RI ESG Briefing, January 12: Concerns mount over future of Green Investment Bank under Macquarie

Environmental

The UK Government is under fire for its decision to sell the state-owned Green Investment Bank to Australian infrastructure giant Macquarie. It is understood Macquarie has been selected to take a 100% stake in the bank, which was created to stimulate private investment in renewables and energy efficiency projects in the UK. But NGOs E3G and Greenpeace UK say there is evidence of potential plans to ‘asset strip’ the GIB and avoid tax – an accusation that been levelled at Macquarie in relation to some of its other holdings, including Thames Water. According to the investigation, in the last two months of 2016, 10 companies were formed by the GIB in correlation with its 10 largest assets. “The establishment of holding companies, and multiple corporate layers, is often synonymous with practices such as leveraging excessive debt, asset stripping and financial engineering, including tax avoidance measures,” it warns.
Private investment into conservation hit more than $8bn – an increase of more than 62% in just two years, according to a report from Forest Trends’ Ecosystem Marketplace, backed by JP Morgan Chase. $6.5bn of the $8.2bn invested in the space was in sustainable food and fibre, with a further $1.3bn being channeled into habitat conservation. Just $400m went into improving water quality or quantity. The “vast majority” of conservation investment is taking place in North America, according to the findings, although financing is beginning to reach emerging markets, especially in Latin America. The report claims that around half of for-profit investors that participated said they expected returns of 10% or more.
New investment in clean energy worldwide fell 18% in 2016 to $287.5bn according to latest research from Bloomberg New Energy Finance (BNEF). Despite a record year for offshore wind financing with $30bn in new investment – up 40% on the previous year – a Chinese slowdown and falling costs of solar power led to a drop in overall investment, according to the research. Justin Wu, head of Asia for BNEF, said: “China is facing slower power demand and growing wind and solar curtailment. The government is now focused on investing in grids and reforming the power market so that the renewables in place can generate to their full potential.” Also measured by BNEF, but not included in the figures for new investment, is acquisition activity in clean energy. This totaled $117.5bn in 2016, up from $97bn in 2015 and the first time it has surpassed $100bn. The top takeovers included Tesla’s acquisition of SolarCity for $4.9bn and Enel’s buy-back of the minority holders in Enel Green Power for $3.5bn.
A UNEP-backed initiative called the GreenInvest platform was re-launched at an event in Singapore under the auspices of the German G20 presidency. GreenInvest is described as a G20 platform for promoting policy dialogue on green finance “with and for developing countries”. The initiative was first discussed under Mexico’s G20 Presidency in 2012. In a statement, UNEP said GreenInvest complements other actions taken under Germany’s G20 Presidency, such as the so-called Green Finance Study Group in the Finance Track.h5. Social

Sustainalytics has reportedly closed its Singapore office as a result of difficult market conditions in the country. Sustainalytics had helped the Singapore stock exchange launch the SGX Sustainability Index last May, the country’s first set of indices focused on sustainability, but Eco-Business reports that it has now closed its Singapore branch. In a statement, Sarah Cohn its head of marketing said: “The current market dynamics in Japan and Australia present significant opportunities for Sustainalytics. Therefore, we decided to open an office in Tokyo and to focus on growing our presence in Australia. “Given our size, we must deploy our resources effectively to respond best to market conditions, and we had to make the difficult decision to close our Singapore office. We remain committed to providing superior service to all of our clients in the Asia Pacific region.”
Bridges Ventures has launched a $25m real estate fund with Prudential Financial as one of the first investors. The fund, Bridges UrbanView, will invest in urban areas that need revitalization, with a focus on building healthy neighborhoods and broadening access to economic opportunity. As its first investment, the Fund has committed $11m to finance Spoke, a project involving the construction of 224 new units of housing on the east side of Atlanta. The Spoke project will form part of a larger ‘transit-oriented development’ (TOD) that aims to transform an underutilized parking lot adjacent to a train station into a vibrant, sustainable neighbourhood. Bridges UrbanView will be led by Rachel Diller, who was most recently Managing Director at Goldman Sachs’ Urban Investment Group. Along with Prudential Financial, Ron Moelis, CEO and chairman of L+M Development Partners is a strategic investor.
The Edinburgh-based Centre for Finance and Investment at Heriot-Watt University and the Ethical Finance Hub are holding their annual CFI Debate on the subject: Ethical investment is the pursuit of shareholder value in the Cairn Auditorium at the Postgraduate Centre, Heriot-Watt University on Thursday 9 February. Speakers include Professor Robin Angus, Executive Director of Personal Assets Trust and an Honorary Professor at Heriot-Watt, Bill Dinning, Non-Executive Director at the Medical Defence Union, Professor Iqbal Asaria CBE, Islamic finance consultant and academic and Tomas Carruthers, CEO of the Social Stock Exchange.

Governance

Canadian boardrooms are suffering from a lack of “climate competency”, according to a report from the Shareholder Association for Research and Education (SHARE). “Investors need boards to demonstrate …that they understand and prioritize climate change risks to long-term value, including the physical, legal, reputational, stranded asset and regulatory risks related to climate change,” said Share, which reviewed disclosures from 52 companies in Canada’s energy and utilities sectors to assess their board skills and experience, oversight and risk disclosure. For the full report, see here. “Taking Climate on Board: Are Canadian energy and utilities company boards equipped to address climate change?”