this was partly linked to carbon removal schemes, which commonly aim to convert land into biodiverse forest that can absorb carbon from the air and store it indefinitely.

As I wrote in a recent newsletter, carbon dioxide removal must be a big part of any serious approach to the climate crisis: between 100bn and 1tn tonnes will need to be removed this century, according to the Intergovernmental Panel on Climate Change. And while technology-based approaches are gradually scaling up (as seen with a big expansion in Iceland that’s just been announced by Zurich-based Climeworks), their high cost and energy requirements are helping to drive interest in forest-based schemes.

The IPES paper raised concern about the huge amount of land that will be needed to meet government carbon removal targets, which it said could threaten food production and encourage speculative investment into farmland, destabilising agricultural communities. “Through carbon offsets, huge swathes of land are being appropriated and the financialization of land is being fast-tracked,” it claimed.

When I discussed these claims last week with nature-based carbon removal companies, they told me they approached local social impacts with care. Thiago Picolo, chief executive of Rio de Janeiro-based re.green, told me his business typically buys land that was previously deforested for cattle pasture when landowners want to exit the beef industry. The reforestation process creates more jobs for the local community than cattle ranching, Picolo added, and re.green does extensive due diligence to ensure that the land has not been unfairly obtained.

Two other nature-based carbon removal companies that I spoke with — Mombak, which is focused on projects in Brazil, and Ponterra, which is developing its first project by reforesting cattle pasture in Panama — also said that this due diligence, and ensuring positive outcomes for local communities, was central to their business model.

“A lot of farmers want to get out of this [cattle] business, and this becomes a really attractive way for them to shift,” said Celia Francis, chief executive of Ponterra, which will on Wednesday announce a 30-year contract with three institutional buyers for carbon credits from its first reforestation project. “We’ve made a decision to lease the land, which means that the farmers continue to be stewards of the land,” Francis added.

One reason for developers to take this issue seriously, Picolo said, was pressure from removals-based carbon credit buyers such as Microsoft, which have made it clear that they are willing to buy only from projects with strong social as well as environmental profiles.

It’s worth noting that the nature-based carbon removal sector is in its infancy. There is a relatively small volume of removal-based credits in the voluntary carbon market, where projects have so far tended to focus instead on avoiding emissions by protecting existing ecosystems. The buyers of expensive removal-based credits are today a relatively small group of companies, which tend to have an especially rigorous approach to sustainability.

As this market grows, more of the prime project opportunities with straightforward social impact profiles will be snapped up, and developers may need to start considering investments that need more work to ensure positive social outcomes.

The same logic holds for renewable power generation, where the need for massive growth — with the attendant land usage — is particularly stark in developing nations. As they grow, so too will the scrutiny of whether these green sectors are proving to be good for local people, as well as for the planet.

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