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Attending the Webinar on Forest Bond of WWF on the 29th. gave me the feeling that WWF is perhaps not aware of the 1) Business Need of raising Forest Bonds and 2) The Business Risk Associated with the Bond Markets. The WWF panelists were all environmentalists or biologists who were looking for funds to stop deforestation of forests. The funds assessed by them was of the order of $17 billion to$33 billion each year and since most of the forests exist in the less prosperous Southern Hemisphere and Governments have been tardy to put up the funds for their upkeep, they asked next plausible source the investment Bankers of how to raise the funds
The panelists at the WWF Forest Bond Webinar had little clue of the actual operations and how bonds mortgages work or the market reputation of Goldman Sachs ... "the giant vampire squid of financial markets"
The crafty Goldman Sachs sold them the dream option of Forest Bonds . They told them that the Bond Market had raised $100 Trillion from the global investors and could easily raise $1 Trillion each year and could easily meet the funds required to avoid the deforestation of global forests . Goldman Sachs would be more than willing to co-operate with WWF and write the Forest Bonds.
What Goldman forgot to say is the Sub-prime Housing Mortgage Crisis and the current Euro-ozone crisis were basically nothing but Bond Market crisis. That Goldman and other Wall Street Banks and hedge funds play the market on the bonds by shorting the bonds, raising yield and creating instruments like the CDO Collateral Debt Obligation and the CDS Credit Derivative Swap to create volatility in the financial markets.
The Bonds as Greece realizes today can be a death noose and the failure to repay bonds timely by the poorer
nations of the Southern Hemisphere can lead to investors taking charge of forests against whose natural resources the money had been raised and actually lead to mass logging and deforestation to repay investors,
So the animals and hundreds of living species, the plants and trees that are equal stake holders to the forests would not know what hit them so hard when humans start this debt repayment and tree-cutting expedition, should the poor nations fail to repay the Wall Street Bankers.
Attending the Webinar on Forest Bond of WWF on the 29th. gave me the feeling that WWF is perhaps not aware of the 1) Business Need of raising Forest Bonds and 2) The Business Risk Associated with the Bond Markets. The WWF panelists were all environmentalists or biologists who were looking for funds to stop deforestation of forests. The funds assessed by them was of the order of $17 billion to$33 billion each year and since most of the forests exist in the less prosperous Southern Hemisphere and Governments have been tardy to put up the funds for their upkeep, they asked next plausible source the investment Bankers of how to raise the funds
The panelists at the WWF Forest Bond Webinar had little clue of the actual operations and how bonds mortgages work or the market reputation of Goldman Sachs ... "the giant vampire squid of financial markets"
The crafty Goldman Sachs sold them the dream option of Forest Bonds . They told them that the Bond Market had raised $100 Trillion from the global investors and could easily raise $1 Trillion each year and could easily meet the funds required to avoid the deforestation of global forests . Goldman Sachs would be more than willing to co-operate with WWF and write the Forest Bonds.
What Goldman forgot to say is the Sub-prime Housing Mortgage Crisis and the current Euro-ozone crisis were basically nothing but Bond Market crisis. That Goldman and other Wall Street Banks and hedge funds play the market on the bonds by shorting the bonds, raising yield and creating instruments like the CDO Collateral Debt Obligation and the CDS Credit Derivative Swap to create volatility in the financial markets.
The Bonds as Greece realizes today can be a death noose and the failure to repay bonds timely by the poorer
nations of the Southern Hemisphere can lead to investors taking charge of forests against whose natural resources the money had been raised and actually lead to mass logging and deforestation to repay investors,
So the animals and hundreds of living species, the plants and trees that are equal stake holders to the forests would not know what hit them so hard when humans start this debt repayment and tree-cutting expedition, should the poor nations fail to repay the Wall Street Bankers.
I think you've missed something; I was a presenter on that webinar and do understand bond markets.
ReplyDeleteA small point first - there is no suggestion that Goldman Sachs would be the ones issuing bonds, although it is true that they were a sponsor of WWF's work on forest bonds (but not a sponsor of my organisation, the Climate Bpnds Initiative). Of course they could manage the issuance of forest bonds, as could virtually any bank in the world. Essentially there's a chance of getting this sort of contractual promise out of rich countries now while there is very little chance of getting cash.
In terms of developing nations debt, a core proposal in the webinar was that richer countries need to provide guarantees for forest bonds. I.e. if something goes wrong the rich country steps in and pays.
Having said that, there is no substitute for constructing investments that are real and not a house of cards (like Green sovereign bonds have proven to be). An important principle with forest bonds is that there be a clear and transparent link between the money raised and the practical projects it gets invested in, as distinct from a country raising bonds for miscellaneous government expenditure.
I doubt that forest bonds can in themselves meet the financing needs relating to saving forests, especially as some of the things that have to be financed won't be suitable for bond financing. But they can make a big contribution if structured properly.
Dear Sean,
ReplyDeleteThanks for your response.
1) I made my remark based on what I heard from one of the panelists at the Webinar,that he was a scientist and not a bond market expert. You did not step in at that point and clarify to us listeners,that you were the finance person behind the project.
2) I will now put forward in my next blog post links from dozens reputed global publications both about Goldman Sachs, J.P.Morgan, Morgan Stanley etc. and the bond market volatilty. That would convince you perhaps of the pitfalls of the Forest Bonds and define the CORE PROBLEM
3) After that I will put forward the issues related to carbon trading and why despite a 10 year effort by EU ETS the Carbon market has not provided a worthwhile SOLUTION for Emission problems.
3) Finally in the 3rd post I will put forth the POSSIBLE SOLUTIONS to the fund raising problem which could give some answers to deforestation without endangering forests and exposing them to the Bond market volatilty.