Not-So-Green Green Bonds: We Told You So

In our April 24 report Why Green Bonds Might Not Be So Green After All we examined some of the frankly ludicrous definitional games and wordsmithing behind the green bond industry, such as pretending that a subway system is “green” because its enormous fossil fuel energy consumption happens somewhere else. We also questioned the bona fides of a sister industry that verifies carbon offset standards, using the example of the Family Forest Carbon Program, which purports to generate CO2 offsets based upon improved forest management, as quantified and verified by third-party carbon consultancy Verra. To say that the “first-of-its-kind carbon accounting methodology" verification standard ¹ is subjective is an understatement.

Verra’s credibility been under attack by the The Guardian newspaper ² along with Die Zelt and others beginning in early 2023, and in May its longstanding CEO resigned³ amidst claims that:

The forest carbon offsets approved by the world’s leading certifier and used by Disney, Shell, Gucci and other big corporations are largely worthless and could make global heating worse, according to a new investigation.

The research into Verra, the world’s leading carbon standard for the rapidly growing $2bn (£1.6bn) voluntary offsets market, has found that, based on analysis of a significant percentage of the projects, more than 90% of their rainforest offset credits – among the most commonly used by companies – are likely to be “phantom credits” and do not represent genuine carbon reductions.⁴

Now, a new study⁵ of the top 50 emission offset projects found that 39--or 78%--were likely worthless due to one or more fundamental failing that undermines its promised emission cuts:

The top 50 included three projects in the US, including a tree-planting project in the Mississippi Delta which a 2020 Bloomberg investigation found took “credit for trees that were already planted, or would have been planted anyway”, and the oil company project in Wyoming which stores only a fraction of the carbon captured.

Verra reportedly certified about two thirds of the traded projects, but the most recent study found similar issues with offset projects from other certifiers, including five of eight offset projects under the UN-led “clean development mechanism” such as the Teles Pires hydropower dam in Brazil which has reportedly damaged Indigenous and traditional communities, harmed biodiversity and fisheries, and is also probably emitting significant carbon emissions.

As we cautioned in our April 2023 report, carbon offsets are a modern version of medieval indulgences, only here used to wipe away climate sin; the religious overtones are inescapable.

The ESG narrative always demands close attention to--and questioning of--definitions, details, and context. When you apply serious scrutiny, some of the so-called “Green Bonds” inspired by the ESG religion seem to fall far short of the environmental virtues being signaled with the green label.

1. To measure the carbon benefit of the project, enrolled properties are compared to the dynamic baseline of matched (unenrolled) forest plots. By measuring the difference between the forests, the methodology pinpoints the project as the sole intervention that contributed to the carbon benefit, providing increased accuracy and transparency to the marketplace… A project has additionality only if the carbon sequestration and storage would not have occurred absent the project.
2. https://verra.org/statement-vcm-stakeholders-latest-guardian-attack/
3. https://www.theguardian.com/environment/2023/may/23/ceo-of-worlds-biggest-carbon-credit-provider-says-he-is-resigning
4. https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe
5. https://www.theguardian.com/environment/2023/sep/19/do-carbon-credit-reduce-emissions-greenhouse-gases?CMP=Share_AndroidApp_Other