News June 2008

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

Fund managers ‘a long way’ from addressing environmental risks

The fund management industry as a whole increasingly recognises that environmental, social and governance issues can influence risk and drive returns, but it is struggling to integrate theminto its day-to-day operations, according to a new study.

“We see pockets of excellence in getting these activities and processes developed, but … as a whole, the industry has a long way to go,” said Will Oulton, co-founder of RImetrics, a recently formed responsible investment specialist. “But what’s clear is that there is recognition across a broad church that these issues can affect value at risk and returns.” More...  

Carbon market worth $64bn in 2007 – World Bank

The value of the global carbon market doubled last year, to $64 billion, the World Bank said last month in its annual State and Trends of the Carbon Market report. However, growth in transactions from new Clean Development Mechanism projects came to a halt last year and risks plummeting as the Kyoto Protocol’s expiry in 2012 nears.

A doubling in value of the EU market underpinned the growth, with the EU Emissions Trading Scheme worth $50 billion. More than 2 billion EU allowances were traded last year, up from 1.1 billion in 2006. More...  

China quake shakes carbon credit supply

The impact of the 12 May earthquake in China’s Sichuan province on scores of hydropower projects in the area, as well as the extent of damage to the country’s largest manufacturer of power generation equipment, remains unclear.

The magnitude 7.9 quake has claimed at least 50,000 lives and shook the centre of China’s hydropower industry – with damage to 391 dams in the area, the government said. According to Laurent Segalen, head of global carbon emissions at Lehman Brothers, hydropower projects representing 15 million tonnes of carbon credits generated annually under the Clean Development Mechanism are within 150km of the earthquake’s epicentre. More...

Private equity giant to develop environmental metrics

Leading US private equity firm Kohlberg Kravis Roberts & Co (KKR) is to require companies in which it invests to measure and improve their environmental performance, in a partnership with Environmental Defense Fund. The two organisations are to develop pilot metrics that they hope will be rolled out across KKR’s portfolio and, ultimately, more widely.

“The private equity model of ownership is unique … in its use of metrics to improve performance, and in that companies are not hostage to quarterly reporting,” said Ken Mehlman, head of global public affairs at KKR. “This will help us to improve environmental performance in [investee companies] over the long term.” More...  

Shell turns away from landmark wind project

Royal Dutch Shell is weathering a storm of criticism after confirming plans to sell its stake in the London Array – a massive 1,000MW offshore wind farm.

Shell was one of the founding members of the consortium launched in 2001 to erect 341 wind turbines in the Thames Estuary. If built, the £2.4 billion ($4.8 billion) wind farm could supply up to a quarter of the electricity for Greater London. All major planning consents were granted in March this year, which was thought to have cleared the way for the project to go ahead. More...  

Biofuel-friendly US Farm Bill voted through with huge majority

The US Congress has voted overwhelmingly to pass legislation that shifts tax breaks towards cellulosic ethanol production and renews support for biodiesel production. Lawmakers are also debating revisions to the tax code that would stop ‘splash and dash’ trades, which has led to the EU being flooded with cheap biodiesel routed via the US.

The majorities in the House of Representatives and Senate votes were sufficiently high to override a veto by President George Bush, who criticised the 2007 Farm Bill for increasing subsidies to farmers and failing to implement reforms. More...  

Exxon resists shareholder revolt on climate, governance

ExxonMobil has resisted pressure to strengthen its response to climate change by the descendants of the company’s founder, John D Rockefeller, as well as by large institutional shareholders, including the $250 billion California Public Employees Retirement System.

At ExxonMobil’s annual meeting on 28 May in Dallas, four resolutions related to climate change and a proposal to split the now combined positions of chairman and CEO attracted good support, but failed to win over the majority of shareholders. More...  

Rapporteur calls for EU biofuels target to be scrapped

A key figure in the European Parliament is calling for the proposed 10% biofuels target to be scrapped, and alterations to plans for member states to meet challenging renewable energy targets through a trading scheme.

Claude Turmes, Greens MEP and rapporteur for the renewables package in the Parliament, said that there is “overwhelming evidence” to suggest that the target of supplying 10% of Europe’s transport fuel from renewable sources by 2020 should be binned. More...  

McCain’s plan opens door to offsets

Presumptive Republican presidential candidate John McCain unveiled his climate change plan on 12 May, calling for a cap-and-trade scheme that would initially allow the use of offset credits for 100% of compliance. He also pledged to engage in UN-led negotiations on a successor agreement to the Kyoto Protocol, which expires in 2012.

“Our government must strike at the source of the problem – with reforms that only Congress can enact and the president can sign,” McCain said, and vowed to support state-led initiatives, using a federal scheme to tie them together. “As a nation, we make our own environmental plans and our own resolutions. But working with other nations to arrest climate change can be an even tougher proposition,” he added, citing the need for India and China, among other developing nations, to transition to a low-carbon economy – aided by the developed world. More...  

$20bn boost for US wind power supply chain

Companies supplying the US wind-energy industry should be the biggest winners of plans by Texas oilman T Boone Pickens to build America’s largest wind farm in the Texas panhandle, analysts say.

Pickens’ Mesa Power has begun ordering turbines for a proposed 4,000MW, 400,000- acre wind farm called the Pampa Wind Project, which will eventually power 1.3 million Texas homes and cost Mesa Power around $12 billion to build.The first phase of the project should start generating electricity in 2011. More...  

Coalition questions EBRD and IFC financing for ArcelorMittal

Multilateral banks are under fire for continuing to finance the expansion of ArcelorMittal, despite the steel giant’s questionable record on meeting environmental, social and human rights standards.

The European Bank for Reconstruction and Development and International Finance Corporation have been criticised for providing $692 million in financing for ArcelorMittal over the past 10 years, in a report from a newly-formed coalition of environmental and community groups,GlobalAction on ArcelorMittal. More...  

Noble Environmental to blaze trail with Nasdaq IPO

US wind energy developer Noble Environmental Power has filed plans to raise up to $375 million via an initial public offering on Nasdaq – the first time a significant US wind energy developer has tested the public markets.

On 8 May, the Connecticut-based developer filed registration documents with the Securities and Exchange Commission, naming Lehman brothers, JPMorgan and Credit Suisse as underwriters. However, it did not disclose when it hopes to float, nor how much of the company will be floated. More...  

Supply chains targeted to disclose carbon risk

The Carbon Disclosure Project is sending a second series of questionnaires to more than 1,000 companies supplying major multinational businesses, to try to understand better the climate risks in supply chains.

There is growing interest in the carbon produced in supply chains where, for many sectors, the majority of greenhouse gas emissions are generated through activities such as processing, packaging and transportation. More...  

Troubled carbon firms set for takeovers

Carbon project developers Econergy and AgCert are both set to be taken over, following troubled times for both firms.

Econergy has received an offer from fellow London-listed project developer Trading Emissions (TEP), for £27 million ($54 million). The offer was structured as either a cash payment of £0.30/share or 0.233 of a TEP share for each Econergy share (which closed at £0.295 on 14 May, the day before the offer was announced). More...  

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