KKR Backs Environmental Credits Linked to Great Barrier Reef

(Bloomberg) -- A group backed by U.S. investment giant KKR & Co. will soon offer a financial incentive for projects that improve water quality at Australia’s endangered Great Barrier Reef

The iconic reef -- a popular tourist attraction and the world’s largest single structure made by living organisms -- faces an existential threat from mass coral bleaching caused by warming sea temperatures. The reef is also being damaged by nearby farmland runoff, including fertilizers and pesticides.

GreenCollar, Australia’s biggest provider of carbon abatements, is turning its expertise to the issue with a system that credits landowners for practices that support improved water quality. Under the program, landowners will be able to earn a “reef credit” for preventing a quantifiable amount of nutrient, pesticide or sediment from entering the reef’s catchment area.

Landowners would be able to sell these credits to corporations or organizations looking to offset their own environmental impact, similar to carbon abatements.

Access to these markets has been a boon to farmers, giving them a steady stream of income from projects that improve the productivity of their operations while having a positive impact on the environment, according to George Aitken, a director on KKR’s Private Equity team in Australia.

“This is right down the fairway for us in terms of addressing issues around climate change,” Aitken said in an interview, “but it’s also good business.”

KKR’s investment in GreenCollar, announced this week, is the first in Australia for the company’s Global Impact Fund, which invests in companies that contribute toward United Nations sustainable development goals. Its commitment totaled about A$100 million ($70 million), according to a person with knowledge of the situation, who asked not to be identified. The companies declined to comment.

The not-for-profit Great Barrier Reef Foundation also announced this week A$96 million in funding for reef conservation initiatives over the next 12 months, and is expected to assist in finding projects eligible for reef credits.

First credits from the scheme are likely to be issued and sold within the next couple of months, according to Aitken. Sugarcane growers in particular, he said, are keen to sign up.

©2020 Bloomberg L.P.