Vincent Rajiv Louis on the Challenges of the Voluntary Carbon Markets and Conservation in Asia Pacific
A Conversation with Rajiv Louis from Carbon Growth Partners
November 18, 2021
Global investment executive Vincent Rajiv Louis has a lifelong passion for conservation. He currently holds positions with The Nature Conservancy (TNC), African Parks Network and the Pho3nix Foundation. We recently spoke with Rajiv Louis and about his views on philanthropy and sustainable investing in Asia Pacific. We continue our series learning more about his involvement and perspectives on environmental activism and conservation.
Rajiv Louis: Regulation is important to the healthy development of the carbon markets globally
When it comes to the carbon markets and related offsets, there is a proclivity for players to think that it will be easy pickings in an embryonic market. Unfortunately, these behaviors cause a stain on the overall integrity of a burgeoning industry that is critically important to climate action and the protection of forests and biodiversity, particularly in the developing world. Thankfully, regulation, a raft of real players with genuine experience and talent, and a focus on quality and reputation are what can create positive changes for the long term. This is no different than the development of other markets and asset classes, not least of which the development of emerging markets themselves as an asset class in the 1980s and cryptocurrency today.
Rajiv Louis: Many people tend to underestimate the challenges of conservation and the dedication required to forest protection in the developing world.
As more attention focuses on the carbon markets, we've recently seen an increase in the number of players talking about the carbon market – people who previously had absolutely no prior interest in conservation or the environment. The proclivity in this cohort is to vastly underestimate how hard and how long it takes to protect forests and develop a carbon sequestration project in earnest. Serious people have been working to protect forests and promote biodiversity with the communities that work alongside them for a very long time. These are the projects that we are focused on and where we want to cooperate for capacity building in these indigenous communities.
Rajiv Louis: Two organizations making a difference for the long term
I'm extremely proud to be part of the Leadership Council at The Nature Conservancy and the Advisory Board in Asia Pacific for African Parks Network. These two organizations have been engaged in conservation for a long time but, more importantly, pursue this herculean work with the required scientific rigor. African Parks has been around for 20 years and The Nature Conservancy for far longer than that. They are two of the largest and most reputable organizations in their respective fields, and the models they employ have real substance, a dedicated team of professionals and the required care that goes into effecting change.
Rajiv Louis: A long-term commitment is a must
In the dash to participate in the voluntary carbon markets, there is sometimes a lack of understanding by participants in the required long-term dedication to the project. In Indonesia as an example, the concession model is well understood as natural resources and related businesses account for some 60% of Indonesia’s GDP where the concession licensing model is the norm. The burden of care in a carbon sequestration project over life of concession, however, is perhaps less appreciated and understood. In a coal mining concession, for example, the duty of care, free prior and informed consent (FPIC) of local communities and biodiversity conservation is a secondary or even tertiary objective (all too often forgotten or misplaced). In sharp contrast, such objectives are necessary and primary objectives in forest carbon projects. Pursuant to project design, registration and verification, which may take as long as two years or more, the obligations of care, monitoring and constantly improving on the work at the concession continues for life of concession. It's a huge undertaking and by some reckoning far more onerous than mining for ore bodies.
Rajiv Louis: The objectives of the Carbon Growth Fund
What we seek with our current Carbon Growth Opportunities Fund (Australia) is high-quality carbon credits. Future funds will be focused on projects where we can have a deeper involvement in projects positioning us to share the collective experience of the team in conservation and our financial and philanthropic networks. Through this, we hope to help the indigenous people who rightly own and deserve this land and support biodiversity conservation. All the while, we hope that the fund’s activities will contribute to the integrity and maturity of the voluntary carbon markets and drive the value of carbon offsets to levels that are commiserate with the true opportunity cost of the damage we have imposed on climate and nature for a century.
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Vincent Rajiv Louis has built a powerful network of relationships throughout the Asia Pacific region with investment groups, corporations and NGOs. Indeed, Rajiv’s particular strength throughout his career has been to support these relationships with strategic ideas around the world – a strength he continues to deliver to several family groups particularly in Indonesia.This is the second part of our conversation with Rajiv Louis, in which we further delve into his views on philanthropy and sustainable investing in Asia Pacific. Read part one of the article here.Rajiv Louis: Millennials are changing philanthropy and sustainable investing in AsiaWe discussed how philanthropy is still quite new in Asia. What is happening now is factors have started to change in a really positive way. One is the way Millennials approach this entire spectrum even before we were beset by the COVID pandemic. You were already starting to see changes because Millennials as a cohort are not behaving the way traditional investors or any other group have behaved in the past – that is, just looking at the bottom line or doing the minimum necessary to get to the endpoint. It's very meaningful to Millennials how businesses operate, and they're forcing corporations to think about sustainability, climate change and conservation. It’s the Greta Thunberg moment, and it’s having a fantastic ripple effect.Rajiv Louis: The impacts of COVID-19 are here to stayIf there was one good thing that came out of the pandemic, it would be that the world lens has been pointed at the horrific dangers of human and animal conflict and the zoonotic diseases that eventually and necessarily come with it. The critical issues of sustainable development, climate action and conservation are front and center in the public discourse. We see genuine growth in the ESG side (Environmental, Social, and Corporate Governance) and the number of companies that are looking at their carbon footprints. Net Zero pledges have nearly doubled in less than a year from both local governments and corporations as many prioritize their commitment to mitigating climate change in a post-COVID-19 world. A report published by the Data-Driven EnviroLab and the NewClimate Institute highlights the massive increase in pledges with “a nine-fold increase for regions, with an additional 101 in 2020 from 11 recorded in 2019; an eight-fold increase for cities, with 823 more in 2020 from 100 recorded in 2019; and a three-fold increase for companies, with 1,541 in 2020 from around 500 recorded in 2019.”Rajiv plants a free as as symbol of Carbon Growth Partners mission and goals Rajiv Louis: COP26 in Glasgow will drive the carbon conversationAt the UN Climate Change Conference COP26 in Glasgow starting in October, the world will be talking about carbon and how to force segments of the economy and corporations to be responsible for their carbon footprints and what that's going to cost. In addition, you have multiple countries talking about a carbon tax and voluntary carbon offsets starting first and foremost from the energy sector. Indonesia recently announced its carbon tax regime set to become effective in 2022. The benchmark tax is far too low in comparison to other countries, but the first step is always the hardest. Hopefully, increases to the base rate from this point forward will be more compassionate to the environment and give citizens something to cheer about. As the fossil fuel sector is forced into compliance, the focus is slowly but surely expected to shift to a raft of other emitting sectors, notably, airlines, shipping and cloud computing. Right now, Europe leads in both experience and price, followed by California’s cap trade system, the Regional Greenhouse Gas Initiative or RGGI in the Northeast US, and China, Australia and New Zealand have their own compliance markets. All of these are domestic-focused, and it's only a matter of time that other Asian, African and Latin American countries follow.Rajiv Louis: Innovation is starting in the voluntary carbon markets but it’s still early daysIt's still very early to tell because, especially on the carbon side, the market is still embryonic. The reason you're not getting a huge amount of innovation is that the size of the voluntary carbon market is still subscale for major financial intermediaries to focus attention on. Everyone knows it's coming, but it's not here yet. The major trading houses Trafigura and Glencore have already established carbon trading desks, and the likes of Goldman Sachs and others are threatening to do so. Major fossil fuel companies like Shell and BP have had trading desks for several years already – perhaps the most telling sign of all that a carbon tax on emitters is here to stay and far too low at current levels. As the investment banks set up shop for carbon trading, innovation will definitely follow by way of futures and options and standard trading contracts. You've seen the first installments of innovation in terms of green bonds and blue carbon bonds, and I think it will continue as the contracts and the products that investors can trade become more standardized.Perhaps in the near future, we’ll see a carbon coin – if we have a Dogecoin why not a carbon one? Someone please shout out to Elon Musk, we need a carbon coin tweet from him!
Vincent Rajiv Louis has over 20 years of experience as a global investment executive in Southeast Asia markets including Indonesia, Singapore, Thailand, Japan and Vietnam. Dedicated to conservation, Rajiv has served as Chairman of the Leadership Council for The Nature Conservancy (TNC) in Indonesia (which he helped charter in 2017) and is also a member of the Asia Pacific Leadership Council for TNC (2019). In 2019, he joined the Asia Pacific Advisory Board of African Parks Network.We recently had a chance to catch up with Rajiv Louis and ask him about his views on philanthropy and sustainable investing in Asia Pacific.Rajiv Louis: Before we can talk about sustainable investing, let’s examine the state of philanthropyThe concept of philanthropy in Asia is new and evolving and quite unlike the level of philanthropic maturity you find in North America or Europe. Therefore, one is almost forced to lead with sustainable investing and trying to get people focused in this manner first before turning to a purely philanthropic model. However, as in all things Asia over the past 30 years, things move fast and change is accelerating at a pace unprecedented in history, and there is little reason to doubt that a similar rate of change won’t apply to philanthropy in Asia as well.Rajiv Louis: Philanthropy lags in Asia Pacific but there are some standoutsIt's fantastic to see that philanthropy has caught on extremely fast in China and is growing by leaps and bounds. You see wealthy private donors inside China not just embrace philanthropy first and foremost for China itself, but they've started to look outward now as well. So that's great, and it sets an example for others. However, at present, the rest of Asia lags quite significantly. Philanthropy in Japan is advanced, but it is a market unto itself. Australia has a very developed level of philanthropy, but they are focused on many domestic issues, such as historic indigenous inequality, and more recently climate change.Rajiv Louis: Philanthropy in Asia must be localizedThe real question for NGOs that focus on Asia Pacific to ask is how they can bring about increased levels of Asian philanthropy. If you look at past NGO models, the lessons learned were that philanthropy had been previously viewed through a North American or European lens, and that doesn't work for the same reason it doesn’t work in many other industries. We need a fit-for-purpose philanthropic model in Asia that gels well with the families and corporate titans that lord over the region.Rajiv Louis: In Asia, relationships are crucial, but they take time to buildRelationships take time here. You don't get a mandate after one or two meetings. You've got to build relationships and that’s hard enough to do from a business or commercial perspective, so you can imagine what it's like when you're asking people to open their purse strings for donations. The entire NGO field must develop a different way of approaching fundraising here – you need persons with deep local relationships and cultural understanding to spearhead these efforts in combination with successful models from developed nations.Bridging African and Asian conservation efforts Rajiv Louis: Several obstacles impede the development of philanthropy in the regionPerhaps the single most important factor in impeding a more giving society in Asia is the last of a tax scheme to incentivize philanthropy. That's a huge issue as people give out of their own largesse with little or no tax benefit, which as we understand is a massive incentive in North America in particular. Also, same as from a commercial perspective, you can't look at Thailand in the same way that you look at Indonesia, or the Philippines or Vietnam or China. Each jurisdiction has its own unique perspectives and set of issues and why there is more or less philanthropic giving. Dealing with these issues and getting people to focus on philanthropic work can be extremely time-consuming and an art in itself. But ultimately, Asian families thrive on and value relationships and this is what must be focused upon.Rajiv Louis: Ultimately, look to business and investment modelsIn philanthropy, there are several parallels to business and how investment works. How do you pursue investors alongside the philanthropic mission in these countries? Ask yourself which donors you want to partner with, learn their history, understand their culture and appreciate the needs of their business. Considering these macro and micro issues, it's not unsurprising that many global NGOs active in Asia are predominantly funded from outside Asia. But just as Asia is constantly evolving and fast, there is hope to believe that we will see ever increasing rates of philanthropy from Asia as the climate discussion takes more prominence in our lives. It's a new and exciting area to be involved in.