oil

Oil investor to cash in on government tree planting plan

A Swiss bank with shares in some of the world’s biggest oil companies will profit from a controversial Scottish Government scheme to limit climate pollution by planting trees.

Lombard Odier is one of three firms that agreed in March 2023 to work with conservation agency, NatureScot, on a pilot scheme to attract £2bn of private money into restoring Scotland’s native woodlands. 

The pilot was hailed by biodiversity minister, Lorna Slater, who said private investment will be “absolutely vital to meeting our climate targets and restoring our natural environment”.

Critics, however, have branded it as ‘greenwashing’. They argue the scheme is being driven by financiers more interested in securing profits from Scottish land than tackling climate change.

Lombard Odier says it is “working towards a net-zero world” and invests its clients’ money with climate change in mind. 

But new analysis by The Ferret has found that the private bank and wealth manager has shares in dozens of oil and gas companies including four of the world’s top ten producers of climate-polluting carbon dioxide (CO2) – Saudi Aramco, ExxonMobil, Shell and BP.

The findings have been met with concern by campaigners who are calling on the government and NatureScot to rethink the woodland pilot. 

One activist claimed the scheme “privatises Scotland’s trees” and that our findings show the government has entrusted part of Scotland’s green agenda to “a company whose financial interests depend, in no small part, on delaying climate action”.

Another questioned whether the government and NatureScot had done “any due diligence” on partners in the woodland scheme before it signed up to it. 

NatureScot said Lombard Odier is “committed” to tackling climate change and claimed the “absolute priority” of the pilot is to deliver “for nature, communities, the economy, and climate”. “No profits from fossil fuel companies have or will finance” the pilot, a spokesperson said.

Carbon credits 

Our analysis looked at the climate reports of all of Lombard Odier’s investment funds, which are published on its website.

Twenty-three of these have at least some investments in fossil fuel companies, with one having as much as 17 per cent of its money in oil and gas. Another fund invests in more than fifty separate fossil fuel firms.

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Lombard Odier invests its clients’ money in four of the top ten biggest corporate producers of climate-polluting carbon dioxide. Image thanks to iStock/think4photop

The NatureScot woodland pilot also involves the bank, Hampden & Co – which will provide finance to landowners who want to use their land to restore woodland. The so-called “global impact” firm, Palladium, will design the tree planting projects.

NatureScot – which has an advisory role in the pilot – says the scheme could create 185,000 hectares of native woodland and absorb 28m tonnes of carbon dioxide over the next 30 years. Planting trees is important to tackling the climate crisis and plans for woodland restoration make up part of the Scottish government’s net zero plan.

The first two woodland projects to be financed through the pilot will be in the Borders and Atlantic rainforest zone, on the west coast.

Lombard Odier’s role in the pilot is to sell carbon absorbed by the planted trees in the form of carbon credits to companies across the UK who want to compensate for part of their climate footprint. The firm will keep a cut from the sale of the credits. 

Each carbon credit represents a tonne of CO2 captured by a tree planted through the pilot. A company that buys a credit is allowed to produce one tonne of CO2 pollution without counting it towards their emissions. This is called carbon ‘offsetting’. 

Supporters claim that because they offer financial incentives to plant trees, carbon credits help lure private money into woodland restoration projects which would not otherwise get off the ground. 

But some big polluters buy them to improve their green credentials without actually trying to reduce emissions. According to campaigners, if this happens with credits from the pilot scheme, then the trees planted will “contribute nothing” to Scotland’s efforts to tackle climate change. 

Last year we revealed that carbon credits so far produced by trees planted on Scottish land had been sold to companies including Shell, arms firms Thales and Babcock, and banks which invest in fossil fuels. 

Concerns about who can buy credits make Lombard Odier’s role selling them to companies with “credible carbon reduction pathways and net zero targets” crucial to the pilot’s success from an environmental perspective.

It is essential that companies are not allowed to offset emissions while continuing to profit from carbon intensive activities.

Laurie Macfarlane, Future Economy Scotland

But our analysis found that even Lombard Odier investment funds which specifically target net zero have holdings in BP, Shell and the Norwegian firm, Equinor, the company behind plans to drill for oil and gas at the Rosebank field in the North Sea.

Lombard Odier also has money invested in coal – the most polluting fossil fuel – and in a company that drills for oil in the Arctic, a form of extraction which is opposed by green groups.

The Geneva-based firm holds these investments despite the International Energy Agency warning two years ago that no new fossil fuel projects could go ahead if the world is to limit global heating to 1.5 degrees, the stated aim of the 2015 Paris Agreement.

Corporate ‘bonanza’

As well as scepticism about its effectiveness as a means of tackling the climate crisis, the woodland pilot has faced a backlash from land reform campaigners. 

They are worried about the impact it will have on rural land prices which have already increased as demand for space to produce carbon credits has grown. There are also concerns that communities will be cut out of the financial returns generated by the sale of credits from trees planted on their local land.

Alastair McIntosh, who has authored books on both the climate crisis and land reform, wrote this year that the NatureScot pilot could be a “fresh driver of upheaval, disempowerment and depopulation” in rural Scotland.

He said The Ferret’s findings about Lombard Odier’s investments raise questions about “what due diligence NatureScot and the Scottish Government have carried out” on the partners in the woodland pilot. 

“People will not like their local land, their habitat, their territory in both economic and psychological terms being used as a doormat on which others can wipe their dirty carbon karma, and carry on polluting,” said McIntosh. 

He added: “It is not good enough to have the world of real people in real places subordinated to landowners and corporations, whose lifestyles typically drive the very problems that the world is so desperately trying to address.”

No profits from fossil fuel companies have or will finance the partner project.

NatureScot

His view was echoed by climate campaigner, Coll McCail, who argued that the woodland pilot scheme “privatises Scotland’s trees”. 

“This is not the first time the Scottish Government has asked the arsonists to put out the fire,” McCail said, pointing to the results of last year’s ScotWind leasing round which saw some of Scotland’s offshore wind energy capacity auctioned to Shell and BP. 

“Now we learn that responsibility for a key part of Scotland’s ‘just transition’ lies with a company whose financial interests depend, in no small part, on delaying climate action. 

“Increasingly, the Scottish Government’s green agenda reduces to little more than a bonanza for the corporate lobby.”

The co-director of Future Economy Scotland, Laurie Macfarlane, urged the Scottish Government to rethink the NatureScot deal and “explore alternative approaches that better align with just transition principles”. 

“If Scotland is to deliver a just transition to net zero, it is essential that companies are not allowed to offset emissions while continuing to profit from carbon intensive activities,” Macfarlane told The Ferret. “It remains unclear how luring private finance will benefit local communities and local economies.”

NatureScot said it had undertaken due diligence on all the partners in the pilot and that Lombard Odier was a “firm committed to driving the sustainable transition”. 

A spokesperson added: “The project is based on the development and sale of carbon credits as a means of funding projects that will benefit Scotland’s communities and help restore nature. 

“No profits from fossil fuel companies have or will finance the partner project. In addition to no involvement of fossil fuel resources at the financing stage, we have also publicly stated that carbon credits will not be sold to fossil fuel companies.”

Both Lombard Odier and the Scottish Government directed us to NatureScot’s statement when we asked them for comment. 

Lombard Odier’s website says the company is “working towards a net zero world” and that it considers tackling the climate crisis as a key part of its responsibility to invest its clients’ money in their best interests.

“But this does not mean we avoid high emitting sectors ,” the website notes. “Although carbon data are widely available, focusing only on low-carbon companies is a flawed approach.

“This strategy considerably narrows the universe of companies that would be eligible for investment, fails to encourage companies’ real reduction of greenhouse gas emissions over time, and does not provide a genuine path towards a global, well-functioning net-zero economy.”

Cover image thanks to OKrasyuk/iStock

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