Scammers are moving to sunnier climes: They are actively targeting climate change investors at the very time that small Pacific nations are pleading for help to mitigate the impacts of rising sea levels
Cook Islands government has issued a warning to potential investors in the small nation’s clean energy overhaul after a sophisticated scam was unearthed by a New Zealand bank.
Sustainability leaders in New Zealand and heads of investment in the Pacific Islands say small remote climate schemes could be identified as opportunities by bad actors, but believe this is something of an outlier.
Cook Islands Prime Minister Mark Brown said a New Zealand bank uncovered a “very credible looking prospectus” as a scam and blocked a $100,000 investment.
Brown said he was disappointed that the Cook Islands' efforts to entirely convert the country to sustainable and renewable energy were "being targeted by crooks" as a potential way of stealing from investors.
Cook Islands Government and New Zealand’s major banks did not provide any additional information. Cook Islands was at the centre of the notorious wine box scandal in the early 1990s, when politician Winston Peters alleged criminality by some of New Zealand’s largest companies, some involving tax deals with the Cook Islands.
Then in 2019, ANZ Cook Islands was named in a major US ‘Wolf of Wall St’ style fraud case: Beverly Hills stockbroker Todd Ficeto was found guilty of 18 federal criminal in a $300m share scam that stretched from the beachside mansions of Malibu to historic Palma de Majorca in Spain – to a small bank in tropical Rarotonga.
The country has expanded the size of its overseas trusts industry, allowing Americans in particular to put their funds beyond the reach of their own courts and revenue agencies. But it's also cleaned up its reputation. In 2020 the European Union removed it from its "grey list" of of Uncooperative Jurisdictions for Tax Purposes.
There is a significant amount of cash being funnelled into the island nation, which is part of the New Zealand realm and uses the NZ dollar as its currency.
Brown’s statement was released the same day as Foreign Minister Nanaia Mahuta visited the archipelago's remote Northern Group of atolls, and announced a $7.5 million investment to upgrade solar farms there.
In announcing the support, Mahuta said, “Climate change is the greatest challenge facing the Pacific. It critically impacts our way of life, our economy and our shared futures.”
The investment followed $40m put into the Cook Islands Infrastructure Trust Fund earlier in the year.
Business Link Pacific deputy director Paul Wendland said the country had systems and processes in place with plenty of due diligence which meant any scams didn’t make it very far.
Toitū Tahua Centre for Sustainable Finance director David Woods said the smaller nature of projects in the Pacific Islands could be identified as an opportunity by bad actors.
“I suspect there is vulnerability in people going to the islands and saying, you know, this might be possible in the future, pay us this advisory fee and we'll see what we can do.
“I haven't come across it personally, but having worked for a number of years in microfinance, I'm aware of how this sort of thing starts to start to happen.”
While there are some scammers in the sustainability/climate space, the industry believes bad actors in the form of corporate greenwashing presents a much bigger issue.
A report on barriers to allocating or receiving sustainable finance released by KPMG New Zealand and Toitū Tahua earlier this week pointed out that misleading claims could damage the ability to direct enough cash towards ventures required to address and mitigate climate impacts.
A key barrier in the report was greenwashing, with two-thirds of sustainable finance professionals reporting having seen examples of greenwashing in New Zealand.
It pointed to greenwashing and the prevalence of ‘do no harm’ products as masking the extent of the change still required.
KPMG sustainable finance lead Alton Pollard said it would be a significant barrier to achieving 2050 targets, which weren't on track currently.
“The financial system is the engine of our economy – it decides where capital should or shouldn’t be directed. At the moment, the system is not yet adequately mobilising capital towards projects or areas that will support a sustainable, resilient and equitable New Zealand.”
He said attempted scams were likely to crop up, "In an environment in which global financial fraud volumes are increasing, it would not be surprising to see bad actors attracted to an area of finance that is experiencing significant growth, with investor and lender appetite for sustainable finance increasing exponentially.
It's worth noting though, that if attempted incursions by these bad actors did occur they would probably be less likely to succeed given the heightened level of diligence required around the sustainability credentials of financial products, particularly by institutional capital-backed investors."
