Renat Heuberger has resigned as CEO of South Pole
Renat Heuberger has resigned as CEO of South Pole
Or how an “environmentalist” turned into a capitalist profiting from the climate crisis
A few weeks ago, the Swiss carbon consulting firm South Pole pulled out of the Kariba REDD project in Zimbabwe. The decision followed a steady stream of criticism in the media.
Last week, the company announced that Renat Heuberger, co-founder and CEO of South Pole, is resigning with immediate effect.
In its press release, South Pole states that “it is determined to learn form the experience of working with the Kariba REDD+ project in Zimbabwe. At the core of this commitment is a focus on enhancing its group-wide quality and risk controls, and due diligence processes.”
South Pole’s press release adds that,
The Board of South Pole believes this exercise will be best delivered by new senior leadership, with the required experience to design and implement a comprehensive program of review, change and governance and process improvements, while also improving stakeholder engagement, trust and communication.
But new leadership at South Pole will not solve the problems of carbon offsets. The problems are systemic.
The three types of people in the carbon offsetting business
Writing in Bloomberg, opinion columnist Matt Levine lists three main types of people who get into the carbon offsets business:
Environmentalists who believe that selling carbon offsets are a way of addressing the climate crisis. Their motives are idealistic.
Loggers who calculate they can make more money by not cutting trees and selling offsets than cutting the trees and selling the timber. Their motives are price-based.
Financial engineers who structure financial products, sit in the middle of the trade and take a cut. Carbon offsets, a fictitious commodity with complicated accounting regimes, are a perfect vehicle. Their motives are profit-oriented.
Levine calls the last group ESG Consultant But Evil.
Levine asks the question, what do you do if you find out some of the carbon credits you’ve been selling are fake? The answer, he argues, depends on your original motivations.
Environmentalists should take the news badly. Levine suggests they might apologise, pay back the money, and promise to do better. (That, as far as I’m aware, has never happened.) “You might have come to the business as an environmentalist, but it’s a good business,” Levine writes. You might say something along the lines of, “We’re making the world better by selling these credits, even if some of them are fake, and let’s not let the perfect be the enemy of the good.” Your idealistic motives are compromised, in other words.
Loggers don’t really care. They’ll sell carbon credits, fake or real, or timber.
Financial engineers won’t worry about making money from an accounting fiddle. “If you are an ESG Consultant But Evil, the evil is part of the point,” Levine writes.
Cashing in on carbon
Levine moves on to the article Heidi Blake wrote in the New Yorker about the Kariba REDD project. A lot of the carbon credits sold from Kariba were fake and a lot of the money pretty much disappeared. Levine looks at some of the reactions to this news within South Pole.
Renat Heuberger got into the carbon offsets business as an environmentalist. But he got very comfortable with cashing in on carbon.
Heuberger’s co-CEO, Christoph Stutter resigned in 2012, six years after South Pole was founded. Stutter told Blake that,
“I was building up this worry. It’s just paper credits.
“The big majority of what you see in the market, in my view, boils down to a lot of greenwashing, a lot of marketing, a lot of money-making.”
Dirk Muench was another of Heuberger’s colleagues at South Pole. The two were friends in college. Muench became an investment banker. He joined South Pole in 2021 to “support climate action in the world’s poorest places,” Blake writes.
Muench wondered about how much of the money from sales from Kariba carbon credits actually reached the people living in the project area.
Muench was a financial engineer. But he got into the offsets business as an idealist. He started an investigation into the Kariba project.
Pandora’s box
He tried to get details of where the money had gone from Steve Wentzel, the white Zimbabwean entrepreneur behind Carbon Green Investments, the company incorporated in the tax haven of Guernsey that was running the project in Zimbabwe.
Wentzel told Blake that the inquiries didn’t bother him:
“I was, like, Yeah, whatever. As long as I get my end of the deal.
“You have your ways and means, and they’re not all traceable, put it that way.
“No one actually has a damn clue about what’s going on. Not even South Pole. I hold the key to Pandora’s box.”
Muench eventually got a spreadsheet from Wentzel, but it only accounted for some of the money, and even that, Muench told Blake, had “no backing, nothing behind it”.
“Red Flag”
On 9 July 2022, Muench sent an email to Heuberger and other South Pole executives, with the subject line “Red Flag”. He reported that his investigation revealed that most of the Kariba funds had gone missing.
Muench urged Heuberger to admit the problems before the media found out and published the story.
Instead of admitting the problems, South Pole removed Muench from the investigation.
Blake writes that,
To Heuberger’s mind, the Kariba project was as good as it needed to be: “Is it perfect? Is the guy a hundred per cent? Every dollar always a hundred per cent?” He shrugged. “You have to navigate your way around.”
By September 2022, crisis point had arrived. South Pole was required under Verra’s carbon certification scheme to check its baseline - the counterfactual story about what would have happened if the Kariba REDD project didn’t go ahead.
Fake offsets
Here’s how Heidi Blake puts it:
After months of reviewing satellite imagery, the company’s data analysts had determined that deforestation in the control zone was dramatically lower than projected. They estimated that only fifteen million of the forty-two million carbon credits generated by the project had actually been backed by avoided emissions. All the rest of those supposedly offset tons of carbon simply weren’t real.
Muench tried to persuade Heuberger to stop selling offsets from Kariba. Heuberger rejected that idea. In the months after learning that it was selling fake credits based on a miscalculation, South Pole sold more than three million fake carbon credits to to Porsche, Nestlé, Nando’s, the Cannes Film Festival, and a network of Australian zoos.
Muench confronted Heuberger in Autumn 2022. “You sold credits that weren’t real,” he said. Muench told Heuberger he should hand the money back to the people who bought those credits.
Muench told Blake that Heuberger screamed at him. “Get out! Get out! You know nothing!”
Muench left South Pole three days after an internal South Pole meeting in December 2022 about Kariba. A recording of the meeting was subsequently leaked to the Dutch watchdog website, Follow the Money.
Muench told Blake that the meeting was Machiavellian. “I think, at the end of the day, they started to lie to themselves.”
Before leaving South Pole, Muench filed a report through South Pole’s whistle-blower channel. A few weeks later, he received a response:
An investigation has been completed and we conclude that South Pole were following the approved Verra methodology. We are therefore going to close this case.
Then Muench received an email from South Pole’s lawyers. They demanded that he present himself about the leaked tape of the meeting.
Blake writes that,
[Muench] denied being behind the leak, but the investigation struck him as an opportunity to relay his concerns about Kariba. He agreed to meet the lawyers, and sent them detailed written testimony in advance. The lawyers abruptly cancelled the meeting.
Totally amazing story! Great research - thank you!