A green imperative

Throughout the world there are people and companies coming up with ideas that will help solve the problems associated with climate change. There is no shortage of entrepreneurs, engineers, scientists and designers with the flair, imagination – and common sense – to get the job done.

There is, too, broad political agreement on the subject although the arguments will continue about which particular road to take and which countries should take the lead. And make no mistake; political will is vital in the battle against climate change because binding agreed reductions in CO2 emissions are at the heart of the strategy.

In the end though, like many things in life, it all comes down to money. How do we pay and who pays and how do we value our efforts?

First we must admit that we have failed properly to value many of the things that count most – a stable climate, thriving ecosystems, good soil quality and clean water, for example. The world is only just beginning to realise that a tree is worth more alive than dead and are working out the mechanism to make that a reality. And we continue to fine-tune the mechanism that will value carbon, or the lack of it, in such a way that it will encourage investment in the low-carbon economy.

The realisation, ahead of time, that the transition to the low-carbon economy is an economic opportunity as well as an environmental imperative is what led to the setting up of Climate Change Capital. It is, as its name implies, an investment manager and advisor specialising in the opportunities created by the low carbon economy and aims to make the world’s environment cleaner while delivering attractive financial returns.

The areas on which the company concentrates, through its funds and teams, are carbon finance, private equity, property and energy infrastructure as well as advising other business. And far-sighted investors have realised the value to be gained from this investment in the future. After all, a pension fund has a duty to look ahead and the enlightened ones are realising that putting money into the equivalent of a gas guzzler is not the way forward.

But the twin drivers of climate change and energy demand means that huge sums of money are needed for a complete overhaul of how we produce, deliver and consume energy worldwide with the International Energy Agency estimating that the cost of creating a clean energy infrastructure will be anything up to $45trn. The building of a single carbon capture and storage power station in the UK will cost around £1bn.

So how do you encourage those investors who have not yet recognised the value in going green to do so? One answer that Climate Change Capital’s vice-chairman James Cameron has come up with, working alongside the environmental advisor Tom Burke is modelled on the war bond philosophy. Cameron believes that a series of targeted bonds, with their proceeds ring-fenced for investment in tangible green infrastructure, could capture investors’ attention whether they be individuals or institutions such as pension funds looking, as they must, for financial return over many years.

Cameron says: “The bonds could be fixed or index linked, offering low but stable rates of return over a long period of time, matching that of the assets into which the funds would be flowing. That is to say we would build things to last. They would have the backing of government and the expected cash flows from the projects themselves. These climate bonds would be a sensible way to finance the needed long∞term investment in tangible assets that society should have to improve the quality of our lives. I sense that there is now a will for people to put their money to productive use.”

Away from the really big picture investments are being put to work. Climate Change Capital’s clean tech private equity fund has already invested in a German solar module manufacturer, a UK developer of biogas plants, an Italian developer of solar farms, a smart metering business and an energy efficiency advice company with many more opportunities in the pipeline.
The company’s carbon finance team currently manages 750m euros focused on the carbon and clean energy markets – the largest private sector carbon fund in the world.

The property team are buying commercial property and then, with the cooperation of the tenants, retro-fitting the buildings to make them more energy-efficient which cuts emissions and costs to the benefit of all.

Another team manages the Ventus Funds, specialist venture capital trust funds which target the UK renewable energy sector, including onshore wind-power, landfill gas, hydroelectric and biomass.

And understanding how the low carbon economy works – and how the myriad regulations are interpreted – has helped Climate Change Capital and its clients. Vattenfall used the advisory team to help guide them through the purchase of three major windfarm deals in the UK.

Since every decision taken by every company now has to have climate change at its core, it is quite clear that companies like Climate Change Capital are in the right place at the right time. Says Cameron: “With strong leadership from governments, thoughtful leadership from business and the participation of the financial markets, we can help create wealth worth having.”

Further information: www.climatechangecapital.com