How we are supporting a nature positive future in our sustainable funds
Carbon offset programmes channel funding into vital environmental projects, while we make progress towards our longer-term goal of net zero.
If the world is to meet climate change, biodiversity, and land degradation targets, it needs to invest an additional $4.1 trillion in nature by 20501.
We are committed to playing our part in building a nature-first future, combining our low-carbon sustainable investment approach with the purchase of carbon credits to offset the scope one and two carbon emissions generated by the equities in our sustainable funds.
We focus on nature-based solutions, such as mangrove restoration in Madagascar, and the protection of biodiverse forests in Cambodia. To date, we have supported the prevention of an estimated 46,243 tonnes of CO2 from being emitted through 11 verified carbon avoidance projects and planted a total of 152,871 trees (and counting).
The costs of funding these “carbon offset” projects are captured by Cazenove Capital, and not passed onto investors. You can read more about nature-based solutions and funding of carbon offsets here.
Source: Protecting globally-important rainforest in Cambodia | Ecologi
Why do we do this?
Our sustainable equity funds have a 54% lower carbon footprint than the global equity market2. As a founding signatory to the net zero asset managers initiative, we have committed to achieving net zero by 2050 or sooner. The purchase of offsets is simply our way to improve our planetary impact today and channel funding into these vital environmental projects, while we progress on our journey to net zero. Importantly, we do not factor in the offsets when reporting on the emissions generated by our investments and we do not claim carbon neutrality. The offsets do not form part of our plan to reach net zero, where our focus is on reducing absolute emissions.
Emissions from tropical deforestation and forest degradation are estimated to account for 14-21% of human-generated emissions per year3. Furthermore, it is estimated that nature-based solutions could reduce emissions by 11.3 billion tonnes per year by 20304. As well as drawing down carbon from the atmosphere, nature-based solutions provide many benefits, such as conserving wildlife habitats, protecting biodiversity, improving water quality and reducing flood risk.
Carbon offsets are a way to channel funding into these essential projects, which are currently largely dependent on state financing. While carbon offsets may not be the only solution, they do contribute as part of a wider carbon reduction strategy.
“The wave of net zero pledges in the last three years has led to increased demand for offsets from projects which are less verifiable and more exposed to overstating of the carbon avoided.”
Offsets must be properly verified and there are weaknesses in the market. The primary weakness is around credits from carbon avoidance projects generated in developing regions (for instance, the protection of a rainforest from deforestation) where enforceability, traceability and establishment of the project’s contribution to carbon avoidance is more challenging. How accurate is a project’s claim about how much deforestation would have happened if the project had never taken place? The wave of Net Zero pledges in the last three years has led to increased demand for offsets from such projects, which are less verifiable and more exposed to overstating of the carbon avoided.
How we ensure our offsets are of the highest quality
"Our Impact team reviews up to 200 projects a month, we only fund the top 1%" - Elliot Coad, Ecologi CEO 2023.
To combat this, we buy offsets through our partnership with social enterprise Ecologi, which undergo stringent verification processes. Ecologi’s internal climate experts assess over 200 projects each month, before choosing to fund a carefully-selected handful. Projects are chosen according to their climate impact regionalisation strategy, which directs funding towards places with the greatest potential impact, and prioritises areas at greater risk of degradation. Every tonne of carbon that Ecologi offset is certified by an industry-leading carbon standard. The two standards that Ecologi uses most often are the Verified Carbon Standard (VCS) and the Gold Standard. These standards have been identified by research carried out by the Stockholm Environment Institute, on behalf of WWF Germany, to be among the most effective and appropriate standards available for carbon offset projects.
Additionally, Ecologi works closely with Sylvera, the leading carbon intelligence platform. Sylvera independently verifies each of the reduced deforestation projects Ecologi supports. They assess the likelihood that credits issued have delivered on their carbon avoidance and reduction claims by applying proprietary machine learning technology to satellite data, which is then analysed by leading researchers to measure factors such as tree growth and deforestation. All frameworks are peer-reviewed by a committee of experts to ensure scientific consensus. 5 6 The nature-based projects Ecologi supports are amongst the most highly rated by Sylvera. For these reasons, we remain comforted that our offsets are of the highest quality.
Last year, our offsets supported the protection of globally-important Rainforest in Cambodia as part of the Southern Cardamom REDD+ Project (SCRP). The project protects a critical part of the Cardamom Mountains Rainforest Ecoregion – one of the 200 most important locations for biodiversity conservation on the planet.
The Cardamom Mountains Rainforest Ecoregion is a critical habitat for many threatened species, including the Asian elephant, clouded leopard and Southern river terrapin. The forest is constantly under threat from deforestation and degradation from farmers clearing trees. The project supports alternative livelihoods to farming, such as direct employment, alternative income-generating activities, and initiatives to stimulate investment in local businesses to reduce pressure on the environment. Additional programs address food security, improve healthcare and education facilities, and increase environmental awareness among local people.
The project directly supports the livelihoods of 21 villages in nine communities around the project area. In eight additional villages across four communities, local people will be eligible for educational scholarships. These communities represent approximately 3,957 families, totalling 16,495 individuals7.
It's estimated the project will prevent roughly 115,000 million tCO2e of emissions over its lifetime, for which we have already avoided 28,013 tCO2e through our 2022 funding. Find out more here. This type of project is called carbon finance, which has a large role to play in preventing deforestation.
When done properly, carbon finance provides crucial funding to high-quality forest protection projects. This can have a positive impact on both the environment and local communities. With so many impactful projects out there, it’s essential that funding continues to flow into them.
1UN Environment program State of Finance for Nature November 2021
2MSCI. Based on scope 1 and 2 emission of the equity holdings
4The Nature Conservancy
This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.
This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.
All data contained within this document is sourced from Cazenove Capital unless otherwise stated.