News July/August 2007

The following are summaries of news stories from the July/August 2007 print edition of Environmental Finance magazine

US Congress poised for energy, climate breakthrough

Hopes are high that the US Congress could pass far reaching energy and environmental legislation in the autumn, following changes of heart from key representatives, and plans for two comprehensive Senate bills tackling greenhouse gas (GHG) emissions.

On 29 June, John Dingell, chairman of the House of Representatives energy and commerce committee, promised legislation to cut GHGs 60–80% by 2050. The Democrat represents Detroit, the heart of the US automobile industry, and has baulked in the past at regulating GHGs.

Two days earlier in the Senate, Republican John Warner agreed to work with Independent-Democrat Joe Lieberman on climate legislation. The announcement was described as a “milestone” by Barbara Boxer, chairwoman of the environment and public works committee.

UK outlines energy efficiency trading scheme

The UK government has published a detailed plan for its proposed cap-and trade scheme to encourage energy efficiency among big energy consumers.

The Carbon Reduction Commitment (CRC) will be a mandatory, auction-based emissions trading scheme, explicitly designed to encourage energy efficiency.

According to proposals outlined in a consultation document published on 26 June, it will cover most organisations that use more than 6,000MWh a year of electricity. The CRC is expected to cut emissions by some 3.7 million tonnes of carbon dioxide (CO2) a year by 2020.

Investment banks launch voluntary carbon standard

A group of European investment banks have waded into the increasingly crowded market for standards for voluntary carbon offsets – in an effort that cuts across other existing and planned initiatives.

European Carbon Investors and Services (ECIS) – which counts ABN Amro, Barclays Capital, Fortis and Morgan Stanley among its members – says the Voluntary Offset Standard (VOS) will bring a level of assurance to the voluntary market equal to that of the compliance market by following the procedures established by the Kyoto Protocol’s Clean Development Mechanism (CDM) and Joint Implementation systems.

Finance sector in the dark on biodiversity risks

The financial sector has a long way to go to understand the rising risks posed by biodiversity loss, according to the author of a report on the subject for the IUCN–World Conservation Union. More work particularly needs to be done to make the link between loss of biodiversity and financial impacts, he said.

“If biodiversity continues to be degraded … supply chains will be more closely scrutinised, and there will be more risks to the bottom lines of businesses,” said Ivo Mulder, author of Biodiversity, the Next Challenge for Financial Institutions. As providers of capital to high-biodiversity impact companies, banks will face both reputational exposures and direct financial impacts, he argues.

Swiss Re bids to boost cat bond trading

Swiss Re has started indexing the performance of catastrophe (cat) bonds in a bid to increase the transparency and encourage secondary trading of the rapidly growing asset class.

Cat bonds allow the insurance industry to lay off natural catastrophe risk to the capital markets. Around $4.9 billion worth of such bonds were issued in 2006, double the previous year, with $3.8 billion issued in the first six months of 2007.

Leaf float raises £200m for North American renewables

EEA Fund Management and Shaw Capital have raised £200 million ($403 million) to invest in North American renewable energy projects through London’s Alternative Investment Market (AIM) market.

The two firms listed Leaf Clean Energy Company on AIM on 28 June, selling all available shares to 20 institutional investors, including UK pension funds. Leaf already has a pipeline of wind, hydro, geothermal and biofuels projects in which to invest and expects to commit the full £200 million within 18 months. Each investment will typically involve $20 million–30 million of equity, and Leaf plans to stay invested in these projects for five years or more.

US firms underestimating shareholder interest in CR

US corporations underestimate the importance placed on corporate responsibility (CR) by shareholders, according to a survey by Thomson Financial.

Although 78% of US investors surveyed by the data provider said that CR is important in their investment decisions, investor relations officers (IROs) underestimated the emphasis placed on the issue – only 8% believe that shareholders viewed it as very important, although 36% of investors gave it this rating.

And while 73% of investors said that corporate responsibility issues affect share prices, only 59% of IROs agreed.

Solar IPO enthusiasm remains undimmed

A spate of photovoltaic (PV) manufacturers have come to market with well received initial public offerings (IPOs) in recent weeks, tapping into growing investor enthusiasm for solar power.

Solaria Energia, PV Crystalox, LDK Solar, Jetion Holdings and Yingli Green Energy all saw share prices rise after successful IPOs.

OECD bolsters environmental guidelines for ECAs...

OECD countries have tightened the environmental standards a project must meet to receive support from their export credit agencies (ECAs).

The updated recommendation on common approaches to the environment calls on ECAs in OECD countries to assess the environmental impact of projects using the policies of the World Bank and the International Finance Corporation’s Performance Standards.These are similar to the environmental tests projects must pass to receive financing from banks under the Equator Principles.

...while OPIC caps carbon emissions

The Overseas Private Investment Corporation (OPIC) has promised to cut emissions from the projects it finances by 20% over 10 years, but environmentalists have slammed the move as insufficient.

The Washington, DC-based agency, which is part of the US government and supports US private sector overseas investment, plans to cap annual, direct greenhouse gas (GHG) emissions from projects it supports at 54.7 million tons of carbon dioxide equivalent (CO2e) – the level of emissions from its portfolio in fiscal year 2007.

Canadian travellers offered snow risk bet

WeatherBill, an online weather risk management service launched in January, has struck its first major deal that could provide up to C$100 million (US$95 million) of coverage in the event of heavy snowfall at Canadian airports.

Canadian online travel retailer itravel2000.com has launched a sales promotion that will refund customers the entire cost of their winter holiday if more than five inches of snow lands on New Year’s Day 2008, at Calgary, Halifax, Montreal or Toronto airport, whichever is closest to the customer – and even if the holiday is unaffected.

EPA offers tougher ozone rules

The US Environmental Protection Agency (EPA) has proposed stricter rules for ozone levels. Although environmental and health groups complain that the agency’s plan is not sufficient, any change could impact revisions to power plant emissions regulations.

On 21 June, the EPA proposed changing rules to control ground-level ozone, which can aggravate asthma and other conditions. Ozone is created when nitrogen oxides (NOx) – emitted by power plants and vehicles – combine with volatile organic compounds (VOCs) in sunlight.

go to Features July/August 2007