20th July 2012
The first political risk insurance contract for a Reduced Emissions from Deforestation and Degradation (REDD) project, provided by the Overseas Private Investment Corporation (OPIC) to Terra Global Capital for a project in Cambodia, has been awarded the Sustainable Forestry Transaction of the Year by Environmental Finance magazine, according to an OPIC press release.
Reducing Emissions from Deforestation and Forest Degradation (REDD) is a set of steps designed to use market/financial incentives in order to reduce the emissions of greenhouse gases from deforestation and forest degradation (see article). OPIC is an arm of the U.S. Government that mobilises private capital to aims to solve critical development challenges. By doing so, it advance U.S. foreign policy priorities as well as help American businesses gain footholds in emerging markets by providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds.
The award recognises “excellence in the application of capital markets know-how to addressing the world’s environmental problems.” The magazine’s criteria rewarded deals that were “novel, offered the potential for replication, and facilitated the solution of environmental problems using finance and/or market mechanisms.” Environmental Finance is the leading global publication covering the financial impact of environmental issues on the business community.
The OPIC insurance project, announced in November 2011, aims to help protect 64,318 hectares of forest in Cambodia and sequester approximately 8.7 million metric tons of CO2e by providing $900,000 in political risk insurance to Terra Global.
Mark Nicholls, editor of Environmental Finance, is quoted as saying, “So many opportunities to cost-effectively tackle the world’s environmental problems are found in jurisdictions in which investors struggle to operate – and which use novel mechanisms, such as REDD, which carry plenty of risk themselves. So it’s encouraging to see institutions such as OPIC stepping up to the plate with support for investments like the one that Terra has made in its cutting-edge projects in Cambodia.”