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News September 2002
Aquila weather head optimistic on rescue 
The head of weather risk management at Aquila is confident that he will find a new sponsor for his team – and hold together the consortium of four reinsurers that had bought into the troubled energy group’s weather portfolio.
“The existing partners have agreed to continue their support for the team, and they’ve asked us to find a sponsor to step into Aquila’s shoes,” Ravi Nathan told Environmental Finance.
French government backs domestic GHG market
French business organisations have won government backing for a series of voluntary measures to reduce their emissions of greenhouse gases (GHGs).The proposals, which include an experimental GHG emissions trading scheme,were approved by the new right-of-centre government in late July.
The bulk of the reductions are expected to come from enhancements to production processes but the ‘flexibility mechanisms’ defined in the Kyoto Protocol are also likely to be used. These mechanisms allow investors to claim ‘carbon credits’ for investing in projects that reduce or avoid emissions.
CDM jigsaw falls into place
Key documents setting out how to register projects under the Clean Development Mechanism (CDM) are to be released on 29 August.“As of that day, the CDM will be operational,” says Christine Zumkeller, Bonn-based secretary to the CDM Executive Board.
The CDM is one of the Kyoto Protocol’s flexible market mechanisms for combating climate change. Investors in CDM projects that reduce or avoid greenhouse gas emissions in developing countries earn ‘carbon credits’, which they can sell or count towards emissions targets. It is designed to encourage sustainable investments from North to South, and was originally intended to be operating by 2000.
FTSE-100 coal firm accused on listing rules
Xstrata, one of the 100 largest UK listed companies, broke stock exchange disclosure rules when it was floated in March, Friends of the Earth (FoE) alleges. An FoE report found “30 specific failures” in the UK-based mining firm’s listing particulars, mostly concerning its disclosure of risks posed to the company from efforts to tackle climate change.
FoE is calling on the Financial Services Authority, which regulates the London Stock Exchange, to publicly censure both Xstrata and JP Morgan, the US bank which was the firm’s sponsor and financial advisor.
Neither Xstrata nor JP Morgan would comment in advance of the FSA's response.
Green certificates spread across Europe
Major growth in the European market for renewable energy certificates is expected in coming months with new national trading schemes to be launched in Sweden, Italy and Belgium. And, by 2010, turnover in Europe as a whole could reach €20 billion–30 billion ($19 billion–29 billion), according to a recent study.
But it is not all good news.The new right-wing Dutch government has cut back support for renewable energy and in mid-September is expected to impose new restrictions on the domestic green certificate market. In addition, there are questions over the funding of the next phase of a voluntary industry initiative known as the Renewable Energy Certificate System. Market specialists are also concerned that the future could see a profusion of separate closed markets rather than a liquid, fungible international market.
Zurich Capital eyes carbon credits from forestry
Zurich Capital Markets (ZCM), part of the Zurich Financial Services Group, has set up a wholly-owned subsidiary to invest in forestry projects in Australia. The new company – Australian Forest Fund – will own and develop nearly 100,000 hectares of forest and land and will provide institutional investors with returns from both traditional timber operations and “the emerging market for carbon sequestration credits”, says Mike Watanabe, a managing director at ZCM.
Hancock Natural Resources Group (HNRG) will act as the investment manager for the fund. HNRG is the world’s largest forestry investment management organisation and currently manages some 1.2 million hectares in Australia and North America.
Industry predicts $11/tonne of CO2 in 2010
The price of a tonne of carbon dioxide (CO2) – the standard commodity in the emerging market for greenhouse gas emission reductions – will rise from an average of just over $5 in 2005 to around $11 in 2010, according to a recent survey commissioned by the Canadian environment ministry, Environment Canada.
The survey was conducted by energy and environmental broker Natsource and Canadian consultancy Global Change Strategies International, which was acquired by Natsource earlier this summer (see Environmental Finance July–August 2002, page 10). It was based on interviews with representatives of 35 companies, covering a range of industries, with operations in the US, Canada, Japan, the European Union and Russia.
Australian power retailers face GHG curbs
Electricity retailers in New South Wales (NSW) face mandatory limits on greenhouse gas (GHG) emissions – and an associated emissions trading scheme – following the failure of the existing voluntary scheme to generate the hoped-for reductions in emissions.
In the first year of the scheme, which is planned to come into force in Australia’s most populous state next January, retailers must ensure that no more than 8.65 tonnes of carbon dioxide or equivalent (CO2e) are emitted for each NSW resident. This is slightly above per capita emissions in 2000–01 of 8.42 tonnes/person. The target will decline to reach 7.27 tonnes by 2007, where it will remain until 2012.
Banks rate poorly on CSR
More than half of the leading financial institutions studied by Oekom Research for a corporate responsibility rating “proved to be so lacking in transparency that it was impossible to analyse their social and environmental activities in any depth,” says the Munich-based rating agency.
US firms JP Morgan Chase, Merrill Lynch and Morgan Stanley Dean Witter, and Japanese firms Nomura and Daiwa Securities Group were among the 50 companies that could not be rated because of insufficient information, making the sector one of the most opaque Oekom has measured under these criteria, it says.
Kingsway claims Asian SRI first
Kingsway Fund Management plans to launch what it claims will be the first Asian-domiciled sustainable investment fund investing in non-Japan Asia.The Kingsway Asia SRI Fund will apply both the negative screens that Hong Kong-based Kingsway applies to all its $100 million under management, as well as positive ‘responsibility’ and ‘sustainability’ screens.
“Within Hong Kong, there is a growing awareness of these issues,” says Euan Marshall, a director at Kingsway. “And outside Hong Kong,we’ll be presenting socially responsible investment as a source of capital – it’s an opportunity for companies to differentiate themselves to attract investment”.
Oregon funds more carbon offset projects
The Climate Trust – a non-profit that uses funds collected from new power plants in Oregon to offset their greenhouse gas emissions (GHG) – has announced two new carbon offset projects.
On 25 July, the Trust signed an agreement to invest $780,000 in the Deschutes Resources Conservancy to pay landowners to plant trees along the waterways of the Deschutes Basin and ensure they are maintained for 52 years. By 2006, between 1,500 and 1,800 acres of riverside land will be restored and sequestering carbon, the trust claims.
Also in late July, the trust said it would invest nearly $1 million in Portland to improve the energy efficiency of more than 12,000 apartments and 40 commercial buildings.The funding is intended to help the city achieve its goal of reducing local emissions of GHGs to 90% of their 1990 level by 2010.