Investment in high integrity ACCUs

Last updated: 12 August 2024

Investment in Silva Carbon Origination Fund

Rio Tinto, Qantas and BHP commit $80m as foundation investors

Rio Tinto has invested in the first close of the Silva Carbon Origination Fund – one of the first in Australia to provide investors with access to large-scale, high-integrity carbon credits from land reforestation projects integrated with sustainable agriculture to support the global transition towards a low-carbon economy. 

The Fund aims to raise A$250 million, with A$80 million already committed between Rio Tinto, Qantas and BHP as foundation investors.

Silva Capital – a joint venture between investment managers Roc Partners and C6 Investment Management – will originate and manage high-integrity Australian Carbon Credit Units (ACCUs) generated through land reforestation initiatives. 

Raphael Wood, Silva Capital Co-Managing Director said: “We are thrilled to have Rio Tinto, Qantas and BHP as foundation investors in the Silva Carbon Origination Fund. Their partnership and commitment highlight the importance of high-integrity carbon credits in the transition to a low-carbon economy. 

“This fund represents not only an investment in carbon abatement but a significant milestone in Australia’s carbon market, that will, importantly, support the long-term success of our farming communities and nature repair.”

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. 

“We also believe it is important to enable more carbon projects that partner with farmers and local communities to integrate agriculture with nature repair.”

Silva Capital's strategy involves investing in agricultural land in Australia to develop large-scale carbon sequestration projects by reforesting cleared areas while ensuring the land remains productive for farming. These high-integrity environmental planting projects combine robust carbon credit methodologies with ongoing farming activities that benefit local communities, as well as promoting habitat restoration and biodiversity protection. By integrating carbon projects with traditional farming, Silva Capital aims to balance agricultural productivity and environmental stewardship, adopting a model that supports both economic and ecological sustainability. 

The Fund is designed for financial investors seeking attractive risk-weighted returns and carbon market participants looking for high-integrity ACCUs to complement their decarbonisation efforts and meet their regulatory compliance obligations. The Fund will enter the Australian market in the early part of its growth phase, prior to its maturity, through a targeted carbon credit creation strategy, directly investing in projects that bring food and fibre production together with carbon sequestration and provide scale to the industry more broadly.

The Australian Government’s Safeguard Mechanism requires large emitters to lower their carbon emissions, creating a regulatory environment that supports the transition to net zero. For many corporate entities, carbon credits will remain an important piece of the puzzle while many low-carbon technologies are still under development or not yet commercially available. 

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 Chief Sustainability Officer Andrew Parker said: “Alongside our investments in other technologies like sustainable aviation fuel, high-integrity carbon projects will play a critical role to help us progress our climate targets as aviation continues to be a difficult sector to decarbonise.”

“Our investment in the Silva Carbon Origination Fund will help to meet our compliance obligations and progress our climate targets with verifiably high-integrity carbon credits. Importantly, the fund will help to scale quality, nature-based carbon credits in the Australian market with social and economic benefits for local communities.”

BHP Vice President Climate Graham Winkelman said: "The investment in Silva Carbon Origination Fund is aligned with BHP’s integrity standards on carbon credits, which prioritises nature-based solutions and carbon removal. 

“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.”

23 November 2023

Investment in Australian Integrated Carbon

Rio Tinto has acquired a 14.15% interest in Australian Integrated Carbon (AiCarbon), a leading developer of high-quality carbon credits, following a competitive investment process run by climate change advisory and investment firm Pollination on behalf of AiCarbon.

AiCarbon CEO Adam Townley said: “We are delighted to have a company like Rio Tinto join AiCarbon as a shareholder. Rio Tinto’s investment highlights the strength of AiCarbon’s business as a leading carbon credit developer in Australia.”

Rio Tinto Chief Decarbonisation Officer Jonathon McCarthy said Rio Tinto was working on solutions to decarbonise a range of hard-to-abate processes but much of the technology needed to reduce emissions did not yet exist.

“Our absolute priority is to cut operational emissions from our business but developing, piloting and implementing the new technologies we need takes time."

“As a transition measure, access to the high-quality carbon credits generated by AiCarbon, in partnership with Australian landowners and local communities, will help us meet our compliance obligations as we progressively reduce emissions.”

AiCarbon has an existing portfolio or more than 40 carbon farming projects across 8 million hectares in Australia. To date, these projects have included working with landholders to implement rotational grazing strategies, weed and pest control, and improved fencing and watering systems. However, the Australian carbon market is now entering a new era with the implementation of new credit methodologies, including integrated farm and land management, which creates new opportunities to collaborate with landholders. Further, the tightening of Safeguard Mechanism requirements is expected to increase demand for carbon credits going forward.

Mr Townley said: “The investment by Rio Tinto comes at an exciting time for AiCarbon, as we see increasing demand for high-quality carbon credits in the Australian market. Rio Tinto’s investment will enable AiCarbon to execute its growth strategy to meet this growing demand, as we develop our pipeline of new carbon farming projects in partnership with local landholders, Traditional Owners, and the broader community.”

As part of its investment, a representative of Rio Tinto will join the board of AiCarbon alongside representatives from existing shareholders, including Japan Integrated Carbon (a joint venture between Mitsubishi Corporation and NYK Line) and Bentleys Carbon Fund, who both elected to reinvest as part of this competitive process.