In Sabah, natural capital agreement surfaces again, despite critics

Supporters of an embattled carbon deal in the Malaysian Bornean state of Sabah have publicly resumed efforts to bring the 2-million hectare (4.9 million-acre), 100-year agreement into force.

“This initiative is expected to become a prominent carbon dioxide sink, reinforcing our proactive stance on climate restoration,” Sabah’s Deputy Chief Minister Jeffrey Kitingan said in a June 28 statement, according to The Star newspaper.

Kitingan has been the project’s most visible proponent and a driving force in putting together the natural capital agreement (NCA) without public knowledge in October 2021. But since November 2021, when Mongabay first surfaced news of the agreement — signed by members of the state government, a Singaporean firm and an Australian consultancy — it has faced a backlash of criticism about its origins and planned implementation.

Nearly two years on, Kitingan said Aug. 3 that plans were in the works for a pilot project in Sabah to work out the complexities of carbon and natural capital crediting, according to Talantang, an online news site. Seri Hajiji Noor, Sabah’s chief minister, also confirmed to several media outlets that the state government is “fine-tuning the details.”

“It is good for us to explore this industry,” Hajiji said Aug. 1, according to The Star. “Our forests can offer us lucrative returns, but we have to manage our areas and water sources properly.”

Kitingan and other backers of the NCA argue the sale of carbon credits from Sabah’s forest resources will provide a much-needed economic infusion to the state. Kitingan’s political secretary, Anuar Ghani, said the state was losing the equivalent of 8 million ringgit (more than $1.75 million) per day that the project is stalled, according to The Star.

Mongabay attempted to reach Kitingan through multiple channels to clarify how these calculations were made, but he did not respond to these requests.

Kitingan and other proponents of the NCA say that efforts to block its implementation are based on unfounded concerns.

“Who will take responsibility for this loss?” Anuar said in the article from The Star. “They have to step forward and take responsibility.”

Since November 2021, environmental and human rights NGOs in Sabah and internationally have raised a long string of questions and concerns about the project. The agreement became public only after it was anonymously leaked to the press, and later, thanks to a lawsuit by Adrian Lasimbang, a Sabahan Indigenous leader. The text revealed few details about the specific forest areas in Sabah that would make up the 2 million hectares, how the NCA would affect forest-reliant communities and who stood to benefit from the anticipated financial gains promised by the project proponents.

Given the tumult facing carbon markets globally, experts also caution that it is essential to maintain good governance and oversight of carbon deals and the credits they produce. Criticism of carbon markets — and in particular the “offsets” that companies and individuals use to claim they are compensating for the emissions they produce — have long centered on whether they meaningfully address climate change. Those critiques came into sharper focus beginning in January when a series of reports by The Guardian and other news outlets concluded that many such credits were “worthless.”

In Sabah, observers say the financial gains promised by the deal’s creators could be jeopardized by lingering questions about Indigenous rights and whether adequate technical capability exists to carry out this type of project.

Concerns center on the fact that the deal remains opaque and its proponents still have not answered key questions about its inception or its implementation.

Civil society leaders say they are generally supportive of initiatives that can help protect forests while bringing in funds for economic development, but they have taken issue with the surreptitious way the deal came about. “If it was more open, if it was more straightforward, most probably the deal would have gone through,” Alexander Yee, president of Sabah Environmental Protection Association (SEPA), told Mongabay.

“We sincerely want things out on the table,” Cynthia Ong, founder and chief executive facilitator of the Sabah-based NGO Land Empowerment Animals People (LEAP), said in an interview.

LEAP and SEPA are part of a civil society coalition that is urging caution with respect to the enactment of the NCA. They have initiated a judicial review of the project “to determine if the Sabah government complied with the relevant laws and procedures in the approval of the NCA,” Ong said in a statement from the coalition. The group says it hopes a review will reveal whether the state government performed adequate due diligence prior to the agreement’s signing Oct. 28, 2021.

The state’s attorney general, Nor Asiah Mohd Yusof, released an assessment in February 2022 calling the NCA nonbinding and “legally impotent.”

Ghani said her statements have been “superseded by events,” according to The Star. It is not clear what those events are, but Kitingan has said the attorney general should have presented her concerns to the state cabinet and the NCA’s steering, management and implementation committee (which Kitingan chairs) instead of releasing them to the press.

At this point, Yee said he is eager for Nor Asiah to weigh in.

“What does the [attorney general] say about whether it’s a binding agreement?” Yee said.

Nor Asiah did not respond to Mongabay’s emailed request for an interview.

Free, prior and informed consent

The ongoing lack of a map of the area covered by the agreement is another key issue raised by civil society. In addition to raising alarm about where these forests are, the agreement text also did not make clear whether the project’s leaders had obtained the consent of local and Indigenous communities who would potentially be affected by potential restrictions on their use of the state’s forests.

Mongabay’s initial reporting revealed conflicting explanations from the agreement’s backers about their adherence to the principle of free, prior and informed consent (FPIC) as laid out in the U.N. Declaration on the Rights of Indigenous Peoples (UNDRIP). Ultimately, they asserted that they had informed the relevant communities, though they declined to say where these communities were situated.

On July 27, Kitingan held a press conference with 16 Indigenous organizations, all of whom called on the state government to move forward with the deal. He claimed that this amounted to adequate FPIC, according to the Malay Mail newspaper.

But without a map showing that these organizations would indeed be affected by the sale of rights to carbon, water and other natural capital, the event was little more than theater, said Lasimbang, president of the Sabah Native Voices Organization and a former senator in the national government.

Lasimbang called it an “abuse of the process” and said it “sets a worrying precedent.”

“FPIC under UNDRIP [is supposed to] act as a safeguard,” he told Mongabay by text message, “not a process to be used by project proponents to justify [their] acts!”

The lack of a public map also raises questions about the value of carbon in the forests that will be part of the project. Early on, Kitingan insisted the 2 million hectares would come from Sabah’s bank of protected areas, obviating the need for a formal FPIC process. But if that were the case, critics said, the forests would not be providing the added carbon benefit, or “additionality,” currently valued by carbon markets. Typically, such credits are generated by initiatives that prevent carbon from being lost into the atmosphere due to things like logging or conversion of forests for agriculture. In principle, forests that already have protected status should not be under threat, and therefore projects in such areas do not sequester additional carbon.

The civil society coalition is also working to uncover the full ownership structure of Hoch Standard, the Singaporean private equity firm that signed the NCA. Documents seen by Mongabay show that it is wholly owned by Lionsgate Ltd., a British Virgin Islands (BVI)-based company, but Lionsgate’s owners have remained a mystery.

“We don’t have any clue who is behind the company,” Lasimbang said.

Now, however, recent changes to BVI law have made it more difficult to keep those names hidden, and the coalition is hoping to capitalize.

“Sabahans deserve to know who has acquired these extraordinary financial rights over our natural heritage and to know if there are any conflicts of interests between them and the NCA’s State government proponents,” Yee said in the civil society coalition’s statement.

This article by John Cannon was first published by Mongabay.com on 3 August 2023. Lead Image: Mother and baby orangutans in Sabah, Borneo, Malaysia. Image by Carine06 via Flickr (CC BY-SA 2.0).

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