Saturday, March 27, 2010

Brave New World: Financing for a Low Carbon Economy - Globe 2010

coverage of the Globe Conference provided by Allyson Clark

“Energy is a low hanging fruit… but a watermelon of a fruit”, a memorable quote from Bruce Schlein, Vice President of Corporate Sustainability at Citigroup in New York, and a great way to start off the round table discussion on solutions for a low carbon economy. His speech addressed not only the big picture, but also the simple things that one person can do in order to create a better world, such as reducing their energy use through the use of retrofits and other mechanisms.

The conversation quickly shifted to finance and investment as a driving mechanism for making large scale changes. As Michael Jantzi, CEO of Jantzi-Sustainalytics, said “We essentially decide what we support through where we spend our money.”

Personal decisions such as investing in SRI funds are one way to begin to create a low carbon economy, but discussion centred on the need for large capital investment in green tech or clean tech projects. This can come from the pools of money that are being run by the world’s rich as well as investments from countries through sovereign wealth funds. Paul Clements-Hunt, the head of the United Nations Environment Programme Finance Initiative (UNEP-FI), stated: “a combination of market and policy will help us reach a low carbon economy”. This sentiment resonated throughout the panel.

New products and services are being offered through banks and insurance companies to make a move to a low carbon industry. Insurance providers are beginning to understand the need to mitigate risks associated with climate change, which will impact how risk is assessed for everything from infrastructure projects to homes. Understanding how a company operates around the world and their impact on the environment will ultimately affect their business and consequently their profit. “Green will become a part of risk rating” says Sandra Odendahl, Director of Corporate Environmental Affairs at RBC Canada.

Unfortunately, according to Mr. Jantzi, a complication arises when looking at the risk return profile of green investments as the returns occur in the medium to long term and often don’t match the short term time frames of today’s financial world.

Sandra Odendahl, in response to a question from the audience, stated that she was interested in looking into double entry book-keeping for carbon, thus creating a system where carbon would be more accurately reflected on the books than it is today. Only time will tell how things will play out but the future will include more green investments and many more initiatives for development of the carbon markets.

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