News September 2000 UK emissions trading plan gets £30 million boost Plans for the UK to launch a national market in greenhouse gas emissions in April next year are still on track thanks to thepromise of £30 million ($45 million) in government incentives to kick-start the scheme. Continuing industry pressure for furtherchanges to the controversial climate change levy (CCL) another major plank in the government's climate change policy is unlikely tojeopardize the start of trading despite the close links between the two measures, insiders say. News of the £30 million was welcomed by leading industrialists, "We are very pleased ... we are now working with the government toget a UK scheme up and running as soon as possible," says John Cridland, deputy director-general of the Confederation of BritishIndustry. "It's what we were asking for," adds Margaret Mogford, head of the secretariat at the Emissions Trading Group (ETG), an associationof more than 100 companies and trade associations which is working on the detailed design of the proposed trading scheme. The Apriltarget date was chosen largely because that is when the CCL is due to be introduced. But, says Mogford, "trading has got it's ownmomentum now." Consortium opens one-stop CDM shop A consortium of five companies are to set up what they call a "one-stop shop" for Clean Development Mechanism (CDM)projects. The web-based venture will aim to bring together potential projects with investors, and connect users with verification,certification and risk management specialists. The consortium comprising consultants Arthur Andersen, French investment bank Credit Lyonnais, insurance company Jardine LloydThompson and inspection agencies Det Norske Veritas and SGS hopes to have the website, www.cdm-marketplace.com, up in time forCOP 6, the annual UN climate change meeting, which is to be held in The Hague in November Dow Jones reveals sustainability leaders Dow Jones Sustainability Group Indexes (DJSGI) has unveiled, for the first time, all 200-plus constituents in its family ofsustainability indexes which it launched 12 months ago. The Zurich-based company, a partnership of Dow Jones and Switzerland's SAMSustainability Group, had previously named only the top one or two companies in each of the main economic sectors. This increased openness should boost demand for investment products linked to the indexes, says Ivo Knoepfel, head of rating and indexresearch at SAM. Assets under management linked to the DJSGI indexes now total around 1.3 billion euros ($1.17 billion), he says. Henderson team defects to Morley Morley Fund Management, the asset management arm of UK insurer CGNU, has recruited the bulk of Henderson Investors' sociallyresponsible investment (SRI) team, and will begin to apply SRI principles to parts of CGNU's £200 billion ($300 billion) of assets. Theteam is also charged with building up Morley as a force in the UK SRI investment market, which analysts say is poised for dramaticgrowth. "The team will initially have a portion of CGNU's assets to manage on an SRI basis," says Mark Miller, head of marketing at Morley. Ithas not yet been decided how much of CGNU's total assets will be subject to SRI principles, he says. In-flight emissions trading? International civil aviation should be included in the emissions trading regime proposed under the Kyoto Protocol, says TheInstitute for Public Policy Research (IPPR), an influential UK think tank. The 1997 agreement to limit emissions of greenhouse gases (GHGs) treats domestic and international aviation differently. The former isincluded in national targets for emissions cuts; the latter is excluded from the agreement. "International aviation slipped through the netat Kyoto," says the IPPR in a new report Plane Trading. International flights should be treated in the same way as domestic flights and other sectors of the economy and be subject to a 5.2%reduction in carbon dioxide (CO2) emissions from 1990 levels by 2008-2012, say the report's authors Chris Hewitt and Julie Foley."Emissions trading is an effective policy instrument because it can ensure the certainty of emissions reductions at the least cost to theeconomy," they say. Neither taxes on jet fuel nor voluntary agreements to improve fuel efficiency can guarantee that emissionsreductions will be achieved, they add. Natsource looks to Asia Natsource is to set up a joint venture with Mitsubishi which the US broker hopes will give it a head-start in Asia's emergingenvironmental and electricity markets. The Japanese trading giant is to take an 7% equity stake in the company, for $3.5 million. "The Japanese and Asian electricity and environmental trading markets are just emerging, but they have the potential to quickly evolveinto the largest in the world," says Jack Cogen, president of Natsource UK urged to cut more carbon For would-be weather hedgers, hungry for high quality data, famine is rapidly turning to feast. Two US firms have begun offeringoff-the-shelf temperature data for hundreds of US cities reaching back as far as 50 years. Such data is essential to help companiescalculate the fair value of derivatives contracts which they can use to protect their revenues from adverse weather. Initially, the two rival data sets cover only temperatures for US cities, but both providers Risk Management Solutions (RMS) andApplied Insurance Research (AIR) plan to extend their coverage to European and Asian cities and to include other weather variablessuch as precipitation. Both companies deliver the data via the internet. Liffe mulls alternative weather contracts Two leading weather derivatives firms have suggested that Europe's first exchange-traded weather contract should bereferenced to a new temperature index. This would be a departure from the over-the-counter market's current focus on heating degreeday (HDD) contracts. Representatives of French bank SG, and US energy giant Enron who are members of the weather advisory group of the LondonInternational Financial Futures and Options Exchange (Liffe) say the exchange should consider listing contracts referenced to averagetemperatures. In contrast to HDDs a measure used in the gas and electricity industries average temperature indexes are readilyunderstood by a wider range of potential contract users, they argued at a July meeting. Liffe is consulting with market participants on the proposal, says senior analyst Matt Evans. "We're considering all the possibilities we intend to explain the average temperature contract, and if people go for it, fine." Nonetheless, Evans believes that the exchange islikely to favour HDD-based contracts. Liffe hopes to have weather products ready for the start of next year. SFE carbon contract goes up in smoke The Sydney Futures Exchange (SFE) has abandoned its plans for the world's first carbon emissions contract. But its partner in theproposed contract State Forests of New South Wales will press ahead with work to establish a benchmark price for carbonsequestration credits. In August, the SFE said it is reconsidering all its proposed contracts in the light of its demutualisation. "The SFE has decided to reviewits commitment to carbon trading. The commercial viability of carbon credits at least in the near term is not proportionate to otherbusiness initiatives," a spokesman told Environmental Finance Stakeholder value quantified A new methodology has been developed to assess how much value is created or destroyed by companies' stakeholders'. Themethodology is designed to help management and analysts quantify the effect of a company's relationships with its employees,government and customers. "Traditional accounting methods no longer capture what is creating value," explains Frank Figge, sustainability consultant at Pictet, aSwiss Bank. Figge developed the methodology with Stefan Schaltegger of the University of Lueneburg, and in association with the UnitedNations Environment Programme. FIGS sows sustainable finance seeds A group of leading sustainable finance specialists has launched a new institute to provide a web-based collection of information onthe incorporation of sustainability issues into financial decision-making. The Financial Institute for Global Sustainability (FIGS) aims tohelp companies and individuals understand "the correlation between sustainability and improved financial performance". FOR THE FULL STORY EVERYMONTH, SUBSCRIBE TO ENVIRONMENTAL FINANCE, OR CONTACT info@environmental-finance.comFOR OUR BACK ISSUES SERVICE