The Time for a Green Stimulus is Now!

US President Barack Obama will today sign the $787bn (£551bn) economic stimulus package in Denver, Colorado with proponents of green business celebrating that a tenth of the money will be directly targeted at environmental initiatives.

Environmental America, a federation of state-based, environmental advocacy organizations, examined the final bill and said there were $32.80bn in funding for clean energy projects, $26.86bn for energy efficiency initiatives and $18.95bn for green transportation, giving a total of $78.61bn directly earmarked for green projects.  

Although this is not the initial $150bn promised for green projects, it marks a historic step in the right direction.  One that if followed worldwide, with a concerted effort, will dramatically change the face of the world for the better.  Ban Ki-moon, UN secretary-general and Al Gore, former US vice-president discussed this issue in an article in the FT yesterday that I have posted below.  

Al Gore is widely recognized for his groundbreaking film, 'An Inconvenient Truth' , but I believe many are unaware of his involvement in Generation Investment Management LLP.  Former U.S. Vice President Al Gore is chairman of Generation, and David Blood — previously chief executive of Goldman Sachs Asset Management — is CEO. The pair has given the company its nickname, "Blood and Gore."  Generation has built a global research platform to integrate sustainability research into fundamental equity analysis. The firm focuses on the economic, environmental, social, and governance risks and opportunities that can materially affect a company's ability to sustain profitability and deliver returns.    

Green growth is essential to any stimulus

By Ban Ki-moon and Al Gore

Published: February 16 2009 19:40 | Last updated: February 16 2009 19:40

Economic stimulus is the order of the day. This is as it must be, as governments around the world struggle to jump-start the global economy. But even as leaders address the immediate need to stimulate the economy, so too must they act jointly to ensure that the new de facto economic model being developed is sustainable for the planet and our future on it.

What we need is both stimulus and long-term investments that accomplish two objectives simultaneously with one global economic policy response – a policy that addresses our urgent and immediate economic and social needs and that launches a new green global economy. In short, we need to make “growing green” our mantra

First, a synchronised global recession requires a synchronised global res ponse. We need stimulus and intense co-ordination of economic policy among all main economies. We must avoid the beggar-thy-neighbour policies that contributed to the Great Depression. Co-ordination is also vital for reducing financial volatility, runs on currencies and rampant inflation as well as for instilling consumer and investor confidence. In Washington last November, G20 leaders expressed their determination “to enhance co-operation and work together to restore global growth and achieve needed reforms in the world’s financial systems”. This needs to happen urgently.

Stimulus is intended to jump-start the economy, but if properly conceived and executed it can also launch us on a new, low-carbon path to green growth. Some $2,250bn (€1,750bn, £1,569bn) of stimulus has already been announced by 34 nations. This stimulus, along with new initiatives by other countries, must help catapult the world economy into the 21st century, not perpetuate the dying industries and bad habits of yesteryear. Indeed, continuing to pour trillions of dollars into carbon-based infrastructure and fossil-fuel subsidies would be like investing in subprime real estate all over again.

Eliminating the $300bn in annual global fossil fuel subsidies would reduce greenhouse gas emissions by as much as 6 per cent and would add to global gross domestic product. Developing re newable energy will help where we need it most. Already, developing economies account for 40 per cent of existing global renewable resources as well as 70 per cent of solar water heating capacity.

Leaders everywhere, notably in the US and China, are realising that green is not an option but a necessity for recharging their economies and creating jobs. Globally, with 2.3m people employed in the renewable energy sector, there are already more jobs there than directly in the oil and gas industries. In the US, there are now more jobs in the wind industry than in the entire coal industry. President Barack Obama’s and China’s stimulus packages are a critical step in the right direction and their green components must be followed through urgently.

We urge all governments to expand green stimulus elements, including energy efficiency, renewables, mass transit, new smart electricity grids and reforestation, and to co-ordinate their efforts for rapid results.

Second, we need “pro-poor” policies now. In much of the developing world, governments do not have the option to borrow or print money to cushion the devastating economic blows. Therefore, governments in industrialised countries must reach beyond their borders and invest immediately in those cost-effective programmes that boost the productivity of the poorest. Last year, food riots and unrest swept more than 30 countries. Ominously, this was even before September’s financial implosion, which sparked the global recession that has driven a further 100m people deeper into poverty. We must act now to preventfurther suffering and potential widespread political instability.

This means increasing overseas development assistance this year. It means strengthening social safety nets. It means investing in agriculture in developing countries by getting seeds, tools, sustainable agricultural practices and credit to smallholder farmers so they can produce more food and get it to local and regional markets.

Pro-poor policy also means inc reasing investments in better land use, water conservation and drought-resistant crops to help farmers adapt to a changing climate, which – if not add ressed – could usher in chronic hunger and malnutrition across large swaths of the developing world.

Third, we need a robust climate deal in Copenhagen in December. Not next year. This year. The climate negotiations must be dramatically accelerated and given attention at the highest levels, starting today. A successful deal in Copenhagen offers the most potent global stimulus package possible. With a new climate framework in hand, business and governments will finally have the carbon price signal businesses have been clamouring for, one that can unleash a wave of innovation and investment in clean energy. Copenhagen will provide the green light for green growth.This is the basis for a truly sustainable economic recovery that will benefit us and our children’s children for decades to come.

For millions of people from Detroit to Delhi these are the worst of times. Families have lost jobs, homes, healthcare and even the prospect of their next meal. With so much at stake, governments must be strategic in their choices. We must not let the urgent undermine the essential. Investing in the green economy is not an optional expense. It is a smart investment for a more equitable, prosperous future.

Ban Ki-moon is UN secretary-general. Al Gore is former US vice-president

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Assessing Water Opportunities and Risks

Following my post on the drought in China, I came across this framework of guidelines for assessing the opportunities and risks posed by rising water stress from the United Nations Environment Program Finance Initiative (UNEPFI), which is a global partnership between UNEP and the financial sector. Over 170 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. It is titlted, Half Full or Half Empty? A Set of Indicative Guidelines for Water Related Risks and an Overview of Emerging Opportunities for Financial Institutions. If you would like a brief summary and analysis of water scarcity issues, which I will be expanding on in the future, I suggest you take a look at one of my previous posts titled, Blue Gold.
I used to have a gym teacher in junior high school that use to say to kids when they were out of line, "Listen son! You'd better ask yourself a question, is your glass half full or half empty?" in a Clint Eastwood, Dirty Harry manner. Coincidentally, he also led a class called outdoor education and was a rather environmentally focused individual. I'm happy to say that I learned the lesson he was trying to teach me, and that my glass will always be half full, the unfortunate thing is that more and more I begin to realize that the World's glass is half empty, and something needs to be done about it.

Drought in China Diminishes Wheat Crops

I apologize for the lack of posts this month, as I have been extremely busy so far in 2009. I am currently preparing many articles and working on additions to this blog, to improve access to resources and events focused on SRI.

Climate scientists working for the United Nations' Intergovernmental Panel on Climate Change (IPCC) have forecast more catastrophic weather events in the near future: more floods, hurricanes, tornadoes, wildfires, and droughts. Mainstream media worldwide have already reported on the significant increased unpredictable and extreme weather events linked to global warming

Let's take a very brief glimpse at China’s water problems associated with climate changed-induced extreme weather events in the past two years:

• Begun on May 26, 2008, the 20-day torrential rains, floods, and landslides in the 15 provinces of eastern and southern China left more than 200 dead or missing and forced 1.3 million people to evacuate. The damages were estimated at $2.2 billion.
• In the first three months of 2008, China suffered a devastating drought in Liaoning Province, which left nearly 700,000 people without drinking water; approximately 66 reservoirs dried up, and 1,700 new wells were drilled in a desperate search for drinking water, according to Reuters and Xinhua. Also affected were 19.4 million hectares (48 million acres) of land and 3.3 million hectares (8.15 million acres) of cropland. Water is a serious problem in China: annually about 30 million rural and 20 million urban Chinese face drinking-water shortages.
• In mid-2008, Shanxi Province was also hit with drought: 560,000 people had no drinking water, according to Xinhua news agency.
• In mid-2007 in Liaoning, the worst drought in 30 years left more than 8 million people without water; nearly 90 reservoirs dried up and 25,000 wells could no longer supply enough water, and 1.4 million hectares of crops were damaged, according to Xinhua news agency. In Inner Mongolia Province, 870,000 people and 1.5 million livestock had no water (and many livestock died of hunger and thirst).
• In August 2008, Sichuan Province suffered the worst drought in 50 years, with no rain for more than 70 days: more than 10 million people had no drinking water, and economic losses totaled at least 9.9 billion yuan. Two-thirds of lakes and rivers dried up, and more than 200 reservoirs were extremely low; the Chongqing section of the Yangtze River was lowest in 100 years.

Today, I came across this news clip on Reuters titled 'Rare Drought Hits China'. In light of China's already severe water issues, I fail to understand how this drought is classified as 'Rare', but I believe it highlights the trends pointing towards an elevated price for wheat, due to a increasing uncertainty in supply from climate change induced weather events and water shortages.

Greening the Stimulus Packages

Global economies are currently at a juncture in their approach to combating climate change and preserving the environment. In the face of the economic crisis and low fossil fuel prices, the investments needed now in clean energy are being threatened. On a global basis, the biggest contributor to CO2 emissions is power generation (33%). In Europe, Germany is the largest carbon polluter, with some 40% of the country's CO2 emissions coming from the power generation sector, while the lion's share (55%) of power assets is fueled by coal and lignite - the dirtiest means of electricity production. Over the next 25 years, German generation capacity will decline by over two thirds, which is similar situation to many other European countries, as in the US. Until then, approximately, 60 per cent of the lignite and 50 per cent of coal plants will have reached the end of their operating lives and will be retired. Capacity replacement decisions clearly represent both a big opportunity, and a big risk for the companies and investors involved. This particular example highlights the perils facing the clean energy sector, but fortunately public spending plans from governments could turn the tide in favour of a sustainable future. Barack Obama, the chief proponent of a green stimulus, has pledged $150b of in investment in low carbon infrastructure and his kill two birds with one stone approach is being followed.

In the UK, Lord Mandelson commits to a £2.3 billion rescue for Britain’s carmakers with all funds tied to investment in low carbon initiatives to produce lower-emission cars.

Smart grid could be early winner in U.S. stimulus package

Lawmakers propose $54B for cleantech, including $11B to the smart grid sector.

Support from Democratic lawmakers in the U.S. could mean the smart grid sector will finally have the traction it needs for widespread adoption amongst global utilities, industry leaders said today.

Democrats from the U.S. House of Representatives yesterday unveiled an $825 billion plan to stimulate the American economy, including $54 billion for renewable energy, energy efficiency and smart grid projects.

Smart grid projects pulled one of the biggest chunks of the cash, with $11 billion being proposed. The numbers are far from final as the money must be approved by the U.S. Senate and President-elect Barack Obama, but it indicates that tides could be turning for one of the lesser-known sectors of cleantech.

“The new administration hasn’t taken office, and already we see a sign that momentum is building for utilities and other stakeholders to adopt the smart grid,” Michael Jung, policy director of Redwood City, Calif.-based Silver Spring Networks, told the Cleantech Group. “Utility regulators are very cautious, so for them to see this leadership coming from the policy front, this is a vote of confide and will encourage them to see it’s not just R&D, it’s the real thing.”

The U.S. electric grid loses roughly 7 percent of energy production through faulty transmission lines, theft and mechanical problems. But utilities don’t have a way to track where energy is lost, when energy is consumed or where outages occur. Lost electricity accounts for about $20 billion in unrealized revenue a year, drives up the cost to produce energy and causes additional power plants to be needed.

Although much attention in cleantech has been focused on new energy generation or ways to lower consumption, smart grid technology looks to improve the system of distribution.

However, that has started to change. Smart grid technology raised an all-time high of $202 million in venture capital in the third quarter of 2008, led by a $120 million round by by GridPoint (see Masdar makes another move in cleantech). The sector averaged less than $30 million a quarter in the previous 10 quarters (see Cleantech investment breaks all-time record).

The U.S. leads the world in utilities adopting smart grid technology. There are about 100 million electric meters in the U.S., and 40 percent to 60 percent are in communities that say they are interested in deploying smart grid technology.

Jung said the U.S. government’s investment into the sector could prompt other countries to adopt the technology, much of which is developed and manufactured by American companies.

“If we figure out how to scale this correctly, there’s no reason we shouldn’t be the leader in the global marketplace,” he said.

Smart grid differs from other cleantech sectors because its adoption must be widespread to have any impact, requiring the industry to agree on platforms. Silver Spring and Fat Spaniel Technologies are among the companies that have promoted an IP-based system on which companies can build platforms and applications to manage the power grid.

“It has to be a ubiquitous kind of thing,” Jung said. “If the smart grid technology only reaches 40 percent of the grid, it wouldn’t provide enough of a benefit, whereas solar and wind can come on in different increments.”

Once the standard system is established, applications of smart grid technology can be added over time, such as metering or distribution optimization, Jung said.

Money from the stimulus package would go to utilities to spend in the sector. Eric Dresselhuys, a vice president at Silver Spring, said the stimulus spending on smart grid technology would help already-supportive utilities such as Pacific Gas & Electric, Florida Power & Light, Oklahoma Gas & Electric and American Electric Power to accelerate their smart grid projects in the works, while the money could draw other utilities to make their first foray into the smart grid.

“One things that got smart grid in the stimulus package is that these are shovel-ready projects. The technology is available and people are ready to go,” he said. “There’s so much momentum around smart grid right now that I hope the stimulus spending happens in a way to give utilities a very quick turnaround on whatever the process is.”

The House version of the proposal calls for the money to be distributed as grants to utilities, but Jung warned such a process could slow the spending by about six months. He encouraged lawmakers to come up with standard requirements so that utilities could start projects and file for reimbursement.

The proposed stimulus package also sets aside $6.7 billion to improve the energy efficiency of federal buildings, $4 billion for research in renewable energy and advanced batteries, $6.2 billion for improving energy efficiency of homes through weatherization, $6.9 billion in renewable energy block grants, and $8 billion in renewable energy loans. Renewable energy providers would be able to choose whether to receive tax credits or grants under the proposal, which could expand the options available to developers to finance projects.

The package also contains $9.5 billion for clean water and $300 million in rebates for consumers buying energy efficient appliances.

Ian Tharp, senior analyst of cleantech and renewable energy with Toronto-based Dundee Capital Markets, noted in a report released today that Canadian-listed geothermal companies with projects in the U.S. are likely to benefit from the stimulus, including U.S. Geothermal, Nevada Geo, Western GeoPower and Sierra Geothermal, because of the proposed extension of the eligibility period for receipt of the renewable energy Production Tax Credit.

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Obama's stimulus plan: The energy debate

It is evident that 2009 will mark a turning point in the United States and hopefully the world, to begin thinking long term and acting more responsibly. I suggest you watch the speech within the article below, that addresses Obama's plan for 'investing in the future' and renewable energy.

Shortly after President-elect Barack Obama set a goal of doubling the country's renewable energy in three years, the jockeying over the energy portions of his administration's stimulus plan began.

At a speech at George Mason University on Thursday, Obama repeated his intention to promote the development of clean-technologies such as solar and wind energy, and to upgrade the electricity distribution system to enable smart-grid technologies. Obama said:

To finally spark the creation of a clean-energy economy, we will double the production of alternative energy in the next three years. We will modernize more than 75 percent of federal buildings and improve the energy efficiency of 2 million American homes, saving consumers and taxpayers billions (of dollars) on our energy bills.

In the process, we will put Americans to work in new jobs that pay well and can't be outsourced--jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain."

More details on how to fund energy-related programs trickled out after Obama's talk.

In response to a query from The Wall Street Journal, an Obama transition aide said doubling renewable-energy production in the United States is possible through a combination of loan guarantees and, ultimately, a national renewable portfolio standard (RPS).

There are a number of state-level RPS policies mandating that utilities get a certain percentage of their electricity from renewable technologies; the targets in California have set off a race to build up solar-power plants there. During the campaign, Obama had advocated a national RPS at 10 percent by 2012 and 25 percent renewable energy by 2025.

Renewable energy from wind, solar, and geothermal is about 24,000 megawatts, according to the aide, which represents about 1 percent of all power generation in the country.

"By providing significant loan guarantees and ultimately, later down the road, a national (renewable portfolio standard), we are confident we will get the wind industry back on track. In addition to the 20,000+ megawatts of wind, we are confident that with the same combination of support and renewable standards, the geothermal and solar industries can install 4,000MW of new power," the aide told the Journal.

After his talk, members of Obama's economic team met with members of Congress, who voiced their concerns with the plan.

"Energy is way underrepresented here in the package that has been discussed," said Sen. Kent Conrad, according to a report at Energy and Environment Daily (subscription required).

That sentiment was echoed by Sen. John Kerry: "I'm very confident that some adjustments are going to be made...We positively--absolutely in my judgment--need to spend more on energy, and I made that point and will continue to make that point."

The entire stimulus plan put forth is structured so that 40 percent of the money comes from direct tax cuts, 40 percent from direct investments in initiatives such as efficiency, and 20 percent directed at states, according to reports.

Overall, renewable-energy companies are optimistic on the potential for policy changes under Obama. In response to Thursday's speech, the American Council on Renewable Energy said it is issuing a call to action to its 600 members to issue plans on how to double renewable energy output in the next three years.

The auto sector is also angling to secure loan guarantees and incentives to establish electric-car manufacturing in the United States, according to a report earlier this week in the Detroit News.

Advocates of underground storage of carbon dioxide at coal-fired power plants are also hoping to restart investment in the Department of Energy-sponsored FutureGen project.

See original article

California Scheming

Clean Technology: As Obama prepares to take office, Silicon Valley is sensing a change to land backing for an array of project that us IT to boost green energy and help create jobs.

Barack Obama has expressed support for a 'smart grid' to optimize electricity transmission and save power. It should be capable of carrying power from the place where it can be created - the windy centre of the US, the sunny south-west and the geothermal hot spots in the Rockies - to the coastal cities where it is most needed. I am currently investigating the technology and processes behind 'smart grids' and geothermal power plants, and will hopefully have a synopsis of both up shortly.


California Scheming

By Richard Waters in San Francisco

Published: January 14 2009 19:58 | Last updated: January 14 2009 19:58

A new Silicon Valley is being born. The northern Californian region that brought the world microprocessors, personal computers and Google now has its sights set on another technological revolution: one founded on photovoltaic solar cells, sources of biofuel such as algae and the application of information technology to improve energy efficiency.

Yet this new green technology industry needs help. As Barack Obama prepares to take office as US president next week, Silicon Valley has sensed that a turning point is at hand. It has been working overtime to convince the incoming administration of the strategic importance of these developments – and their need for financial backing.

To hear Valley notables describe it, the answers to some of the biggest issues facing the US can be found there. These range from climate change and America’s lack of energy independence to the need to create jobs and ensure long-term competitiveness in the next big strategic industry, the one geared to weaning the world from its reliance on fossil fuels...MORE

The Rise of Environmental Funds in the Downturn

As the dust is beginning to settle, it is promising to see environmental funds rising from the maelstrom and leading the charge in sustainable and responsible investing.

London-based fund is expected to take advantage of downturn to invest in solar, agriculture, and waste-to-energy.

A new venture capital fund is launching in early 2009, with the goal of raising $5 billion in the next five years to invest in energy security and climate change.

London-based Earth Capital Partners is spearheaded by former Man Group chief Stanley Fink. The fund is expected to be run by Rufus Warner, formerly of Close Investments.

The group's first funds are expected to focus on solar, waste-to-energy, agriculture, and new technologies. Later funds are planned for infrastructure, forestry, carbon trading and energy arbitrage.

The environmentally focused fund has reportedly secured $250 million in seed investment. Earth Capital Partners expects to attract institutional investors such as pension
funds.

The company said environmentally focused funds are finding it easier to raise money than other funds.

The fund is awaiting government approval.

Other major funds have launched in recent weeks with the expectation that environmental technologies could perform better than other investments during the economic downturn (see Cleantech funds worth $1.9B lead the week).

Among them, U.K.-based Aviva Investors announced plans to raise a €500 million ($625 million) fund for cleantech investing in Europe (see Aviva creates €500M fund for European cleantech). London-based investment firm Climate Change Capital announced that it plans to invest in China for the first time, setting aside RMB 5 billion ($732 million USD) to take advantage of deals during the economic downturn (see Climate Change Capital plans $732M for Chinese cleantech).

And venture capital investment fund CMEA Ventures has launched a $400 million late-stage fund focused on alternative energy.

See original article

Clean-Tech Stocks Set for Rebound

Clean technology stocks are set to rebound in the next three months, following a dismal performance in 2008, according to a report from Banc of America Securities-Merrill Lynch.

But the rally will be “within the context of a continued bear market”. Bank analyst Steven Milunovich said earnings revisions from the sector in 2009 are likely to remain negative, as funding remains difficult to secure and competition heats up.

Meanwhile, he expects the flurry of government spending – much of which is to be directed at environmental infrastructure – “to prove as ineffective as it was during the Depression/New Deal” and that sustained improvement is unlikely before 2010-11.

The Cleantech Perspective report published on Tuesday cited several reasons for the bounce: optimism regarding US President-elect Barack Obama’s support of renewable energy, a bounce back from extremely poor performance, clean-tech being inexpensive relative to the market average price/earnings and price/earnings-to-growth ratios, and technical support based upon many sectors breaking above their 50-day moving average – which is often interpreted as a bullish signal.

Solar energy stocks delivered the worst performance of the clean-tech sectors in 2008 – falling 69%, according to the bank’s index – but solar is now expected to lead the rally. Candidates for a snap-back include Q-Cells and REC, Milunovich suggested.

He is also over-weighting geothermal energy, “a more promising renewable than many perceive” and energy efficiency, for its quick project payback in a tough economy and relatively low correlation with other sectors.

However, Milunovich is less optimistic about the prospects for alternative fuels, water and energy storage. “Little good is likely to happen until second-generation biofuels arrive,” he said, while the water sector will suffer from poor earnings revisions, and it is “too soon” for the technologies of energy storage to make an impact, he added.

See originl article

Establishing ESG Issues in Analysis

I am currently working with the of CFA Society of the UK Energy and Sustainable Investments special interests group to advocate the integration of ESG issues into investment analysis and aid in developing the standards and techniques for this form of valuation. Here is an excellent list of resources to aid in adapting these standards, provided for by the CFA Institute as they are beginning to recognize the increasing importance that non-financial factors plays in determining performance.

Why are ESG Issues Important?

* Analysts need to understand nonfinancial factors that affect the longer-term viability of companies
* Individual investors are increasingly calling on their financial advisers to take advantage of available ESG opportunities
* Companies that incorporate ESG exposures into long-term strategic planning will provide a more complete picture of their prospective value

Why is CFA Institute Interested?

* We’re charged with educating our members about current developments in the investment landscape and ESG issues are increasingly important factors in the markets
* Money managers and financial analysts who can interpret and relate ESG factors to a company’s future prospects may potentially develop a competitive advantage
* ESG-related disclosures can improve the transparency of the global capital markets through more thorough reporting of the long-term issues facing publicly traded companies
* The implementation of ESG reporting standards is in the early stages around the world, and we want to ensure that investors are aware of and involved in these efforts.