News April 2008

The following are summaries of news stories from the April 2008 print edition of Environmental Finance magazine

Catastrophe risk markets explode

Record volumes of catastrophe (cat) bonds were issued in 2007, as demand from investors continued to outstrip issuance, according to an annual review of the market by Guy Carpenter. Secondary trading of cat bonds has also soared, as has a new market for cat derivatives, say participants.

Albert Selius, head of the insurance-linked securities trading desk at Swiss Re Capital Markets in New York, said the firm’s business in cat derivatives has exploded, from a couple of million dollars in 2006 to around $1.5 billion in 2007, driven by growing hedge fund interest. These contracts either reference an existing cat bond, or an industry loss index, giving participants an alternative to industry loss warranties. More...  

Innovest claims (partial) ESG win on Bear Stearns

Innovest Strategic Value Advisors raised concerns last July over exposures at Bear Stearns to “unanticipated environmental and social shocks (especially in the sub-prime sector)”. The New York-based investment research house awarded the stricken bank a “sub investment-grade” rating – in marked contrast to ‘buy’ recommendations from some Wall Street analysts at the time, Innovest has said.

“In our view, Bear Stearn’s historic collapse represents an important ESG milestone in the finance sector,” said senior analyst Greg Larkin in late March. “It illustrates with alarming clarity that key environmental and social megatrends (in this case that poor people had been saddled with more debt than they could repay) are reconfiguring the financial risk landscape.” More...  

Bellwether carbon stocks see mixed fortunes

Shares in Climate Exchange have soared in recent weeks, following its first reported profit since the company floated in 2003. Meanwhile, leading listed greenhouse gas emissions reduction project developer EcoSecurities has seen a recent rally in its share price peter out, after disappointing analysts with its 2007 numbers.

Climate Exchange, operator of the leading carbon credit exchanges in Europe and the US, announced last month a £850,000 ($1.7 million) pre-tax profit for 2007, compared with a £5 million loss the previous year. Revenues more than tripled to £13.6 million last year, from £3.9 million in 2006. Its shares closed at £16.72 on 25 March, up from a low of £8.45 on 11 January. More...

SRI outpacing broader market – reports

Investors are pouring more money than ever into socially responsible, ethical and sustainable funds, according to three new reports.

US assets managed using socially responsible investment screening, shareholder advocacy or community investment strategies grew 18% between 2005 and 2007, or to $2.71 trillion from $2.29 trillion, according to a report by the Washington, DC-based Social Investment Forum. This represents around one in every nine dollars under professional management in the US. More...  

Europe’s leaders set timetable for climate package

European leaders agreed on 14 March to adopt legislation in 2009 to slash carbon dioxide emissions and increase the use of renewable energy, but underlined that European industry must not suffer as a result of these measures.

Speaking after the EU spring summit in Brussels, European Commission president José Manuel Barroso said leaders hoped to get political agreement on the climate change package – unveiled by the Commission in January – by the end of 2008, which should allow for its adoption in 2009. More...  

HSBC to make $600m push into green infrastructure

Banking giant HSBC is hoping to raise $600 million into its newly launched Environmental Infrastructure fund, but has already announced its first investment, in UK-based wind farm developer Partnership for Renewables (PfR).

The UK-based bank has invested £18 million ($36 million) to take 49% of PfR, and will provide £30 million of construction finance to help the developer build out a 500MW portfolio of wind farms on publicly-owned land. PfR was created by an arm of the Carbon Trust, a UK government-funded organisation with a mandate to help develop the UK’s low-carbon economy. More...  

OPIC to offer $500m for renewables funds

The US Overseas Private Investment Corporation (OPIC) is planning to seed up to five private equity renewable energy funds with a total of $500 million. OPIC, a US government agency that provides risk financing to help US businesses invest in emerging markets, put out a request for proposals for the fund managers at the Washington International Renewable Energy Conference on 5 March.

“This tracks very closely with an initiative we took last June to launch our own greenhouse gas policy,” OPIC president and CEO Robert Mosbacher told Environmental Finance. “That includes reducing the carbon footprint of all of OPIC’s projects by 20% over 10 years … and aggressively pursuing renewable energy projects.” More...  

China issues environmental insurance, securities diktats

China’s State Environmental Protection Agency (SEPA) has issued ‘green insurance’, ‘green securities’ and ‘green trade’ regulations, three of five expected ‘green economic’ schemes. The regulations are part of an ongoing policy shift from “top-down, administrative means” towards bottom-up, market-based solutions for China’s environmental problems – but observers question the degree to which the agency will be able to enforce the new rules.

SEPA and the China Insurance Regulatory Commission are to begin a green insurance pilot programme this year, compelling large Chinese companies in petrochemicals, hazardous chemicals and other heavily polluting industries to purchase environmental liability insurance. “Enterprises and industries having caused serious pollution accidents in recent years will be specially targeted,” SEPA vice-minister Pan Yue said in a statement. More...  

EU producers threaten action against US biodiesel subsidies

The European Biodiesel Board (EBB) was due to file a formal complaint against US biodiesel subsidies as Environmental Finance went to press in late March. The move is an attempt to stem the flow into Europe of cheap biodiesel imports from the US.

EBB secretary general, Raffaello Garofalo, told the recent Bioenergy Europe 200 conference in London that the subsidy – equivalent to about $300/tonne – made imports cheaper than biodiesel raw materials bought by EU companies. “We are fed up with the situation,” he warned.“This is an unfair trade practice and I hope that we can stop it.” More...  

New standards to boost NOx market

The US Environmental Protection Agency has lowered the eight-hour ground-level ozone standard to 0.075 parts per million (ppm) from 0.08 ppm, a move expected to have significant implications for new power sources and other emitters of ozone-creating nitrogen oxides (NOx).

The new National Ambient Air Quality standards, released on 12 March, will also lead to an expanded, and likely more competitive, market for NOx emission reduction credits, said Peter Zaborowsky at broker Evolution Markets. More...  

Auction roils SOx market for climate package

Prices for US sulphur dioxide (SO2) allowances under the acid rain control scheme slumped at the end of March, following the annual Environmental Protection Agency (EPA) auction – in which compliance buyers were conspicuously absent.

The EPA sold 250,000 SO2 allowances for a total of $65.7 million on 25 March, including 125,000 spot allowances, which went for an average of $389.91 a ton, and 125,000 allowances for 2015, which sold at $136.14/t. More...  

Key US regulator predicts explosive growth in carbon trading

Carbon trading could become one of the largest commodity markets in the world in the coming years, a leading US market regulator has predicted.

In bullish remarks to Environmental Finance’s sister publication, Carbon Finance, commissioner Bart Chilton of the Commodity and Futures Trading Commission described carbon trading as “the most exciting and forward-thinking area in the derivatives industry ”and suggested that it “could be bigger than just about any product we have out there ... as early as within four or five years”. More...  

US power plant emissions up 12% in past decade

Carbon dioxide (CO2) emissions from power plants in the US have risen by 11.7% since 1997, with last year’s 2.9% increase the largest single-year rise in the same period, according to a report by the Washington,DC-based non-profit Environmental Integrity Project.

CO2 emissions totalled 2.6 billion tons (2.4 billion tonnes) last year, up from 2.5 billion in 2006. Texas was the most-polluting state, accounting for 262 million tons of CO2 – nearly double the amount of the second-largest polluting state, Ohio, with 139 million tons. More...  

WRI offers industry ecosystem guidelines

The World Resources Institute has developed guidelines for businesses to better understand, and profit from, the link between healthy ecosystems and the bottomline.

The guidelines were created in collaboration with the World Business Council for Sustainable Development and the Meridian Institute, a consultancy. They are a response to the Millennium Ecosystem Assessment, a four-year audit of worldwide ecosystems completed for the UN in 2005, said Craig Hanson, deputy director of WRI’s people and ecosystems programme, and lead author of the guidelines. More...  

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