Friends: I'm at the COP16 Conference in Cancun, aiming to talk about climate bonds as a mechanism to divert private investment to building a low-carbon economy. Here are six snippets from my first 24 hours:
Climate Bonds Blog
"... using retirement funds as a resource to drive growth and development did not mean the government would impose requirements on institutions. The proposal, supported by labour and retirement trustees in the past, had simply lacked "reliable instruments to invest in", he said.
One possible example was a green bond, created by a development finance institution, such as the Industrial Development Corporation, which could apportion a prudent amount of funds towards green economy initiatives.
The Australian Conservation Foundation has just released a useful new report, "Funding the transition to a clean energy economy" (see http://goo.gl/AGPdQ). Among other things, the report recommends the Australian Government issue Climate Bonds, tied directly to financing clean energy.
This letter to investors is how they report on the use of funds raised with Green Bonds - environmental accountability.
The Climate Bonds Initiative has begun work on a crop of new projects. We're looking for a London-based researcher/analyst to help.
The successful candidate will be involved in a variety of projects developing workable policies and solutions to scale up investment into the low carbon economy.
An ideal candidate will have strong communication skills, a good working knowledge of climate policy, economics and finance, imagination and a sense of humor.
Send details to sean(a)climatebonds.net.
The "Andromeda" bond sale involves the securitisation of SunPower Italy's project finance loans for construction of two adjacent Italian solar parks with a capacity of 45.3MW and 6.1MW. Lead managers are BNP Paribas and Société Générale.
These will, as far as we know, be the first bond linked to solar assets. There are two issues of EUR 97.6 million; the first is fully backed by the Italian Import/Export agence, SACE, and rated Aa2 by Moodys. These have been placed with European institutional investors. The second tranche are not backled, and are rated Baa3; they've been placed with the European Investment Bank.
An interesting “Financing Energy Efficiency Retrofits in Buildings” discussion paper recently released in Madrid argues that a significant expansion of energy efficiency retrofits can be driven by a model that employs:
- Standardized contracts adopted by a wide variety of loan originators, such as banks, utilities, ESCOs and other retail outlets.
- A re-financing fund that agrees to buy loans using the standardized contract (thus driving adoption). The fund then taps the wholesale financing markets.
See their Special Report (first published in the International Herald Tribune) called "Sustainable Bonds Hope to Help Fix the Planet".
First time the International Herald Tribune and the New York Times have covered the issue in this fashion. Story begins:
"SINGAPORE — Financial experts may debate how much it would cost to shift the world to a low carbon economy, but they agree on one thing: the amount would be phenomenal. The International Energy Agency in Paris, for example, has estimated that it would take $46 trillion in additional clean-technology investments over the next 40 years to halve carbon emissions by 2050.
Fiduciary duty for a pension trustee is about protecting the financial interests of fund members in the long term. But pension funds and other institutional investors spend more time looking at the trees rather than at the forest – they invest effort in asset management, yet virtually nothing in identifying and taking steps to manage systemic risks. This is despite the fact that a large proportion of their returns and risks are driven by systemic changes - value destruction in recent years is clear evidence of that.
The biggest systemic risk is climate change, where governments have to take decisive action within a very short time to have a reasonable chance of avoiding catastrophic climate change.
UK 'green' energy company Ecotricity announced yesterday that it's issuing ‘EcoBonds’ to fund an expansion of its renewable energy generation capacity. The mix of assets to be developed includes wind, solar and renewable gas. Ecotricity is aiming to raise a modest £10 million with the bonds.
The fixed rate EcoBonds have a 4-year term and pay 7% - or 7.5% for Ecotricity customers. The bonds are aimed at ethical investment market, including, clearly, Ecotricity customers.