New Climate Principles for Financial Institutions

On the 4th December 2008, five leading financial institutions signed up to the Climate Principles, new guidelines developed to deal with the risks and opportunities posed by climate change.

The initial take-up was not as wide as hoped, possibly due to the financial crisis. However, Banks Crédit Agricole, HSBC, Standard Chartered, and reinsurers Swiss Re and Munich Re in signing up to what the Climate Group describes as “the first comprehensive industry framework” to address climate change.

The Climate Principles address the management of operational greenhouse gas (GHG) emissions. More importantly, they provide strategic direction on managing climate change across the full range of financial products and services, including: research activities; asset management; retail banking; insurance & re-insurance; corporate banking; investment banking & markets; project finance.

China drafts environmental guidelines for firms investing abroad

China is drafting environmental guidelines for companies investing in or providing economic aid to overseas countries.

 The work is being undertaken by the Chinese Academy for Environmental Planning (CAEP), in cooperation with the Global Environmental Institute (GEI) and the University of International Business and Economics. The first draft is now being discussed, the GEI said.

 A report released by the CAEP last week said the country lacked comprehensive environmental protection policies in its overseas projects, although investment had been expanding.

 Statistics show that between 2002 and 2006, China’s overseas non-financial direct investment grew by 60 percent annually. By the end of 2006, 5,000 Chinese companies had set up nearly 10,000 directly invested firms and invested $90.6 billion in 172 countries.

China’s overseas investment and aid mainly focuses on exploring oil and other resources, processing, manufacturing, and construction in African and Southeast Asian countries. Without proper management, such projects are likely to cause environmental problems, the report said.

In April, several companies, including China Mobile, Haier Group, and China International Marine Containers, joined “Caring for Climate”, a voluntary UN initiative to combat global climate change. Liu Meng, director of UN Global Compact China Office, told China Daily earlier that these companies’ participation suggests that China’s business sector is catching up with its international counterparts on climate issues.

China National Petroleum Corporation, the country’s largest oil producer, has pledged to stick to stringent environmental requirements before deciding on overseas projects.

Currently, only four banks in China have either formulated independent environmental standards for financing, or have joined the United Nations Environment Program Finance Initiative to reduce environmental risks.

Banks consider how to include climate change in their investment decisions

London, 11 January: A group of investment banks is to investigate how best to include climate change in investment decisions.

The London Accord will seek to provide investors with more information on how best to make investments that address climate change. Sponsored by the City of London Corporation and BP, the project already has the support of investment banks including Morgan Stanley, Bank Sarasin, HSBC, Société Générale, Credit Suisse and Canaccord Adams.

“If you look at the field of climate change and investment decision-making, lots of people are aware of it and want to integrate it into their decisions. But not many people are sure of how you go about it,” said project director Jan-Peter Onstwedder, who was previously head of risk in BP’s supply and trading business.

Extract from Environmental Finance

2005 was a record year for investment in the renewable energy sector

Investment rose from from USD 30 billion in 2004 to USD 38 billion in 2005. A REN21 report estimates that at least 85 renewable energy companies or divisions have market valuations greater than USD 40 million, up from 60 companies or divisions in 2004. The estimated total market valuation of companies in this category is USD 50 billion, double the 2004 estimate, as several high-profile initial public offerings have recently taken place. The solar PV industry invested record amounts in new plant and equipment (about USD 6 billion), as did the biofuels industry (more than USD 1 billion).

In the last year there were many new policies adopted to support renewable energy, and several more were extended, revised, or discussed. Not only were the EU and US active, but more than 16 developing countries as well, including Brazil, China, Egypt, India, Mexico, Thailand, and Uganda.

A number of countries dramatically stepped up targets and mandates for biofuels – ethanol and biodiesel mixed with conventional fuels. The number of countries with “feed-in” policies for the purchase of power from renewable sources increased to 41, and the number of countries with future targets for the share of energy from renewables increased to at least 49.

Interesting Presentations on the Environmental Responsibility of Banks

UNEP FI have made the following presentations available on their website, following a conference on sustainable banking. The presentations contain valuable insights into the benefits of environmental risk management and green products in relation to the topics listed below:

UNEP FI and the two Greek sustainability leaders Eurobank EFG and Emporiki, hosted a one-day conference on sustainable banking. UNEP FI was delighted to welcome a representative of the European Commission as a keynote speaker at the event. The event was supported by the EBRD.

Presentations

• Opening remarks
  Paul Clements-Hunt, UNEP Finance Initiative
• The role of the financial sector in achieving a better environment – EU perspectives and initiatives
  Jorge Pinto Antunes – European Commission
• Eurobank EFG’s motivation for environmental responsibility
  Nikos Pavlidis, Eurobank EFG
• What is the motivation for a Greek Bank to take environmental responsibility? What are the business areas where environmental concern plays a role?
  Evangelos Athanasiou, Emporiki Bank
• Environmental regulations with relevance for financial institutions: the Greek and European legal framework
  Fotis Kourmousis, Union of Environmental Scientists of Greece
• The materiality of social and environmental issues to equity pricing
  Gianluca Manca, Sanpaolo IMI Asset Management
• Greening the banking products
  Dimitris Starogiannis, Eurobank EFG
• Integrating environmental criteria to credit policy
  Stella Kovlaka, Emporiki Bank
• Responsibility for Brownfields Revitalisation
  Sultana Gruber Unicredit/Bank Austria Creditanstalt
• EBRD – Your partner in eastern Europe, Caucasus and Central Asia
  Mark Rachovides, EBRD
• Environmental risk assessment – Guidance from the EBRD
  Mark King, EBRD
• Climate Change: Scientific basis and risks for the finance sector
  Dr. Hadjinicolaou, University of Athens,
• Meeting investors’ expectations
  Esther Garcia, CoreRatings – DNV

Project Finance for Renewable Energy is now a rapidly growing market

The number of project finance deals in the Remewable Energy sector is growing more rapidly than ever, Richard Stuebi explains why:

Structured energy project finance has been relatively commonplace in supporting the development of new energy facilities over the past 20 years. Central to the concept of project finance is disaggregating risk and parceling it out to specific parties who can accept that risk. As a result, project finance works great for the 30th or 40th deal of the exact same type, but it is typically very hard to use project finance approaches for funding the development of facilities using innovative technologies or commercial arrangements.

Accordingly, project finance has historically been somewhat problematic for renewable energy interests to procure. Financiers central to structuring the deal were either unfamiliar or uncomfortable with the risks posed by renewable energy technologies, most of which have not been in commercial operation for decades. This lack of project finance capacity has thus been a major barrier to the widespread deployment of otherwise viable renewable energy technologies in commercial-scale projects.

The good news is that project finance capacity is increasingly opening its doors to renewable energy opportunities. Financial professionals with deep knowledge of the true abilities of renewable energy are finally beginning to amass capital to deploy in sponsoring the development of renewable energy projects.

posted by Richard T. Stuebi click here to link to full article

Project Finance International have just published a new report Financing Renewable Energy: Funding the Clean Alternative, which (for a price) gives details on every renewable financing deal this millennium, plus analysis on future prospects.

Dutch banks are asked to improve their Climate Policies to catch up with big international banks

Banks are increasingly being asked by NGos and shareholders to ensure they have adequate investment policies in place and to ensure their investments are sustainable. This includes directing a suitable proportion of their investment towards solutions for climate change. It is good to see big international banks setting the standard and acting as a driving force for improvements across the market.

A report comparing the nature of Dutch bank investments has claimed that the climate policies of the big Dutch banks are insufficient and lag behind those of big international banks such as the Bank of America and Citigroup: ‘Investing in Climate Change: the Role of Dutch Banks and the Climate Performance Index. Friends of the Earth Netherlands (Milieudefensie) today presented these results during the annual meeting of the branch organisation for Dutch banks, NVB and called on all Dutch banks to improve their climate policies.

Many international banks recognise the role they play in causing climate change. They accept their responsibility by investing billions in the solution. Carbon dioxide (CO₂) emissions are a criteria for approving investments and loans at the Bank of America, J.P. Morgan Chase and Citigroup. The Bank of America has a seven percent reduction target for the CO₂ emissions of its investments in the energy sector.

The research for ‘Investing in Climate Change: the Role of Dutch Banks’, was conducted by Dutch Sustainability Research. The report and the Friends of the Earth Netherlands’ Climate Performance Index suggests that Dutch banks are failing in the area of climate policies. They claim that they lack concrete targets to reduce the greenhouse gas emissions of their investments.

HSBC awarded Sustainable Bank of the Year by the FT

HSBC has bagged the title of sustainable bank of the year at the Financial Times Sustainable Banking Awards.The bank was praised by the judges for its “impressively integrated… emphasis on the triple bottom line”, its readiness to grasp sustainability-related opportunities as well as avoid risk, and its leading position on climate change – including its decision to go carbon neutral.

Brazilian bank ABN Amro Real was named emerging markets sustainable bank of the year, after the judges drew attention to its role in developing the BOVESPA sustainability index and launching Brazil’s first carbon credit fund.