Rio Tinto, BHP, Qantas invest $53 million in new nature-based carbon credit fund

The Silva Capital teamESG Today | 12 August 2024

Rio Tinto, BHP, Qantas invest $53 million in new nature-based carbon credit fund

by Mark Segal

Carbon assets and investment manager Silva Capital announced today the launch of the Silva Carbon Origination Fund, aimed at providing access to large-scale, high-integrity carbon credits from nature-based projects in Australia targeting reforestation and sustainable agriculture.

Alongside the launch, Silva announced the first close of the fund, with mining companies Rio Tinto and BHP and airline company Qantas collectively committing A$80 million (USD$53 million) as foundation investors. Silva said that the fund ultimately aims to raise A$250 million.

Rio Tinto Chief Decarbonisation Officer, Jonathon McCarthy said: “We are absolutely committed to decarbonising our operations, but many of the technologies we need will take time to develop and implement. Meanwhile, our investment in the Silva Carbon Origination Fund helps us meet our compliance obligations with high-integrity carbon credits.”

Silva Capital is a joint venture between investment managers Roc Partners and C6 Investment Management, focused on the origination of high-integrity carbon abatement projects to generate Australian Carbon Credit Units (ACCUs). Silva Carbon origination is the JV’s first fund, and will target the development of mixed used agricultural and environmental planting projects in Australia to generate high integrity ACCUs at scale.

The fund’s strategy involves investing in agricultural land to develop large-scale carbon sequestration projects by reforesting cleared areas, while ensuring the land remains productive for farming, with the projects combining robust carbon credit methodologies, farming activities that benefit local communities, and the promotion of habitat restoration and biodiversity protection.

According to Silva Capital, the projects are designed to complement and enhance farming activity, improving soil health and biodiversity through environmental planting, with benefits including carbon sequestration, food security and land productivity.

Brad Mytton, Silva Capital Co-Managing Director said: “Sustainable agriculture is at the forefront of our investment strategy. With the Silva Carbon Origination Fund, we aim to create a portfolio of mixed farming land with significant canopy cover, generating a large volume of high-integrity carbon credits. The Fund has been designed to appeal to both corporate investors seeking to access carbon credits and institutional investors seeking portfolio diversification, ensuring that we can maximise the volume of capital invested into the sector, capital which is needed to enable Australia to meet its decarbonisation targets.”

Qantas said that it is financing its investment through its Climate Fund, a A$400 million fund set up last year, aimed at investing in solutions enabling the company to decarbonize.

Andrew Parker, Chief Sustainability Officer at Qantas, said: “For hard to abate sectors, such as aviation, high-integrity carbon offsets will play an important role in achieving climate targets. We expect the demand for carbon offsets to continue to grow into the future and it’s going to take partnerships across industries to enhance the overall availability of high-quality, high-integrity carbon credits.”

BHP Vice President Climate Graham Winkelman added: “BHP is actively pursuing structural GHG emission abatement from our operations, but we anticipate a role for carbon credits as part of achieving our 2050 goal for net zero Scope 1 and Scope 2 GHG emissions from our operations, and to meet compliance obligations under the Safeguard Mechanism Act.”

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