Rio to buy carbon credits with Caisse backing

Canada’s second-largest pension fund and Australia’s Clean Energy Finance Corp. (CEFC) are investing in a carbon credits platform helping Rio Tinto (NYSE, LSE, ASX: RIO) cut its emissions footprint. 

La Caisse de dépôt et placement du Québec, with C$473 billion under management as of Dec. 31, is backing the A$250-million (C$227-million) founding of the platform named Meldora, the companies said Monday. The platform aims to combine sustainable agricultural production with large-scale environmental plantings in the credits. 

Global miner Rio Tinto is to serve as a “foundational offtaker” for the carbon credits generated by Meldora. The credits are expected to account for up to 10% of Rio’s plan to halve its Scope One and Two emissions by 2030 from 2018 levels. Scope One comes directly from company operations, while Scope two stem from purchased electricity and heat.

“This investment is a timely step toward advancing resilient, climate-smart agriculture in Australia, while delivering measurable environmental and economic value,” Emmanuel Jaclot, executive vice-president and head of infrastructure and sustainability at La Caisse, said in the release. 

The fund contributed A$200 million of the investment with CEFC committing an additional A$50 million. CEFC manages over A$32 billion on behalf of the Australian government. 

Queensland farm

The Meldora platform will be managed by Australian agriculture and natural capital asset manager, Sydney-based Gunn Agri Partners (GAP), which has about A$750 million under management. As its first asset, Meldora has purchased a farm of more than 15,000 hectares in central Queensland to practice sustainable agriculture and carbon capture and storage.

Under the “environmental plantings” methodology for the credits, native vegetation is planted and maintained for a minimum of 25 years for some projects and as long as a century for others, providing long-term carbon sequestration and biodiversity benefits.

“This initiative represents a long-term investment in nature and land-based strategies in Australian agriculture,” Heechung Sung, CEFC’s head of natural capital, said in the same release.

“It’s a great privilege to again be able to work with La Caisse and GAP to invest in this strategy and alongside Rio Tinto, who have demonstrated with their long-term offtake, a commitment to invest in high-integrity carbon credits.”