Natural Capital March/April 2014

Natural

SUSTAINABILITY FINANCE, INNOVATION & LEADERSHIP

CAPITAL JONATHAN MAXWELL MANAGING THE FUTURE How SDCL has won the mandates for the world’s governmentbacked energy efficiency funds.

By Angela Madden

+ IRISH INGENUITY PROPELS A NEW KIND OF TURBINE

By John Puccio BRAZIL’S WORLD CUP ~ MARACANA STADIUM GETS $393 MILLION GREEN MAKEOVER

By Liza Booth IRELAND’S SMART GRID ATTRACTS ATTENTION FROM US POLITICAL HEAVYWEIGHTS

By Kathleen Barrington VOLUME 2 / ISSUE 1 / MARCH / APRIL 2014

FOLLOWING REMARKABLE RECOVERY IRELAND IS LOOKING TO THE GREEN ECONOMY FOR NEW GROWTH

WILBUR ROSS: BANK OF IRELAND – MY BEST INVESTMENT SINCE THE FINANCIAL CRISIS

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A word from the Editor W elcome to the March/April edition of Natural Capital. For those of you yet to pick up a copy, Natural Capital was launched at the turn of the year. We felt that there was nothing out there that really brought together the detail behind the stories and deals across the wide sustainability sector.

Natural Capital aims to embrace all business opportunities in the sustainability sector from food, agriculture, renewables, energy efficiency, finance, leadership, policy – and everything in between.

But, as with most things in life, the access to capital, financing of the projects and returns generated are key. While there is a lot of information available in today’s modern world, sometimes the devil is in the detail and the detail can be lacking.

And, while we look at global trends in the sector, such as what the recent European Commission’s bid for the bloc’s 2030 climate change and renewable energy

targets really mean, Natural Capital also showcases why Ireland is rapidly garnering attention and investment across the whole sustainability sector at home and is exporting its goods and services to all corners of the globe from Africa to China and the US.

In this issue we highlight how Irish companies are capitalizing on China’s drive for safe baby formula which is a market set to explode further with the relaxation of the one child policy and how Ireland’s renewable companies – wind and solar – are setting their sights on Africa.

We also look at why people like Maryland Governor Martin O’Malley and Steven Chu, Nobel Prize winner and former US Energy Secretary are taking an interest in Ireland’s Smart Grid. This Smart Grid has made the Emerald Isle the first in the world to manage a power system where the grid can accept as much as 40 per cent of its electricity from renewable sources while guaranteeing continuity of supply to customers.

Then there are the Irish Americans leading the way in sustainability with people like Brian Moynihan spearheading Bank of America’s $70 billion investment and twice winner of the Ernst & Young Entrepreneur of the Year, Gerry Ryan, CEO of DGC Capital, who has taken a stake in Irish wind technology company Airsynergy which has big plans to revolutionize the global market. With Warren Buffet and Google both chasing the wind, Ryan may well be on to something.

But, at Natural Capital while we explore in detail some of the news out there, we also seek to bring you the next big thing and highlight some of the trailblazers in sustainability. Hence, the reason Jonathan Maxwell, Founding Partner and CEO, SDCL is on the cover. Somehow we feel that while you might not know him now, you will.

Angela Madden Editor in Chief & Co-Publisher

STEPHEN NOLAN Co-Publisher

ANGELA MADDEN Editor-in-Chief & Co-Publisher

Stephen is currently Chairman of the Sustainability Gathering and Executive Co-Ordinator of the Green International Financial Services Centre (GIFSC) with responsibility for the positioning of Ireland as the global focal point for ‘green finance’.

His experience spans leadership roles in public policy and private sector in Ireland and across the globe. Posts held include ICT Special Advisor to the Secretary General, Department of Communications, Marine and Natural Resources; Advisor to the United Nations ICT Task Force Board; Founding CEO of the UN-established Global eSchools & Communities Initiative and Executive Assistant to the Chairman and CEO, Rivada Networks.

Stephen is also a Board member of the Irish Chamber Orchestra and, in August 2012, Stephen joined the Board of Haven, an organization working to build sustainable communities in Haiti.

Angela is a seasoned journalist. She began her career at the FT Business Group and has since worked as Financial Correspondent, New York-based America Correspondent, Editor, Group Editor and CEO for a number of leading trade, local, national and international titles, amassing excellent media and business contacts in Ireland, London, Scotland, continental Europe and the US. Angela is Founder and Managing Director of transatlantic public relations firm Tempus Media. Tempus Media is a full-service public relations consultancy helping organizations expand business at home and across borders through effective communication with both national and international stakeholders. With particular expertise in international financial services and the green economy, Angela instinctively understands what the media and client needs – and works with clients to meet and exceed their expectations.

Natural Capital is published by Natural Capital News & Events Tel: +353 1 818 3301 editorial@naturalcapitalnews.com sales@naturalcapitalnews.com www.naturalcapitalnews.com Design, typesetting and print by Brosna Press Creative Design and Print, Ferbane, Co Offaly, Ireland.

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JOURNALISTS & CONTRIBUTORS MARTHA KEARNS Martha Kearns is News Editor of The Sunday Business Post, Ireland’s leading financial, economic and political newspaper. She previously held the post of News Features Editor at the same publication. Martha has worked at The Sunday Business Post for the past six years. She is a former Assistant News Editor of the Irish Independent and spent 12 years working with titles in the Independent Newspapers Group before moving to The Sunday Business Post.

Martha holds in degree in journalism from the Dublin Institute of Technology. Her areas of interest include business, agri-business and education.

MARK NICHOLLS Mark Nicholls is a freelance journalist specialising in environmental finance, responsible investment, ESG disclosure, carbon markets and low-carbon business and finance. He has extensive experience as a financial journalist, focusing on environmental markets, responsible investment, and corporate and investor ESG disclosure, but with a background in derivatives and risk management journalism. He also has wide broadcast experience, including on BBC World, CNN, CNBC, American Public Radio and Channel 4. Mark was a member of the judging panel for the European Bank for Reconstruction and Development's Sustainability Awards.

His work has recently appeared in Guardian Sustainable Business, Scientific American, Investment & Pensions Europe (IPE), Energy Risk, Environmental Finance and Responsible Investor and is a regular conference chair/moderator.

FEARGHAL O'CONNOR Fearghal O'Connor is a reporter with the Sunday Business Post where he has worked since 2011.

He has extensive experience as an online journalist, working for news channels such as such as RTÉ and the Business & Finance Magazine.

SINEAD RYAN Sinead Ryan is a journalist for Independent Newspapers, where she has worked for over 12 years.

Her work focuses on personal finance as she is also a qualified financial advisor. She has a property finance column in the Irish Independent as well as being the consumer communist for the Herald. She has authored the book Cents & Sensibility - A Financial Guide for Young Adults. She holds diplomas in Economics and journalism.

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MARK McSHERRY New York-based Mark McSherry is an experienced editor and reporter who covers business and financial news – and a professor of digital and print media, journalism, publishing, design, public relations, advertising and mass communication.

McSherry writes for Forbes.com in the US, and is Wall Street Correspondent for The Independent and London Evening Standard in the UK. He has been a staff reporter, editor, executive and recruiter with news organizations around the world, including Reuters, UK Sunday Times, Bloomberg, South China Morning Post, Scotsman Publications & New Zealand Herald.

McSherry has worked as a news and media executive in Asia-Pacific, the UK and the US.

LIZA BOOTH Liza Booth is a freelance journalist based in Rio de Janeiro. She has reported from around the world for BBC Radio 1, 4 and 5live, and also works for France 24 and The Sun newspaper. She holds degrees from Reading University and City University in London.

JOHN PUCCIO John Puccio is Head of US Operations for Tempus Media, a transatlantic public relations firm, with offices in Dublin and New York and specialists in international finance and the green economy. Having held leadership roles on both the corporate and agency sides of the business, John has established a proven track record of success across the financial services and sustainable building industries with a focus on asset management.

John served as a managing director at New York Life Investment Management (NYLIM), where he created and led the firm’s corporate communication function. With nearly $300 billion in assets under management, NYLIM is a multi-boutique investment management firm and a whollyowned subsidiary of New York Life Insurance Company. Previous to that, he worked at other New York City based PR firms such as Hill & Knowlton and Cohn & Wolfe. Accolades include being named in PR Week’s “40 Under 40” in 2009.

SIOBHAN CREATON Siobhan Creaton is an Irish writer and journalist and was previously Finance Correspondent with The Irish Times and a business journalist with the Irish Independent.

She authored the book, Ryanair: How a Small Irish Airline Conquered Europe, (2004) and later updated in 2007 to Ryanair: The Full Story of the Controversial Low-cost Airline. She also co-wrote Panic At The Bank about John Rusnak with Conor O'Clery.

KATIE GILBERT Katie Gilbert is a freelance writer living in New York. As the go-to writer covering the exploding impact investing arena (green investing, sustainable investing, responsible investing, etc), she has published various articles on the space, has been invited to speak about its trends, and has advised impact investing conference organizers. In addition to that expertise, her skills and interests are varied, as evidenced by her regular work for Psychology Today, her years editing novels, books, articles, and corporate copy as a Senior Editor with DLA Editors & Proofers, her experience co-authoring a self-help book about toxic relationship patterns, and her role as a professor of journalism at Manhattanville College.

MICHAEL HAYES Michael Hayes is Partner, KPMG & Chairman Green IFSC Asset Management Working Group He advises clients across a wide range of industries, including renewable energy, financial services (structured finance, securitisation, investment management), property and infrastructure. He focuses on both domestic and international corporate tax planning (and is a specialist in inbound US tax planning). Mike is part of the global leadership team for tax on KPMG’s Renewable Energy. He is also a steering group member of the Green IFSC Group and the Chairman of the Green Asset Management group, a group that has a target of increasing environmental assets from today’s $24 billion to $200 billion by 2017. (In 2013 alone close to $4 billion in new international funding into Ireland’s green sector has been won).

RICHARD S BOOKBINDER Richard Bookbinder is Managing Member, Terra Verde. He formed Bookbinder Capital Management LLC (“BCM”) in 1999 and is actively involved in all aspects of fund management including portfolio allocation, manager research, and due diligence. Richard Bookbinder currently manages two funds of funds, The Roebling Fund LP launched October 1999, and TerraVerde Capital Partners LP, launched July 2009. Richard Bookbinder is a member of US SIF, the American Council on Renewable Energy, and CERES. He is a member of the Board of Trustees of the Darrow School, New Lebanon, NY, and a member of the Board of Visitors and Governors Investment Committee of Washington College, Chestertown, MD. He also serves as the external advisor to Washington College’s student run Alex Brown Investment Fund. His book, Fund of Funds Investing: a Roadmap to Portfolio Diversification, was published by John Wiley & Sons in 2009.

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LAURA HEUSTON Laura Heuston is a Tax director at KPMG for almost six years, Previous to this she was Tax Manager at Airtricity from 20042008. She has also spent six years in Arthur Anderson working in the field of tax. She studied law in UCD before going on to become a qualified accountant.

MICHAEL SCANLON Michael Scanlon is a financial professional at Silver Leaf Partners, LLC, a broker-dealer with 58 registered representatives nationwide. Michael has held an industry securities registration for 11 years and is subject to FINRA oversight. Silver Leaf Partners provides trading, portfolio management, best execution, prime brokerage, marketing and consulting services to the institutional trading community. Silver Leaf's management team is an experienced group of former buy-side professionals with first hand experience managing the investment operations of hedge/alternative funds, mutual funds and institutional trading accounts.

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CONTENTS EMERALD ISLE’S GREEN GROWTH PAGE 4 BANK OF IRELAND EYES SUSTAINABILITY SECTOR PAGE 12 CHINA’S DIFFICULTY IS IRELAND’S OPPORTUNITY PAGE 20 COME PLAY ON MY GRID PAGE 26 EUROPE SETS ITS SIGHTS ON 2030 PAGE 34 GROWTH IN GREEN BOND MARKET SET TO FUEL CLEANTECH REVOLUTION PAGE 40 BRAZI’S MARACANA GETS $393 MILLION GREEN MAKEOVER PAGE 46 BUFFET AND GOOGLE CATCH THE WIND PAGE 53

MIKE SCOTT Mike Scott is an expert on climate change and the environment and how they affect business, finance and investment. He has been a regular contributor to several leading publications such as the Financial Times, FTfm, Bloomberg New Energy Finance, Sustainable Business, Flight International, Green Hotelier, Renewable Energy Monitor and Ethical Performance.

Mike has developed his reputation on his ability to clearly explain the carbon economy, emissions trading, alternative energy, sustainability, Socially Responsible Investing (SRI), clean technology and Corporate Social Responsibility (CSR). He is one of the most respected journalists in the field of renewable energy finance.

KATHLEEN BARRINGTON During her 20 years in business journalism, Kathleen was twice Business News Winner at the Smurfit Business Journalism Awards and was also named Business Journalist of the Year at the ESB National Media Awards.

Natural Capital is published by Natural Capital News & Events Tel: +353 1 818 3301 editorial@naturalcapitalnews.com sales@naturalcapitalnews.com www.naturalcapitalnews.com

IRISH INGENUITY PROPELS A NEW KIND OF TURBINE PAGE 58 MANAGING THE FUTURE PAGE 63 SUSTAINABILITY SECTOR LIFTS OFF PAGE 71 BANK OF AMERICA’S $70 BILLION BET ON SUSTAINABILITY PAGE 78 ESG INVESTING: APPROACHING THE TIPPING POINT PAGE 85 WATER PROBLEM PRESENTS PLENTY OF OPPORTUNITY PAGE 88 INNOVATION NEEDED PAGE 91 SUSTAINABILILTY GATHERING DUBLIN DECEMBER 2013 PAGE 95 AFRICA WILL BE THE EPICENTRE OF THE RENEWABLE INDUSTRY PAGE 98 SMART YOUNG PEOPLE PAGE 103 PEOPLE ON THE MOVE PAGE 108 3

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EMERALD ISLE’S GREEN GROWTH Following Ireland’s remarkable recovery, the Emerald Isle is now looking to the green economy for growth.

From MARK MCSHERRY in New York and ANGELA MADDEN in Dublin.

Irish Minister for Jobs, Enterprise & Innovation Richard Bruton addressing the Sustainability Gathering, Dublin Castle, December 2013.

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t must be the luck of the Irish! It is difficult to imagine nearly any other country in the world moving from a position of economic crisis forcing it into a €85 billion euro bailout programme to one only a few years later where it is ranked by Forbes as the number one country in the world for business.

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Ireland’s most recent economic turnaround – or at least one that has turned the lights on at the end of what was a long tunnel – is pretty remarkable.

However, in a recent televised address to the nation, an Taoiseach (Irish Prime Minister) Enda Kenny acknowledged that despite recent economic improvements, many are yet to feel the benefits.“This is an important step but it is not an end in itself. Our lives won’t change overnight,” Mr Kenny says.

That is true when one considers the magnitude of the problem faced by Ireland, which saw the country endure four austerity budgets and public spending cuts of €9.6 billion ($13.2 billion).

“But it does send out a powerful signal internationally, that Ireland is fighting back, that the spirit of our people is as strong as ever,” adds the Irish leader.

Ireland re-entered the money markets at the turn of the year emerging as the first Eurozone nation to have completed a strict bailout programme imposed by the Troika, led by the European Central Bank, the European Commission and the International Monetary Fund.

The country exited the bailout programme without a precautionary credit line. Irish bond yields fell from nearly 16 per cent in 2011 to under 4 per cent for most of 2013.

These relatively benign market conditions resulted in national coffers swelling with 6

HOW IRELAND COMPARES: The best small country in the world to do business.

Source: IDA.

Ireland’s most recent economic turnaround – or at least one that has turned the lights on at the end of what was a long tunnel – is pretty remarkable. €21 billion ($29 billion) in cash, and so the economy is pre-funded up to 2015.

The recent healthy demand for Irish bonds showed that international investors have confidence in Ireland’s turnaround story.

National Treasury Management Agency (NTMA) chief executive John Corrigan told the Irish Dail’s (Parliament) Committee of Public Accounts: “The NTMA was able to bring the new 10-year bond to the market at very short notice in the first week of January 2014.

“Having just exited the EU/IMF Programme it was important for Ireland to display that it had full market access and being first into the markets before other sovereign borrowers had announced their issuance plans gave us an early-mover advantage.” ➳

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And, it has been estimated that, up to 10,000 extra jobs could be created in Ireland’s green economy alone by 2015 With international investors on board, it is crucial that Ireland keeps up the progress on the home front - and makes sure it delivers on the huge potential that exists for future job creation in the green economy.

Ireland wants to make sure its economy grows by the roughly 2-3 percent required to drive down its debt.And, it has been estimated that, up to 10,000 extra jobs could be created in Ireland’s green economy alone by 2015.

Globally, the green economy was estimated to be worth $5 trillion in 2010, employing more than 30 million people worldwide. And, this global market provides significant opportunities for Irish-based companies to export innovative goods and services and for Ireland to attract higher volumes of foreign investment.

Corrigan says that in practice, market normalization means moving away from the “opportunistic” transactions that characterized Ireland’s engagement with the bond markets last year to a scheduled and regular series of bond auctions.

The NTMA’s working plan for 2014 is to raise, subject to market conditions, a total of around €8 billion ($10.9 billion).

“Although the order book for the 10-year bond sale in January amounted to €14 billion ($19.2 billion), we decided to limit the size of the new bond to €3.75 billion ($5.1 billion) in order to leave capacity for bond auctions later in the year,” says Corrigan.

“In that context we announced that the NTMA plans to raise about €4 billion ($5.4 billion) through a series of bond auctions over the course of 2014 with indicative sizes ranging from €0.5 billion ($0.68 blilion) to €1 billion ($1.37 billion). It is planned to hold one or two auctions per quarter with the first auction to take place on Thursday, March 13.”

Ireland’s Minister for Jobs, Enterprise and Innovation Richard Bruton says that the government is working towards: “a transition to an economy that is sustainable, an economy that is built on enterprise, an economy that is built on innovation and an economy that has the ability to export.”

“The green economy, as an area,” he adds “is clearly is a huge part of making that transition” ➳

Now, having emerged from its EUIMF bail out and making a very successful return to the international bond market, Ireland is looking to the green economy for growth to help sustain its ongoing recovery.

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“At the same time, Ireland is exploiting its great natural resource renewable energy - and thus dramatically reducing its imports of fossil fuels.

What has been achieved today shows what is possible, but it is only the start.”

Irish Minister for Finance, Michael Noonan with Christine Lagarde, Managing Director of the IMF.

The Minister believes it is a sector where Ireland can do exceptionally well. “It represents an area where Ireland has a natural advantage coming from all sorts of areas. Our natural assets are abundant. We have a super skills base, a tremendous strength in key enabling technologies as well as a capacity for innovation and test bedding of new technologies.

“Then there is our funding expertise, which in many ways is the magic piece that stiches together the other capacities. They all give us a competitive advantage.” ➳ One of the areas he feels Ireland has been strong is in its historical financial assistance to innovators.“Ireland, I think, has a strength in that we have a very strong system in Enterprise Ireland (the government organization responsible for the development and growth of Irish enterprises in world markets) for providing seed capital.”

He sums up: “I believe the green economy represents a huge opportunity for Ireland.

We have a lot of the sectors and the clusters that can make this a reality in Ireland. We also make it a strong sector from which other companies can invest in Ireland as a base to do business but can also bring the ideas that we test and develop and apply here and bring them to the market internationally.”

Certainly, this is a plan that already appears to be paying off directly in terms of job creation and savings to the country.

The latest report from the Sustainable Energy Authority Ireland (SEAI) reports a significant year of progress in sustainable energy in which 4,000 jobs were maintained in the construction and energy service industries and €35 million ($48 million) worth of energy savings were achieved.

In fact, Dr Brian Motherway, chief executive, SEAI says that wind power has saved Ireland more than €1 billion ($1.37 billion) in energy costs, cut green-house gas emissions and has not added to consumers’ energy bills. Analysis shows that renewable energy in Ireland in 2012 also reduced emissions of CO2 by two million tonnes.

“Sustainable energy is vital to Ireland’s economic recovery and job creation,” he says.“Actions such as home energy upgrades and business energy cost savings are already proving how costs can be lowered and jobs created,” he continues.

“At the same time, Ireland is exploiting its great natural resource - renewable energy and thus dramatically reducing its imports of fossil fuels. What has been achieved today shows what is possible, but it is only the start.”

SEAI disbursed over €70 million ($96 million) through capital support programmes in 2012 and about 150 homes a day during the year received energy upgrades.

About 26,000 homeowners underwent insulation and heating upgrades meaning almost €100 million ($137.3 million) was spent in the construction industry, including €29 million ($39.8 million) exchequer support. In the four years through the end of 2012, SEAI says it dispersed more than €315 million ($432.8 million) in financial support. ➳

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Did you know…

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In 2014 Forbes ranked Ireland best country in the world for business

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7 of the top 10 industrial automation companies have operations in Ireland including Siemens, ABB, Emerson, Rockwell Automation, Schneider Electric, Honeywell and Danahar

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33 per cent of the world’s contact lenses are manufactured in Ireland

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100 per cent of Botox is manufactured in Ireland by the fastest growing Med Tech company in the world

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80 per cent of the global supply of stents are manufactured in Ireland

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40 per cent of all leased aircrafts are managed in Ireland

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41 per cent of the world’s alternative funds are administered from Ireland

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The US is the single largest source of foreign direct investment in Ireland

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The stock of US investment in Ireland at $204 billion is greater than the corresponding US investment into Brazil, Russia, India and China combined

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Irish descendants make up a diaspora of 70 million

Dr Brian Motherway, chief executive, the Sustainable Energy Authority Ireland (SEAI) at his closing address for the Sustainability Gathering, December 2013.

Energy efficiency is an important part of Ireland’s focus on the green economy and moves to financial success - and the reason why is clear. Owen Lewis, Chairman of the Irish Green Building Council, points out: “As a nation €6 billion ($8.2 billion) a year leaves this county to pay for oil and gas going to places like Saudi Arabia and Kazakhstan. If we adopted more energy efficiency strategies and made our homes better insulated then less oil and gas is needed and that means people have more money in their pocket to spend in Ireland.”

Comments from An Taoiseach (Irish Prime Minister) Enda Kenny demonstrate the Emerald Isle’s focus on the green economy and what his government believes is a huge opportunity.

He says: “The Green Economy can be a key driver of economic growth and job creation for Ireland. We already have inherent strengths which we can build upon, including world-class renewable energy resources, our excellence in research, development and innovation, an outstanding natural environment and a cluster of Irish companies that are true world-leaders in green goods and services.”

What is clear is that Ireland has turned a corner and is now looking ahead to ensure it is at the centre of the multi-trillion global revolution to a low carbon economy. And, here you would also have to say the country has a marketing edge – it is the Emerald Isle after all.

“We already have inherent strengths which we can build upon, including world-class renewable energy resources, our excellence in research, development and innovation, an outstanding natural environment and a cluster of Irish companies that are true world-leaders in green goods and services.” An Taoiseach (Irish Prime Minister) Enda Kenny

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BANK OF IRELAND EYES SUSTAINABILITY SECTOR Bank of Ireland was the first Irish bank to return to the markets and is planning to release â‚Ź33 billion in new lending to the economy by 2017 and seeking opportunities in the sustainability sector, writes MARTHA KEARNS.

illionaire US investor Wilbur Ross has described his near 10 per cent stake in Bank of Ireland as his best investment since the financial crisis. It just goes to show that Bank of Ireland has come a long way in the last few years after a turbulent period experienced by all Irish banks following the economic crash, which led to the country’s main banks requiring varying degrees of State support.

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But now, with increased interest from investors including Ross and sustained access to international funding markets, the Bank of Ireland Group is making good progress.

As of December 2013, Bank of Ireland has repaid the State for its investment, which was a total of €4.8 billion ($6.6 billion) in cash since 2009.The bank has repaid €5.9 billion ($8.1 billion) for this support, which includes dividends, coupons, warrants and fees as well as facilitating the sale to private investors of the Contingent Capital Notes (Cocos), and preference shares. However, the State continues to hold circa a 14 per cent shareholding in the bank, which was worth €1.3 billion ($1.8 billion) according to the share price at the end of January.

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books oversubscribed at €3.75 billion ($5.1 billion) with the issue placed with a wide range of investor types with a broad diversification of geographies.

The success of consecutive funding rounds reflects a vote of confidence by international investors in both the State and Bank of Ireland. Key to the continued advancement of the bank is the focus on developing business areas and opportunities for existing clients and supporting the emergence of new enterprise.

Bank of Ireland is planning to release €33 billion ($45 billion) in new lending to the economy by the end of 2017, some of which will be targeted towards sustainable projects.

And, Bank of Ireland has long recognised the opportunities in the area of sustainable finance - where it has been active for more than a decade. ¸

Confidence in the bank appears high, bolstered by strong investor demand for funding. Bank of Ireland returned to the public bond markets in November 2012 and has been building up its transactions ever since – the latest round in January, for a €750 million ($1 billion) senior unsecured fixed rate transaction, saw order

Wilbur Ross

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“Sustainability is a key influencer in all business decisions nowadays.

As a pillar bank we must engage with our customers and communities to support their aspirations in this space.”

Bank of Ireland’s Padraig Rushe, Director Corporate Banking

Now, with sustainability emerging as a key theme globally, Bank of Ireland is in the enviable position of having the in-house expertise to lend to projects ranging from carbon and renewables to food and cleantech. The bank has also been a key player in the emergence of Ireland as a global hub for green finance. (See Panel 1 on Bank of Ireland’s role in Green International Financial Services Centre (GIFSC).

Padraig Rushe, director Bank of Ireland Corporate Banking, said: “Sustainability is a key influencer in all business decisions nowadays. As a pillar bank we must engage with our customers and communities to support their aspirations in this space.”

Wind has been - and continues to be - a growth area. Bank of Ireland’s current portfolio of wind farms produce in excess of 350 MW of electricity, enough to power over 200,000 homes. For example, last year, it provided the total debt funding facilities for the 9MW wind farm at Hollyford in Co Tipperary, owned by the Viridian Group.

Completed earlier this year, the wind farm is now fully operational and exporting electricity to the grid.

“The wind sector, in particular, has formed the cornerstone of renewable energy financing in Ireland and is likely to remain a very active sector over the coming years as Ireland continues to work towards achieving its national renewable energy targets, consistent with EU plans,” says Murphy. ¸

The Bank of Ireland funded 9MW Hollyford Wind Farm in Co. Tipperary, Ireland

RENEWABLES Donal Murphy, who is the director of project finance at Bank of Ireland Corporate Banking, says that the institution is committed to supporting opportunities in Ireland across its core markets of infrastructure, energy and renewables. “We have dedicated and experienced teams who are focused on supporting these important sectors.” The bank has a pipeline of wind farm transactions and other renewable energy projects at various stages of analysis and due diligence. “We are actively supporting a range of projects in the biomass and waste management sectors where our experienced team of project finance professionals have a wealth of experience,” says Murphy.

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CLEANTECH Bank of Ireland has also been leading the way in early stage investment in the cleantech space, a critical component of Ireland’s sustainable landscape. Bank of Ireland-backed Seed Funds, totalling €49 million ($67 million), invest in start-ups and early stage companies, with a focus on export-orientated high potential entities operating in the technology, food, financial services, and cleantech sectors.

These funds are managed on behalf of Bank of Ireland and other Limited Partners (including Enterprise Ireland), by Kernel Capital and Delta Partners. Over the past four years, the funds have made several significant investments within the Cleantech space. Donal Duffy, Bank of Ireland’s Head of Enterprise Ireland Relations, states that supporting “ambitious, indigenous companies is key to the success of the funds”. [See panel on page 18 listing some of Kernel Capital managed deals].

CARBON In addition to providing finance from startup to infrastructure lending, the Bank of Ireland offers risk management solutions in the nascent carbon markets. When the EU ETS (emissions trading scheme), the largest

IRELAND’S FIRST BANK TO GET BACK TO BUSINESS IS BANKING ON GREEN FINANCE Green International Financial Services Centre (GIFSC) is an initiative of Ireland’s Department of the Taoiseach (Prime Minister), which aims to make Ireland a centre for the financing of the global sustainability sector.

Bank of Ireland is a co-founder of GIFSC. Padraig Rushe, Director Corporate Banking, says GIFSC has been one of the most important initiatives undertaken by the Irish Government in recent years to help drive a new wave of activity across the well-established International Financial Services Centre (IFSC).

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Bank of Ireland’s Paul Harris, Head of Natural Resources Risk Management Global Markets.

multi-country, multi-sector greenhouse gas emissions trading system in the world, was launched in 2005 it became the first Irish bank to offer a transactional capability in the carbon markets to the 100 Irish companies included in the scheme. Activity has broadened as the scheme has matured with a focus not only on compliance buying and selling – the bank transacts around 600,000t/CO2e annually - but also on devising investment products and initiating relative value transactions.

The bank has gained a reputation across Europe in the carbon space as an innovative niche player. In addition to structuring the first emissions-linked derivative for Edenderry Power in 2005, the bank designed and delivered the award-winning Giraffe Carbon Offset mortgage in the UK and launched Ireland’s first carbon-linked deposit. ¸

Back in 2009 Rushe was chair of the IFSC Banking and Treasury subGroup. His committee advised the government that green finance was a promising new sector in which Ireland could specialise.

An initial ‘desk top’ analysis quickly revealed that there was potential in this idea. With the support of Government, a formal feasibility study was commissioned with Bank of Ireland and Government agencies co-funding.

David Guest, Chairman of the GIFSC Steering Committee, believes Bank of Ireland’s support made the difference especially in the early stage success of the project.

The study predicted that investment in the global green economy would range from $500 billion to $1,000 billion annually in coming years. And Ireland was well positioned to get a slice of the action. Ireland has already succeeded in getting a large slice with 2013 a bumper year for green asset managers, who won close to $4 billion in new funding.

Today GIFSC is poised to become the source of much needed capital for the development of Ireland’s green economy as banks get to grips with funding the needs of entrepreneurs seeking to find solutions to global sustainability challenges. “Capital is our business, sustainability is everyone’s business,” says Rushe.

“The enthusiastic support of Padraig Rushe, Paul Harris and others within Bank of Ireland has been pivotal to the success of this venture. Without this wealth of experience to draw from the project could not have happened”.

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Bank of Ireland supporting Nines Photovoltaic; (l-r) Conall Boyle, Corporate Banking, Bank of Ireland; Edward Duffy, CEO Nines; Dawn Guiney, Kernel Capital; and John O'Dea, Department Manager of High-Potential Start-Ups at Enterprise Ireland.

ONE HOUR OF SUNLIGHT COULD POWER THE WORLD The energy from one hour of sunlight on the earth’s surface would be sufficient to meet the world’s annual electricity needs, yet the technology to harvest this energy remains too expensive for solar electricity generation to become a mainstream source of electricity.

That is according to Nines Photovoltaics (Nines), a Dublinbased firm, which last year secured €350,000 ($481,000) from Bank of Ireland’s Seed & Early Stage Equity Fund managed by Kernel Capital.

Nines says its technology reduces this harvesting cost by dramatically changing the processes used to manufacture solar cells.

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Edward Duffy, CEO, Nines Photovoltaics, said: “As the number of global solar installations continues to rise, solar cell manufacturers continue to look for innovative solutions to reduce costs and increase efficiencies in order to survive. We are currently ramping up our process development and entering the market with a disruptive new technology that will address the manufacturer’s needs.

“Kernel Capital’s support enables us to execute on our plans, their indepth knowledge and experience have proven invaluable,” says Duffy.

Nines is just one of many renewable energy companies that have been supported by Bank of Irelandbacked seed funds.

SolarPrint Limited, a developer of high performance indoor energy harvesting technology, received a €1 million ($1.37 million) investment from Bank of Ireland-supported Seed funds in conjunction with private investors. The company is

developing a technology, which converts light from any source into energy. SolarPrint’s technology provides an autonomous power source for intelligent wireless devices, removing the constraints of mains power wiring or disposable battery replacement. SolarPrint’s target market is powering wireless devices for building energy management. Buildings currently account for over 40 percent of the world’s total energy usage.

In April 2011, Bank of Irelandbacked Seed Funds led a €800,000 ($1.1 billion) investment in Kilkennybased Hybrid Energy Solutions.

Hybrid Energy’s technology enables significant energy savings whilst simultan-eously allowing companies to pursue a green strategy using renewable energy sources whether in the heart of the city or in the remotest areas of the globe.

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Nick McGrath, CEO and founder of Hybrid Energy, says: “I am proud of our role in helping communities in some of the world’s poorest and remotest regions by delivering critical power to telecommunications infrastructure. This infrastructure is life changing for people in remote communities and connects them to the rest of the world. Our solution can enable access to humanitarian aid, medical and financial support not to mention business opportunities as well as education whilst simultaneously enabling direct energy savings.”

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In the coming years the carbon markets are set to expand rapidly with schemes in China, California, Japan and South Korea all emerging and with nearly a decade of experience in the carbon market, the bank appears well-placed to capitalise on this growing demand.

According to Paul Harris, head of natural resources risk management at Bank of Ireland Global Markets: “the EU ETS has endured a torrid time over recent years.The EU has addressed many criticisms of the scheme for the latest phase and the enacted reforms point to an effective and robust market going forward.” The price curve for carbon appears to reflect that view.

LEADING THE WAY But there is more to renewable energy and cleantech than sun, wind and water. Take BioAtlantis, for example. It specializes in the research, development and manufacture of plant biostimulants and animal prebiotics using bioactive molecules derived from renewable natural resources, including seaweed.

The Tralee-based company, with its processing facility in Kanturk, Co Cork received a €750,000 investment from Bank of Irelandbacked Seed Funds in 2010, and has since established itself within the biotechnology market.

BioAtlantis has expanded into 35 countries and is growing exponentially.

But, Bank of Ireland believes it is important that it clearly demonstrates that it is walking the talk and year on year is increasing its internal energy efficiency targets. When the figures for 2013 are finalised, the bank expects to see a 2.5-3 per cent increase year on year in energy savings across the group.

“The aim for 2014 is considerably more ambitious and we plan to achieve an increase of between 6-7 per cent, year on year,” explained Harris.

Essentially, Bank of Ireland is attempting to make all properties across its portfolio as energy efficient as possible. It is worth noting that the Bank has been leading the way, becoming the first financial institution in Europe to be certified to the ISO 500001, the international standard for energy management.

The institution was an Irish Green Award national winner in 2011. That year it was shortlisted in three categories and was named Green Financial Institution and winner of the overall Green Business Award.

The awards show the extensive work being undertaken by staff throughout the group, supporting all elements within the environmental sector. These include the provision of funding for investment in the green economy, provision of finance for personal and business customers who want to make their properties more energy efficient, provision of carbon trading and working internally to make the buildings in its own property portfolio more energy efficient.

Bank of Ireland appears to be well on the road to recovery. Harris says: “We want to benefit from the rapid growth in the sustainability business sector. We have an established track record of transactions in the sustainability sector. I believe the bank can look to the future with optimism.”

Also in 2010, Bank of Irelandsupported Seed Funds led a €600,000 investment in Limerickbased Resourcekraft, the energy cost control technology specialist.

The fund committed €500,000 of the investment in the company.

The remainder was committed by government agency Enterprise Ireland.

Launch of University College Dublin (UCD) Smurfit MSC in Energy & Environmental Finance, Padraig Rushe (Director Bank of Ireland Corporate Banking), Marian Corcoran (Accenture), Professor Ciaran Ó'hÓgartaigh (Dean of UCD School of Business).

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There is a baby formula boom happening in China right now and Irish companies are stepping up to take a large slice of the action, writes MARTHA KEARNS.

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hina has now overtaken the United States as the biggest consumer of infant and young child formula milk powder in the world. And when you look at its demographics, it’s no surprise. Between 16 and 18 million babies are born in China every year and it currently has more than 70 million children under the age of three.

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This continuing baby boom - along with a number of other factors - has led to an increase in the consumption of infant formula in China with sales there increasing by an average of more than 10 per cent every year.

In 2011 alone, the Chinese infant formula market grew in value by 23 per cent and the market is forecast to more than double in

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value from CNY 62 billion (US$7.5 billion) last year to CNY 128 billion (US$15.5 billion) by 2016.

INTERNATIONAL OPPORTUNITIES

One of the reasons for this growth, according to Nicholas McIlroy from the Shanghai Office of Bord Bia, Ireland’s food promotional agency, is increased urbanisation and rising incomes. More than half of all Chinese now live in cities and there has been an increase in the number of mothers working outside the home, leading to both a rise in income and also a necessity to use formula rather than breast milk.

The statistics showing the growth in the market speak for themselves but are there opportunities for Irish, and other international companies, to reap some of the benefits? The answer would seem to be a resounding Yes.

Another reason for the growth is the expanding product range with a rapid growth in ‘follow on’ and ‘toddler’ formula products in China. This widening of the target age range for formula has happened in recent years with products ranging from ante-natal supplement formula for pregnant women (in a country where dairy intake in pregnant women would not be high) to formula specifically aimed at toddlers and young children. Other specialized formulas are also emerging and while, according to McIlroy, they are still less than one per cent of the overall market, these special formulas represent one of the fastest growth segments.

The main reason why there are so many opportunities for international companies to increase their share of this growing market either by providing the formula itself or some of its ingredients - is the perception that there are quality and safety issues with local brands.

One of the events that solidified this fear was the 2008 Chinese milk scandal which resulted in six infants dying and around 54,000 being hospitalised. It happened after infant formula - produced by a number of companies - and other food materials and components were contaminated with melamine. ¸

China Trade Mission.

From left to right: Minister Simon Coveney; Michael Carey, Chairman Bord Bia; Aidan Cotter, CEO Bord Bia, at the opening of Bord Bia’s Shanghai Office.

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China Trade Mission: Irish Minister Simon Coveney in Beijing launching a new dairy product.

The chemical - which is now banned from inclusion in food production - appeared to have been added to the milk to give it a higher protein content and the children died from kidney damage. Later that year, melamine was also discovered in eggs and other food and this was traced to the chemical being added to animal feed.

The serious debacle resulted in major damage to China’s dairy and food export business with at least 11 countries stopping all imports of Chinese dairy products. It wasn’t helped by the fact that the scare came just four years after 13 infants died in China from malnutrition as a result of watered-down milk being used to feed children.

The food scare scandals severely dented public trust and consumer confidence in local infant products and has led to foreign infant formula becoming a much sought-after product in China, with these brands sometimes selling for more than double the price of local formula.

In China, baby formula that has its ingredients sourced in Ireland is seen as a premium product. If that formula is also packaged here, it is seen as an even superior premium product.

Shanghai. In 2012 alone, China imported more than 90,000 tonnes of the product into the country. This is compared to the local production of around 350,000 tonnes.

The main exporter to China is The Netherlands at around 20,000 tonnes, followed by New Zealand, France and Singapore with 15,000 tonnes each. Ireland, along with This increased demand led to a rise in the Denmark and Australia, had direct imports of market share held by international companies, 4,500 to 5,000 tonnes each. According to with this currently standing at around 40 per Michael Hussey of Bord Bia’s Food and cent.Around 40 per cent mainly concentrated Beverage Division, exports through Hong in the big cities including Beijing and Kong from Ireland stands at around 6,500 22

tonnes, with most of this also destined for mainland China.

In China, baby formula that has its ingredients sourced in Ireland is seen as a premium product. If that formula is also packaged here, it is seen as an even superior premium product.

“There is no doubt that there is more demand from middle-class consumers for products not only with Irish ingredients but packed here,” said Hussey. “Because of a number of health scare scandals in China, many people are wary of products that are made abroad but are packaged in bulk in China by local companies.”

Parents are paying between US$50 and US$60 for a 900g tin of Irish-made and packaged formula.They are savvy consumers and are very aware of where the formula is coming from and are demanding high standards.

“It’s down to a combination of the quality of our milk here in Ireland and the fact that we operate a grass-based system rather than the feed-based system,” says Hussey. “It’s also to do with the fact that companies are longestablished in the business here and they are seen as reliable.” ¸

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The Irish Minister for Agriculture, Food and the Marine, Simon Coveney, says that China is a rapidly growing market for Irish food and drink produce across a range of sectors, especially seafood, pork and dairy.

“In dairy, infant formula is obviously one of the key exports but we see potential for broadening this when dairy quotas are abolished in April 2015,” he says. “The Irish dairy sector is undergoing considerable investment to scale up for this new opportunity and I have no doubt that China is viewed as a key market outlet for this expansion. The growing Ireland-China agrifood relationship is also about sharing of knowledge and there are a number of collaborations in the field of agricultural research between both sides.”

China, he says, is now our sixth largest export market and one that has “huge potential given the rising demand there for premium products. This growth in recent years is evidence that the discerning Chinese consumer places great trust in our high quality traceable food production systems,” the Minister says.

CHALLENGES But the Chinese market isn’t without its challenges. Late last year, Japanese dairy company Meiji, which is the world number 10 diary producer, said it was withdrawing from the Chinese infant formula market as a result of high production costs and intense competition.

The company is the first foreign company to leave the market after a pricing crackdown which was designed to help local firms compete with major international rivals. Last August, China's National Development and Reform Commission (NDRC) fined a group of mostly foreign milk powder producers a total of $110 million for price-fixing. These included New Zealand dairy giant Fonterra, Mead Johnson and Danone.

The Chinese Ministry of Industry and Information Technology (MIIT) is also planning a program to support mergers and acquisitions of infant formula companies to promote domestic output. It is planned that this will eventually lead to the reduction in the number of infant formula companies in China from 127 companies to around 50 and the creation of three to five new companies, which will have an annual sales revenue

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exceeding $822 million (€600 million) by the end of 2018.

This will make the industry easier to control and, the government hopes, could lead to an improvement in quality. But, according to Hussey, while the new rules would seem to favour local companies, it should also lead to opportunities for Irish companies. While it will lead to heavier competition for the Irish companies supplying the market directly, it will open up opportunities for those supplying companies in China with ingredients.

POLICY CHANGES Undoubtably, one of the biggest changes happening in China this year is the relaxation of its infamous one-child policy. The law was introduced in China in the 1970s and restricted family size to one-child only. Parents were only allowed have a second child if both of them had come from one-child families themselves. But the new laws will allow families to have a second child if only one parent has come from a single-child family.

It is estimated that between 15 million and 20 million couples will become eligible to have a second child and could increase birth rates from between one and two million over the next two years. Not only will this result in major societal changes, it will also have knock-on effects for the baby formula industry, with an even bigger baby boom now expected across the country. In the aftermath of the announcement, shares in the major diary and powder companies increased.

However, many analysts are tempering the possibility of a surge in the consumption of infant formula. This is because it has been shown that many more urbanised and middleclass couples are not keen to have more than one child, even when the laws are relaxed. Of course, this section of society is the one most likely to be consumers of infant formula.

Even more new rules are being introduced in China to increase consumer confidence in infant formula and ensure high standards. A new project, which began in January of this year, means that eventually all infant formula must be sold through pharmacies or other stores which are allowed to sell medicines. It is hoped that by next year, pharmacies - of which there are 420,000 in China - will account for 20 per cent of total infant formula sales in China. ¸

THE MAJOR PLAYERS In China, the biggest international players in the infant formula market are US company Mead Johnson Nutrition Co and Fonterra (New Zealand) followed by Nestle and Danone. In Ireland, there are three main multinationals based here which are supplying the Chinese market: Danone, Pfizer and Abbott.

Danone Baby is one of four subsidiaries that global company Danone has in Ireland. Danone employs more than 80,000 people in more than 120 countries. In Ireland, its commercial headquarters is in Deansgrange in Dublin and it has production facilities in Wexford and Cork, supplying the infant formula market.

Pfizer has been in Ireland since 1969 and is the largest pharmaceutical sector investor and employer, with 4,000 employees across eight locations based in Cork, Dublin and Kildare. Total capital investment by the company in Ireland exceeds $7billion.

Abbott in Ireland has been manufacturing and exporting healthcare products for almost 40 years. It has six Irish manufacturing facilities which manufacture and export a wide range of products to more than 130 countries globally.

It is estimated that between 15 million and 20 million couples will become eligible to have a second child and could increase birth rates from between one and two million over the next two years.

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THE IRISH STORY Ireland is punching well above its weight in the infant formula market, not only in China but across the world. It is estimated that Ireland is supplying between 10 per cent and 15 per cent of the global infant formula market - which is one of the fastest-growing dairy market segments in the world.

Given that the global industry grew by more than $4.8 billion (€3.5 billion) in 2011, this is a significant figure for such a small country. Even if you take the lowest estimate of 10 per cent, Ireland is producing 190,000 tonnes of the world’s 1.9 million tonnes of baby formula produced every year.

As well as the multinationals (see previous page), there are also a number of Irish companies that are ahead of the pack in this market, including Kerry

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Group, Dairygold, Glanbia and the Irish Dairy Board (IDB). Lakeland is also a major player supplying into some of the multinationals.

Kerry Group, which was founded in 1972 and employs 24,000 people, is a world leader in food technology. It serves the global food and beverage market as well as providing technology for the pharmaceutical market. “We have the broadest and deepest relationships of food and beverage technology spanning all areas of the market,” says Frank Hayes, director of corporate affairs at Kerry Group. “We have a primary focus on nutrition and it spans all life stages, not just the infant sector.”

Headquartered in Tralee, Co Kerry, the group is currently building a major global innovation and technology centre in Naas, Co Kildare. The company has been in China since 2000 and it has built up a strong customer base there among regional companies and major global players. Hayes says that Irish companies are in a unique position to increase their share in an expanding market place.

“China is a very sophisticated market place in this area and there is a demand for quality and Irish produce,” says Hayes.

“One of our greatest strengths here in Ireland is our strong sustainability and green credentials. Most of our farms are

family-run units and we have strong animal welfare practices with animals grass-fed and reared outdoors. Very few countries can say that they have such a high level of quality control and it’s a major benefit.’’

Hayes also points to Bord Bia’s (the Irish Food Board’s) Origin Green campaign as being a major selling point for Ireland.

“This is the first project of its kind in the world and feeds into an already integrated system. The farmers already operate to high standards themselves, then they are connected to companies such as ourselves where they adhere to our high standards and now they will be complying with the standards set by Origin Green so we will have the highest possible level of compliance.”

In October, 2012, Kerry Group signed a partnership deal with Chinese company Beingmate to supply dairy ingredients for infant nutrition applications in China.

Beingmate is one of the country’s leading manufacturers of infant nutrition products and has a well-established distribution and retail network in China.

Kerry Group had been delivering nutritional products through its facility in Malaysia to Beingmate but the new partnership will provide export growth opportunities from its dairy processing facilities in Charleville, Co Cork, and Listowel, Co Kerry.

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Over the past two decades Glanbia has developed a number of strategic business opportunities in China, which is the company’s hub in the Asia Pacific region.

Glanbia, which is headquartered in Kilkenny and employs 4,900 people, opened its Shanghai office in 2005 and sells directly to the market from Shanghai.

It’s premix plant in Suzhou, Jiangsu Province, was commissioned in 2008 and it manufacturers key nutritional components of, among other products, infant formula. Some 60 people are employed in Suzhou, 45 of whom are Chinese.

In 2012, Glanbia Ingredients Ireland Limited (GIIL), a joint venture between Glanbia plc and Glanbia Co-Operative Society, launched Avonol, a whey protein concentrate powder for the Chinese infant formula market.

“GIIL exports directly to over 50 countries and Ireland’s reputation for quality and food safety places this business in a strong position for success in China,” says a Glanbia spokesperson. “Dairy is viewed

Before they can sell the formula, all stores must first get a permit, which is issued by the Chinese Food and Drug Administration.The move is an effort by the China Association of International Trade (CAIT), a division of the Chinese Ministry of Commerce (MOFCOM), to introduce a reliable distribution network for the product and increase consumer confidence.

But the project has been criticised by those who believe that the real issue for the sector is one of food safety and production standards.Wang Dingmian, former director of the China Dairy Industry Association, is reported as saying that “the quality of baby formula products isn’t decided by the sales channel but by previous manufacturing processes and the quality of the milk source and raw materials”.

For Irish companies, with their reputation for high-end, premium products, this can only be a good thing. This is also good news for Irish farmers who are the suppliers of the milk to the Irish companies and multinationals servicing the Chinese market. But there is some concern among Irish farmers about their

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as a nutrition based offering and many customers have set up operations and manufacturing bases in China and are scaling rapidly so it makes sense for Glanbia to be located close to them.”

With annual revenues of more than $644 million (€470 million) and more than 2,000 milk producers, Lakeland Dairies annually produces over 85,000 tonnes of milk powders, over 25,000 tonnes of butter, casein, lactose and a wide range of market leading dairy foodservice products. It has a customer base in 70 countries, exporting 99 per cent of farm produced milk in its dairy products and marketing 170 different branded products worldwide. The company has global partnerships in multiple sectors including infant nutrition.

CEO of Lakeland Dairies Group, Michael Hanley says that milk producers and the Irish dairy industry “are well placed for future growth and success and this must be built on a platform of sustainable development for the future”.

China and wider Asia, Hanley says, are now effectively acting as a ‘milk sponge’ soaking up milk supplies from across the

return in the growing market, especially with the increase in milk demand expected when European milk quotas are abolished in 2015.

Eddie Downey was elected president of the Irish Farmers’ Association (IFA) in January of this year. “I think the opportunities are very well-known to the Irish farmers and Irish companies that are supplying substantial amounts of powders and whey powder which end up in China,” says Downey. “But while we are selling into the system, we are not reaping the benefits that are being felt by the multinationals.”

globe and putting a strong floor into the dairy markets.

Hanley says there are options for Lakeland Dairies to increase milk processing to meet demand, with its new $30 million (€22 million) milk dryer Bailieboro, Co Cavan proving a major success. The company is also re-commissioning a stood down secondary milk dryer to provide flexibility for processing future anticipated increases in milk supply after the abolition of European milk quotas.

“We have the capacity to invest in further growth, we have the necessary customer and distributor partnerships and we have access to all the main dairy markets across the world,” says Hanley. “That will be important in the future because our high quality milk producers have indicated that they will increase milk production by between 35 per cent and 45 per cent in the years ahead, taking our milk processing intake close to approximately 1 billion litres annually by 2020.”

“The fact that our animals are grass-fed and are well looked after is valued by consumers, including those in China,” he says. “Safety is a major concern for the Chinese after what has happened to them over the years and they see Irish produce as among the safest in the world.”

He adds: “As the opportunities in the market expand, this means that farmers have to increase production to meet with demand.

They are very enthusiastic to do this but it will be at a tremendous cost to farmers - and it is a hard slog. While they are happy to do this, they will have to ensure that they are sufficiently rewarded for this.”

Downey agrees that Ireland’s unique selling point to tap into this growing market is the way the milk is produced by Irish farmers.

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COME PLAY ON MY

GRID

Maryland’s Governor O'Malley photographed in Ireland’s National Control Centre (NCC) with Eirgrid’s Chief Executive Fintan Slye.

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KATHLEEN BARRINGTON

reports that Ireland’s Smart Grid will extend a welcome to innovators and policymakers who want to see what the future looks like.

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f you are the guys running Ireland’s Smart Grid, some pretty interesting people want to meet you. People like Maryland Governor Martin O’Malley, a possible 2016 US Presidential candidate; people like Steven Chu, the Nobel prize winner and former US Energy Secretary; people like US Congresswoman Nancy Pelosi and people like UK Business Secretary Vince Cable.

EirGrid Chief Executive Fintan Slye says that EirGrid has a target of being a world leading company in the smart grid area.

Some of the world’s top political brass take time out of their busy schedules to drop in to EirGrid’s offices in Dublin’s Ballsbridge to hear about Ireland’s Smart Grid. That’s because Ireland is the first country in the world to manage a power system where the grid can accept as much as 40 per cent of its electricity from renewable sources – mainly wind — while guaranteeing continuity of supply to customers.

“Ireland is globally the best in the world for Smart Grid infrastructure,’’ explains Michael Walsh, the Executive Director of the Future Grids division in EirGrid, the state-owned electric power transmission operator in Ireland.

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“The renewable targets across the island mean that the power system of Ireland and Northern Ireland will have one of the highest penetrations of variable renewable generation in the world. The integration of renewables and an expected increase in customer participation will increase the complexity of managing the power system and require an increase in the ‘smartness’ of the grid,’’ he says.

“The relatively small size of the power system together with the ambitious renewable targets means that Ireland and Northern Ireland are at the forefront of identifying and solving many of the challenges.”

“We are first in something that matters. We are first in the world to manage a national power system with 40 per cent renewables.

Only Texas comes remotely near. We are a decade ahead of the UK and 20 years ahead of the rest of Europe,’’Walsh reveals. ➳

The Sandbox The Smart Grid Innovation Hub is a collaborative initiative by EirGrid and the National Digital Research Centre (NDRC) to promote the development of innovative Smart Grid solutions, with a focus on entrepreneurial initiatives by companies, academics and entrepreneurs in Ireland and Northern Ireland.

The hub offers: I A facility - ‘the Sandbox’ to enable prototyping, test, integration and demonstration of Smart Grid systems and applications built on digital technologies.

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Commercialisation support structures - people, funding, customers, know-how.

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Access to data and systems with ability to test/trial products and applications.

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Project spaces: temporary/short term office facilities (desks) at the sponsor companies.

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Access to a network of experts across the sponsor companies encompassing technical and engineering domain expertise in electrical engineering, system operation and ICT.

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Access to a wider network within the Smart Grid community, energy industry and supporting industries.

Britain's Secretary of State for Business Innovation and Skills Vince Cable on a visit to the EirGrid National Control Centre (NCC).

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MARCH / APRIL 2014 Former US Secretary of State Chu (centre) with EirGrid's Fintan Slye (right) during a visit to the EirGrid National Control Centre (NCC).

It is true that Denmark has achieved 50 per cent wind, but that is because it is interconnected to a larger European grid, whereas Ireland has built a system which can take as much as 40 per cent energy from renewables on a single grid serving about 5 million people in the Republic and Northern Ireland.

Ireland and Northern Ireland have a unique opportunity in Smart Grid as the country’s rich wind energy resource has allowed it set a target of 40 per cent energy to come from renewable resources by 2020. The island is effectively a live laboratory of Smart Grid evolution.

“We have had to be innovative because we don’t have any compensating grids to avail of,’’ says Walsh.

Walsh admits that many of the VIPs who drop in to EirGrid are there to check if what they are hearing about in theory is actually working in practice. “There is a lot of ‘will it really work?’ So that is why they come by here.’’

Politicians like Pelosi have a strong interest in renewable energy and a trip to EirGrid’s offices is an opportunity to see the worldleading progress the Irish operator has made in facilitating high levels of wind energy on the system.

“Ireland is seen by visitors such as Pelosi as small enough to have made it happen fast – and large enough to matter,’’Walsh says.

SO WHAT EXACTLY IS A SMART GRID? Well, just as a smart phone means a phone with a computer in it, a smart grid means a computerized electricity grid.The grid uses technology to gather information about the behaviour of suppliers and consumers in order to deliver electricity more efficiently, reliably and sustainably.

Ronan Furlong, executive director of Dublin City University’s Cleantech Innovation Campus, explains: “Smart grids use sensors, meters, digital controls and analytic tools to automate, monitor, control and optimise the two-way flow of energy across networks and operations – from power plant to plug. It enables us to incorporate new sustainable energies such as wind and solar generation, and interact locally with distributed power sources, or plug-in electric vehicles.’’ ➳ 29

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Martin Naughton, President Glen Dimplex, An Taoiseach Enda Kenny (Irish Prime Minister) and Sean O'Driscoll, Chairman and CEO Glen Dimplex, at the launch of new Glen Dimplex R+D Centre in Ireland, December 2013.

Courtesy: Glen Dimplex.

Intel and Glen Dimplex light on SmartGrid Access to EirGrid’s SmartGrid has proved helpful to Irish and foreign multinationals operating in Ireland who wish to demonstrate the value of their products.

Irish consumer electronic goods manufacturer Glen Dimplex is pioneering energy-saving inventions that can slash energy bills dramatically.

Glen Dimplex is developing a smart electric heater that can charge up on wind or wave energy and store until it’s needed.

EirGrid effectively makes its Smart Grid available to Glen Dimplex to demonstrate the viability of such exciting new energysaving technologies.

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Glen Dimplex has been able to demonstrate how storage heaters in homes across Ireland can be deployed as a demand-side management tool by switching the heaters on and off remotely.

The project aims to maximise the use of renewable energy, provide increased flexibility to the power system and, last but certainly not least, deliver substantial cost savings to consumers.

The technology has already been tested in 140 houses and is being extended to over 1000 homes in both Northern Ireland and the Republic.

Glen Dimplex is collaborating with the likes of giant US chip-maker Intel on a major R&D project called Enernet Ireland which will focus on Smart Electric Thermal Storage (SETS) systems and will look at the potential economic benefits for Ireland of the technology.

The other partners in the project are EirGrid, ESB Networks, SSE/Airtricity and the Energy Institute at University College Dublin (UCD).

Martin Curley, vice president and director of Intel Labs Europe earlier this year told the Irish Independent.

“Storing renewable energy until it’s needed is what everyone is working for.’’

“Electricity is very expensive, but using electrical heating can be cheap if you have an environmentally friendly renewable energy source.’’

The project also has significant jobsgeneration potential, he said. The developments aim to create the world’s smartest energy grid, taking advantage of renewable energy in Ireland and creating a unique set of products that can be marketed worldwide.

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The Smart Grid also enables EirGrid to optimise grid performance, prevent outages, restore outages faster and enable utilities such as the ESB, the state owned electricity distributor, to provide consumers with the ability to manage their energy usage right down to the individual appliance.

“If we give greater levels of information on electricity pricing and consumption to consumers, we can give them greater control over their consumption and help them reduce their bills with knock on effects in emissions,’’ Furlong adds.

Well, just as a smart phone means a phone with a computer in it, a smart grid means a computerised electricity grid.

Ireland wanted to reduce its reliance on imported energy by tapping local energy supplies. It also wanted to use cleaner sources of energy than traditional fossil fuels, but did not want to go down the nuclear road – to which there was strong public opposition.

There is no shortage of wind in Ireland; the question was how to make the electricity grid smart enough to manage variations in wind volumes, while guaranteeing uninterrupted electricity supply to customers who include many US multinationals with European headquarters in Ireland.

EirGrid hired Walsh, a former chief executive officer of the Irish Wind Energy Association, as director of its Future Grids division in 2011.The challenge he faces is to integrate renewable forms of energy generation, while ensuring security of supply. ➳

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How access to Smart Grid helps my business

By Tim Crowley Smart Grid deploys digital technology and requires capture and analysis of the resultant reams of data. Top tier international tech companies such as Intel, IBM and Cisco see vast potential in bringing intelligence to electricity networks around the world and have all moved to address this opportunity. Smart grid plays to Ireland’s strengths in information and communications technology (ICT). Ireland has become an international exemplar of smart grid technologies deployed to address the challenge of integrating high levels of wind energy on to our electricity grid.

“

I am a director of ServusNet Informatics, based at Cork’s National Software Centre.

We are a great example of ICT skills redeployed in the pursuit of more efficient renewable energy. ServusNet’s founders worked as senior telecoms engineers until Motorola closed their software development centre in Cork back in 2007.

Des Farren and two of his colleagues at Motorola quickly spotted the opportunity to redeploy their expertise in managing data for telecoms networks to managing the myriad of data associated with wind turbines.

ServusNet’s servers now hum quietly as they process gigabytes of data extracted from 900 MWs of wind energy scattered across the US. Analysts at ServusNet parse and analyse this data to assist the owners and operators of those US wind farms to extract maximum production and spot problems before they arise. This is particularly important when the wind turbines are about to exit the warranty provided by turbine manufacturers such as GE, Siemens and Vestas. Search the data to extract evidence of a systemic issue and get the cost covered under the manufacturer’s warranty. Otherwise, the owner will pick up what can be big ticket rectification costs after the warranty expires.

Wind energy has zero fuel cost and generates no emissions. However, it is an intermittent electricity source because wind speeds are forever variable. Here at ServusNet, we are now leveraging our expertise in managing wind farm data to develop a more accurate wind energy forecasting solution. This requires a multi-disciplinary team of wind energy experts and data analysts. Enterprise

Ireland, the Irish Government agency responsible for supporting Irish businesses, co-funded with ServusNet a consortium of researchers led by Richard Linger at Cork Institute of Technology’s energy centre of excellence.

Irish electricity transmission system operator, EirGrid, is supporting ServusNet’s wind energy forecasting initiative with valuable market and user requirement inputs. Through EirGrid’s Smart Grid Innovation Hub initiative they also introduced us to leading Irish energy utility, Energia, where our wind energy forecasting is undergoing field trials. Most importantly, EirGrid will corroborate the results of our beta testing at Energia’s wind farms. This will comprise the most valuable validation which enables us to approach international markets.

Making money from more accurate wind energy forecasting is dependent upon electricity market structures. In Ireland, the transmission system operator, EirGrid, absorbs the challenge of wind intermittency and pays wind energy generators the same pool electricity price regardless of output. In mainland UK and most US regional electricity markets, the market is structured so as to reward generators for accuracy and/or penalise inaccuracy in output forecasts.

Consequently, wind energy traders require the most accurate wind energy forecast to maximise revenue and avoid costly penalties for inaccuracy.

I am working actively with commodity trading teams in London to deploy ServusNet’s new wind energy forecasting solution. ServusNet’s solution enables wind energy to be traded on electricity power exchanges on terms almost comparable with thermal generation. This brings wind energy ever closer to the holy grail of grid parity – ie where wind competes on a par with thermal generation. These commodity traders always tell me that they are interested in only one thing … making money! Maybe we can make wind energy more competitive and make some money – surely the best of all worlds?

”

Tim Crowley is a chartered accountant, technology entrepreneur and a director of ServusNet Informatics. See also http://www.servusnet.com

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MARCH / APRIL 2014 Michael Walsh Executive Director Future Grids, EirGrid.

“Our customers have very high expectations of reliability,’’Walsh adds.

But it isn’t just policymakers who make the trip to EirGrid’s offices in Ballsbridge. It is also business people ranging from senior executives from giant multinationals to entrepreneurs who want to test new products on the Smart Grid.

Walsh welcomes companies to come and test their products on the Irish Smart Grid.

“It’s like having the world’s only Olympic size swimming pool ... We are giving the world’s swimmers the chance to come and train in our pool.’’

Take General Electric, for example. EirGrid has given GE access to the SmartGrid to demonstrate the effectiveness of a product.

The product enables a temporary increase in wind turbine electrical power output over a short period of time in response to an under frequency event, thus enhancing grid stability.

EirGrid is also co-operating with Irish multinational Glen Dimplex to see how storage heaters can be used as a demand side management tool by switching the heaters on and off remotely. The idea is to use as much renewable energy as possible, increase the flexibility of the power system and provide energy and cost savings to home owners.

With the wind energy sector growing in tandem with the grid’s ability to cope with wind power, Irish financiers are coming to grips with the implications for their businesses.

But it isn’t just big companies like GE and Glen Dimplex that stand to benefit.

ServusNet, a Cork company co-founded by Tim Crowley, a chartered accountant and entrepreneur, has also seen the benefits that access to the Smart Grid can bring.

ServusNet is a software company that provides intelligence to help renewable energy companies reduce their operating

costs and maximise energy production as Crowley explains.The fact that the company can test its products on the Smart Grid helps validate the claims it is making. (See panel on previous page).

EirGrid is also involved in the Smart Grid innovation hub to promote the development of innovative Smart Grid ideas on the island of Ireland.

Walsh explains that the innovations in the Smart Grid have had other spin-offs. With the wind energy sector growing in tandem with the grid’s ability to cope with wind power, Irish financiers are coming to grips with the implications for their businesses.

“The whole dynamic about the way the money flows is different,’’ Walsh says as he explains that the capital cost is more significant for these renewable energy projects, while the operating costs are lower.

“With renewables it is a very different cost profile. That changes how the whole financial model and the money works. The banks that are financing wind farms and projects in Ireland get to understand all these tricky issues,’’ he adds predicting that Irish banks will become recognised as experts in this sector and sell their expertise abroad.

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EUROPE SETS ITS SIGHTS ON The European Commission has made its bid for the bloc’s 2030 climate change and renewable energy targets – setting the stage for two years of tough lobbying.

MARK NICHOLLS reports.

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MARCH / APRIL 2014

“We did it,” was the verdict of Climate Action Commissioner Connie Hedegaard on the 40 per cent emissions reduction target her department succeeded in lobbying for.

Johannes Jansson

Climate Action Commissioner Connie Hedegaard

A

The greenhouse gas target – a big increase from EU’s existing 2020 goal of a 20 per cent reduction against 1990 levels – was at the higher end of expectations.The Commission’s Energy Commissioner, Gunther Oettinger, was pressing hard for 35 per cent.

“We did it,” was the verdict of Climate Action Commissioner Connie Hedegaard on the 40 per cent emissions reduction target her department succeeded in lobbying for – a target that confounded “all those arguing that nothing ambitious would come out of the Commissioner today”.

In exchange Oettinger – backed by the UK government – won a proposed relaxation of the EU’s renewable energy targets. Rather than the nationally binding 2020 renewable energy targets, of an aggregate of 20 per cent, the European Commission is proposing a 27 per cent target that is only binding at the EU level. This will give member states more leeway as to how they meet emission reduction targets.

dvocates of action on climate change greeted the European Commission’s proposals with some relief.

“Overall it’s a positive outcome,” agreed Paul Harris, Head of Natural Resources Risk Management at Bank of Ireland Global Markets, in Dublin. “To achieve consensus on an increase of this magnitude is a good achievement and, in terms of the upcoming climate talks in Lima in December, it goes a long way to restoring Europe’s leadership role in the context of international negotiations.”

The Commission is also apparently backing away from a binding energy efficiency target: the 2020 targets include a 20 per cent increase in energy efficiency, a goal the EU is likely to miss. However, a decision on energy efficiency has been deferred to June.

The proposals are the Commission’s opening shot in a policy process unlikely to be completed before the end of next year. The European Parliament’s initial response was to demand more ambition: in a non-binding vote on February 5, it called for a renewable energy goal of at least 30 per cent, a 40 per cent energy efficiency target, and at least a 40 per cent greenhouse gas reduction. The member states are to consider the Commission’s proposal at a summit in March.

Concerns about cost and competitiveness are writ large throughout the Commission’s proposals. It claims that the climate and renewable energy targets will add just 0.15 per cent to the cost of EU’s energy system by 2030, “if targets are met cost-effectively”.

It believes that the average annual cost of €38 billion ($52 billion) between 2011 and 2030 will be “to a large extent compensated for by fuel savings”. And it frequently trumpets the intent of the plan to increase domestic energy supply, reduce fuel imports, and increase energy efficiency. ➳

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MARCH / APRIL 2014

“It does seem like a reasonable balance between climate ambition and cost have been found,” says Lisa Beauvilain, an investment manager at Impax Asset Management in London. She notes that the Commission is forecasting electricity price rises of just 1 per cent between 2021 and 2030 under the full 2030 package, compared with a 30 per cent rise in this decade.

“The ultimate cost will of course depend on the future carbon price development and on any potential further tightening of the renewables or energy efficiency targets, for instance as a part of the 2015 global climate negotiations,” she adds. “But with the data of today, the balance looks reasonable.”

“A reasonable balance between climate ambition and cost has been found” Lisa Beauvilain, Impax Asset Management

That the Commission’s proposals were more ambitious than they could have been did not placate environmental groups.“They will do little to tackle climate change and, in their current form, give little certainty to Europe’s once thriving but now fragile cleantech sector,” argued Greenpeace UK executive director John Sauven.

Certainly, some environmental groups argue that the EU is on course to come close to this 40 per cent target with existing policies and the overhang of surplus carbon allowances within the EU’s Emissions Trading System (EU ETS). This oversupply – caused by economic recession, the overgenerous allocation of permits by governments, and a flood into the EU of international carbon offsets –has brought the price of EU allowances to a little over €5 ($6.9) per tonne of carbon dioxide, down from a high of almost €30 ($41) in 2008.

EMISSIONS TRADING TO THE FORE The European Commission’s proposals include legislation to help address this oversupply, and push carbon prices back up to a level where they once more drive investment decisions. It proposes a ‘market stability reserve’ that, from 2021, will hold back up to 12 per cent of any accumulated oversupply, if the total volume of emissions allowances in circulation exceeds 833 million.

This measure follows the Commission’s ‘backloading’ proposal to temporarily fix the market oversupply. This proposal, which is currently under consideration by the European Parliament, is set to delay the auction of some 900 million allowances from this year and next, to 2019 and 2020.

The Commission is also breaking with existing practice by closing Europe’s doors to international carbon credits, such as those from the UN’s Clean Development Mechanism.

Analysts at Thomson Reuters Point Carbon say these measures will have a big impact on carbon prices. They forecast that carbon allowances will average €35 ($45) between 2019 and 2030 – €12 ($16) higher than would be the case without the stability reserve.

Some industry groups have been arguing for a simpler climate change strategy, pegged to the carbon price alone. The Commission’s proposals “go in the right direction,” said Hans ten Berge, secretary general of Eurelectic, the EU-wide electricity industry association. “Importantly, both 2030 targets are EU-wide, allowing them to be met through a stronger ETS, rather than through a continuation of costly national [renewable energy] subsidy schemes.” ➳

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MARCH / APRIL 2014

“The European Commission is a shadow of its former self, hiding behind the UK and other backward-looking member states and lobbies” Thomas Becker, European Wind Energy Association

RENEWABLES LOBBY DISHEARTENED But the renewable energy industry was, unsurprisingly, dismayed by what it saw as a weak target that Brussels would struggle to enforce. The European Wind Energy Association said the Commission had “capitulated to anti-renewables lobby groups”.

Its CEO Thomas Becker said: “The previously far-sighted and ambitious European Commission is a shadow of its former self, hiding behind the UK and other backward-looking member states and lobbies. By effectively advocating repatriation of energy policy to member

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states, President Barroso appears to have forgotten his previous calls for ‘more European integration’ on energy policy.”

Jennifer Morgan, the director of the climate and energy programme at the World Resources Institute (WRI), a leading environmental think-tank, shares his view.

“WRI’s finds that binding national targets and policies are required to drive further renewables development,” she says. “The European Commission’s proposal replaces national targets with a regional target – leaving implementation open to chance – a risky proposition as other countries forge ahead on renewables development.”

However, the Irish Wind Energy Association “cautiously welcomed” the Commission’s position but, as its CEO, Kenneth Matthews, explains, it would like to see the target raised to 30 per cent and made binding at the national level. “Eight significant member states, including Germany, expressed a desire for binding renewable energy targets at the national level,” he says. He notes that even if only the EU target remains binding, there will still have to be agreement among member states about how that target is delivered. ➳

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MARCH / APRIL 2014

INTERNATIONAL ACTION Meanwhile, the Commission is recommending that the 40 per cent target be the basis for its negotiating position in the UN climate talks. A major new agreement is set to be agreed in Paris at the end of 2015.

Unlike in previous rounds of the negotiations, the Commission is not specifying a higher target that it is prepared to commit to if other major economies step up.

However, it does leave the door open to increasing its ambition. “Should the 2015 global climate agreement enable the EU to increase its greenhouse gas (GHG) reduction target for 2030 to more than 40 per cent, use of international credits with the EU may become relevant,” the Commission says.

THE INVESTMENT LANDSCAPE Given the uncertainty over the final shape of the 2030 package, analysts say its ultimate impact on the environmental technology sector is impossible to divine. But analysts at HSBC note that the proposed 27 per cent renewable energy target implies a decline in the growth rate of renewables next decade – with 150 GW of new capacity, compared with 210 GW expected from 2011-20.

“From the renewable technology perspective, we see increased risk for the offshore wind technology given its higher capital costs and project development risks,” its analysts say. This could have global implications: “In case of a scale down in the UK offshore wind expectations, supply chain development and technology cost reductions are likely to slow down, thereby adversely impacting the offshore wind installations globally.”

For other investors, the EU’s policy landscape is becoming less important.

“Targets and government support at any level we view as a long-term positive,” says Steven Falci, head of strategy development, sustainable investment, at Kleinwort Benson Investors. But with the EU now a relatively mature market for wind and solar, his firm sees more opportunity in Asia and the US, “where we see more near-term regulatory support and demand”.

The agreement “goes a long way to restoring Europe’s leadership role in the context of international negotiations”

Paul Harris, Bank of Ireland Global Markets

In Europe, Falci says the bigger opportunity lies in increasing energy efficiency, especially in the building stock – and here, the investment case is “very much cost driven … Regulatory support, leadership and targets are important, but the key element is the economics.”

NEXT STEPS The European Commission proposal is the first step in what will be a long policymaking process. The immediate next step is consideration of the plans by member states, at the European Council meeting of March 20-21. Some member states – notably Poland – remain opposed to a 40 per cent target. “It won’t be easy to get all EU countries to sign up to this target,” says Haege Fjellheim, a senior analyst at Thomson Reuters Point Carbon. “The European Council in March may well see an exchange of views rather than the adoption of a final EU position.”

European parliamentary elections later this year mean that draft legislation is not likely to emerge until early 2015, with a final agreement unlikely before the end of 2015.

Timeline: Next Steps 2014 January – European Commission communication on 2030 targets February – European Parliament non-binding vote on 2030 package March – EU Council decision on whether or not to endorse the proposed package May – EU Parliament elections

“The paper was very much the start of a process, but I would hope that the 40 per cent target remains intact,” says Harris at Bank of Ireland. “There is an opportunity for member states individually to deliver meaningful policies that continue to drive renewables, low-carbon and energy efficiency investment, but that’s dependent on an acceleration of economic recovery in the bloc.”

June – 2020 Energy Efficiency target review; EU Council to discuss 2030 targets December – End of term for the EU Commission 2015 March – Draft Legislative 2030 agreement expected December – Final agreement on 2030 climate and energy package expected Source – HSBC

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MARCH / APRIL 2014

GROWTH IN GREEN BOND MARKET

SET TO FUEL

CLEANTECH REVOLUTION

Institutional investors are starting to wake up to the potential of the debt market for projects that tackle climate change, writes MIKE SCOTT.

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hen you build a power plant fuelled by coal or gas, the actual plant is only half the story. You then have to factor in the price of the fuel that will run the facility for the next four decades.

As we have seen in recent years, this price can be extremely volatile but it is not included in the initial cost of the project because it is operating expenditure rather than capital expenditure.

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MARCH / APRIL 2014

With renewable energy, the financing profile is completely different. All the cost is up front capital expenditure on new equipment – if you’re building an offshore wind farm, there’s not just the foundations, turbine towers, blades and nacelles to think of, but also the undersea cabling, onshore transformer stations and – because it is an industry that remains in its infancy – even the ships that will install the turbines. But once they are installed and commissioned, the costs of running wind farms are minimal. There is, of course, a certain amount of maintenance and repair, but the fuel itself – the wind in this case – is free. The same applies to solar power.

With many renewable technologies still relatively new and unproven, investors have been reluctant to commit funds despite the pressing need. According to the International Energy Agency, “in order to limit global warming to 2 degrees Celsius and avoid the worst effects of climate change, investments in low-carbon energy technologies will need to at least double, reaching $500 billion annually by 2020, and then double again to $1 trillion by 2030”.

INVESTMENT IN CLEAN ENERGY FELL IN 2013 Yet according to Bloomberg New Energy Finance, in 2013 investment in clean energy fell 11 per cent to $254 billion, far short of what the science tells us is needed. While part of the fall was due to the massive drop in the price of solar power equipment which meant that more power was being generated for less money, there is still a massive clean energy investment gap, says Mindy Lubbers, CEO of Ceres, the US-based sustainable investment organisation.

Today, the leading providers of capital to clean energy are primarily commercial banks, national and multilateral development banks and electric utilities. But these sources alone are insufficient to double annual global clean energy investment by 2020 and quadruple it by 2030, according to a recent Ceres report, Investing in the Clean Trillion: Closing the Clean Energy Investment Gap.

“The issuance of green bonds is being driven both by the capital needs of issuers as well as the commitment of institutional investors to climate finance and responsible investment”

Clean energy projects need new and additional sources of capital, while banks and utilities need to be able to sell out of projects once they have been developed so they can invest in new capacity. The largest potential providers of funding are institutional investors such as pension funds, insurance companies, sovereign wealth funds, endowments, foundations and investment managers. Globally, these institutional investors collectively manage about $76 trillion in assets.

The key to harnessing these investors and their capital to the cause of decarbonising the economy is the market for green bonds, or climate bonds as they are also known. These debt instruments are ideal for financing renewable energy projects because they can provide upfront the capital that the project developers need while also giving investors the long-term returns that they are looking for and fulfilling their desire to improve their green credentials.

“The issuance of green bonds is being driven both by the capital needs of issuers as well as the commitment of institutional investors to climate finance and responsible investment,” HSBC analysts wrote in a recent research note. ¸

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FROM THE NILE DELTA TO THE GREAT BARRIER REEF The Climate Bonds Initiative defines such bonds as debt instruments that raise finance for climate change solutions.“These might be greenhouse gas emission reduction projects ranging from clean energy to energy efficiency, or climate change adaptation projects ranging from building Nile delta flood defences to helping the Great Barrier Reef adapt to warming waters,” the organisation says.

The market for green bonds has been slow to take off, for a number of reasons. Partly, there have not been enough bonds available. Clean energy is still a relatively young sector that is still scaling up, while bond investors need large projects to invest in. This relative youth also meant that green bonds were seen as a risk, simply because there was no track record for investors to benchmark issuance against.

But 2014 could be green bonds’ year to break through to the mainstream. HSBC has said that the market should more than double this year to $25 billion, having tripled in size to about $11 billion in 2013. “The era of green bonds has arrived. We see increasing use of bond markets to raise capital for the lowcarbon economy,” the bank said in a research note earlier this year.

The market looks set to grow as investors get used to the concept and are reassured by the performance of previous issues and the fact that green bonds have not been priced at a premium to other bonds. In addition, as the market grows, the necessary market infrastructure is being put in place to reassure investors and encourage them to commit their cash.

MARCH / APRIL 2014

IT IS ABOUT THE ASSET

“The era of green bonds has arrived. We see increasing use of bond markets to raise capital for the low-carbon economy”

“The development of a robust and liquid market for green bonds is an important progression for debt markets,” adds Suzanne Buchta, global co-head of green debt capital markets at Bank of America Merrill Lynch.

“In co-authoring these principles we attempt to help standardise the product and we hope to catalyse investment into environmentally sustainable projects, something to which our firm is very committed.”

The Principles are an important development, says Sean Kidney, chief executive of the Climate Bonds Initiative, not least because in essence they define what a green bond is. Transparency is central to the green bonds market because issuers need to disclose the nature of the assets being funded so investors know the bond qualifies as green.

Often, the exact nature of the assets or activity being funded by a bond can be somewhat opaque, as evidenced by the financial crisis, which was triggered by sub-prime mortgage bonds.

“The best way to ensure that finance is truly addressing environmental challenges is for each bond to meet clear, transparent (publicly available) environmental impact criteria in order to be called ‘green’ or ‘climate’,” Kidney GREEN BOND PRINCIPLES says. “Such criteria (and whether the issuer One important development in this regard is meets them) should be determined by the creation of the Green Bond Principles, independent experts and academics rather backed by some of the world’s biggest banks, than by issuers or investors.” The Climate including Bank of America Merrill Lynch, Bonds Initiative has been developing one Goldman Sachs, BNP Paribas, Deutsche such scheme, the Climate Bonds Standard.

Bank, Citigroup and JPMorgan Chase. Their aim is to encourage transparency, disclosure and integrity in the development of the market, according to Ceres.

One of the key features is “that it’s about the asset, not the company,” Kidney stresses.“The bond is linked to the asset and we don’t really care if the company has strong ESG (environmental, social and governance) criteria.We just want a wind farm to be built.

If an oil company issues a bond to build a wind farm, the company itself may not meet a fund manager’s ESG criteria for investment, but the bond should.”

To date, the overwhelming majority of green bonds have been issued by national or multinational development institutions such as the World Bank or its offshoot the International Finance Corporation, whose involvement, sturdy balance sheets and AAA ratings gave investors confidence that the bonds would provide a return. The very first bond specifically labelled as green was issued in 2007 by the European Investment Bank (EIB) – a “Climate Awareness Bond whose proceeds were specifically linked to renewable energy and energy efficiency,” says the Climate Bonds Initiative’s Bridget Boule.

While these multilateral institutions continue to dominate the market, 2013 saw a surge in issuance with the first instruments from private companies coming to market. EdF, the French utility, issued a €1.4 billion ($1.9 billion) bond linked to its renewable energy assets while Bank of America Merrill Lynch debuted a $500 million issue that will fund renewable energy and energy efficiency projects and Swedish property group Vasakronan raised SEK 1.3 billion (€147 million/$202 million) to finance new green buildings and energy efficiency refits.

“All of these issuers are expecting to issue more green bonds,” Kidney says. “EdF was extremely happy with the reception for its issue, which was heavily oversubscribed. In fact, we have seen significant and consistent oversubscription. The corporate green bond market will grow in response to that demand.” ¸

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MARCH / APRIL 2014

UN Secretary-General Ban Ki-moon addresses the 2014 World Economic Forum at a session on Climate, Growth and Development. UN Photo/Eskinder Debe.

GREEN MUNI BONDS PROVE POPULAR And in addition to an increase in the corporate market, the market for green municipal bonds is also expected to grow following offerings last year from the city of Gothenburg, which offered bonds based on investments in green property and energy efficiency, and three French provinces that raised money to fund green social housing, renewable energy and energy efficiency projects. Indeed some investors appear to prefer these “green muni” bonds – as the state of Massachusetts found last year when it issued a $100 million green bond alongside regular bonds with exactly the same yield. The state hoped to raise $1 billion from the regular bonds, but found that it could only sell $575 million, while the green bond was 30 per cent oversubscribed. It also found that the green bond attracted a whole new set of institutions, helping it to diversify its investor base.

While it is western markets, along with Japan and Korea, that are the centre of demand, the flood of interest is not confined to the USA and Europe. At the recent C40 Cities Mayors’ Summit in South Africa, the City of Johannesburg announced it is in talks about issuing a green bond to fund new green buildings and retrofits of existing buildings.

Another driver for the consolidation of the market will be the “unlabelled” market – bonds that are not specifically tagged as green but which qualify as such.There are a number of bonds in the market for projects ranging from solar farms to railways that have a beneficial impact on carbon emissions but that have not been sold on that basis. Kidney estimates that the unlabelled market is much bigger than the labelled market at around $72 billion. Reclassifying such debt under the green bond label will further demystify the market and show investors that it is not as exotic as they think.

And he is bullish on the future for the sector.

“We’ve seen about $2 billion of issuance this year already.There’s no doubt that the market will at least double this year. The only question is exactly how much it will grow.”

GREY AREAS However, the standards are important because you quite quickly encounter grey areas. “We wouldn’t define as green a project to improve the energy efficiency of tar sands, for example,” he points out. “It’s good to make tar sands exploitation more efficient but to meet our climate targets we need to stop using tar sands entirely because they are so polluting.”

For the same reason, railway lines to coal mines would also be excluded, while only certain types of investment in biofuels would qualify as some lead to deforestation or compete with food crops for land and water while others such as sugar-based ethanol or second-generation biofuels offer genuine environmental benefits, he explains.

Nonetheless, the green bonds market looks like it is here to stay after UN Secretary General Ban Ki Moon called on investors to “increase finance flows into low-carbon energy and climate-resilient infrastructure, including through setting portfolio targets and increasing the deployment of climate bonds” at the World Economic Forum in Davos.

The bigger the market, the cheaper it will become to fund green projects, says Michael Liebreich, chairman of Bloomberg New Energy Finance. “It is clear that mainstream debt providers are discovering the virtues of clean energy, and that is going to make a difference. A continuing surge in green bond issuance in 2014 will add further downward pressure on lending costs.”

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BRAZIL’S

GETS $393 MILLION

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~

MARACANA GREEN MAKEOVER But the football-mad country is struggling to meet its pledge to make this year’s World Cup the greenest ever, reports LIZA BOOTH from Rio de Janeiro.

~ stadium will host the Rio de Janeiro's Maracana World Cup final in July. Photo: FIFA/ Getty Images

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n June 12, 32 teams of the world's best players will gather in Brazil for what the country is calling “the World Cup of World Cups”. Six hundred thousand fans and armies of media and officials from all over the globe will fly in to celebrate it. But amongst the preparations for the party, has Brazil forgotten its pledge to make this World Cup the greenest ever?

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The Brazil team celebrates after winning last year's Confederation Cup - the World Cup dry run. Photo: FIFA/Getty Images

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It was always a tall order - meeting an environmental agenda as well as building stadia and transport infrastructures, much of it from scratch. And all of this in a country with limited sustainability experience. The organisers set up a series of task-forces to ensure federal, state and corporate stakeholders worked together to deliver on the promise. And they had the country behind them: a 2011 poll for the world football authority (FIFA) found 90 per cent of Brazilians thought it was “vital”. So why ask sustainability professionals - have they failed to make more of an impact?

In Rio de Janeiro on February 6, FIFA showed off gleaming solar panels, intelligent lighting systems and rainwater pitch irrigation to the world's press - the Maracana, the most famous football stadium in the world with a sustainability make-over costing $393 million (€286 million).

“This is our most comprehensive, our most integrated strategy, and also our biggest ever investment in this area,” says Federico Addiechi, FIFA’s Head of Corporate Social Responsibility. “We are struggling all the time to make these things a reality... because we want a better future, we want to protect our planet.”

PASSIONATE RHETORIC But despite the passionate rhetoric, the organisation predicts the tournament will still pump 2.72 million tons of greenhouse gases (GHGs) into the air by the end of the competition - a third more than the last World Cup held in South Africa in 2010.

Eighty-one per cent of those heat-trapping gases will be generated by transport for supporters. International flights will bring the fans to Brazil in June and July, and domestic flights will transport them between stadiums in a country where there is no viable public transport alternative. Travel agents estimate that travelling the 2,800km from Rio to see a match in Manaus, for example, would take two days on bus or four days by boat. ¸

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Federico Addiechi is FIFA's Head of Corporate Social Responsibility.

Photo: Buda Mendes/ FIFA via Getty Images.

International observers are watching with interest. Philippe Pernstich is a Consultant Advisor at the UK's Carbon Trust. He says the so-called mega-events which attract international visitors can never claim to be “Low Carbon”. The task is to find strategies to minimise the factors that can be controlled.

“Brazil has a disadvantage of geography with its size, but electing for 12 distant venues [rather than a possible minimum of six] and building of six new stadia is not ideal from an environmental perspective. Likewise the organisers could have opted to hold all group matches in a single region, which would have reduced fans’ travel. Commercial factors have over-ridden the environmental.”

Brazil’s passion for football is clearly centerstage here. But there is as much at stake in the financial performance as that of star players Neymar or Fred. Brazil’s impressive growth when it won the bid has since dramatically slowed, and last summer’s street protests showed the simmering resentment at the rising cost to the public purse, while hospitals and schools remain woefully under-funded.

The Brazilian government is spending an estimated $14 billion (€10.3 billion) preparing for the World Cup. It’s banking on returns close to EY’s calculations of $71 billion (€52

billion) in direct and indirect investment, although some analysts doubt the figure will be so high. Ministers say by spreading the tournament across the country they can help redistribute wealth and business opportunities, and create around 120,000 new jobs.

TOO LATE But with around three months until the opening ceremony, London 2012’s former Head of Sustainability, Dan Epstein, says the organisers have missed the boat on more ambitious environmental projects which could make the legacy of this event as impressive as the party such as new strategies for sewage, reducing the carbon density of developments, and waste management schemes.

“It’s too late.They’ve had seven years to think about it, but implementation should have begun two years ago. We've been saying you need to plan to deliver real change, we’ve planned strategies, given ideas: but they’ve not really been taken on and developed.

culturally.They were very effective with their supply chain for ethical consumption. They showed how the tournament can lead to long-term changes for the better.”

That Brazil 2014’s carbon footprint isn’t higher still is thanks to the country's existing clean energy matrix, which relies heavily on hydroelectricity and lower carbon liquid fuels, and that has undoubtedly helped with intracity transport and the electricity used by accommodation as well as the big events. ¸

"It’s too late. They’ve had seven years to think about it, but implementation should have begun two years ago...we've planned strategies, given ideas… but they've not really been taken on and developed.”

“We say, don’t look at the London Olympics, the city is too different. Look at South Africa in 2010 - they’re more similar climatically and

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"It’s worth it because we will make that investment back in just three years through savings in electricity and water. And at the same time we can make such a big positive impact inside the stadium”

DEVIL IS IN THE DETAIL As with all carbon footprint calculations, the devil is in the detail of what's being excluded.

In line with previous World Cup measurements, stadia construction projects and transport infrastructure are off the list.

Concrete carries a heavy carbon load: 410 kg/m3 (based on the standard use of 14 per cent cement). Six new stadia have been built from scratch, the others have had extensive renovations to come up to FIFA standard.

None of them have released carbon footprint measurements for the work.

The Arena da Amazonia stadium in the jungle city of Manaus is often singled out for criticism: an over-sized and high-carbon density project with no viable legacy. The 43,000 seater - which is yet to be completed - will only host four matches during the World Cup. Afterwards its energy load will be used by a local football club that usually attracts a crowd of 600. The $205 million (€150 million) design - similar to Beijing’s Bird Nest stadium - has required 6,700 tonnes of smelted steel to be imported from Portugal, and the extraweight cranes to lift the metal to be flown in from China and the US.

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BELO HORIZONTE LEADS IN SUSTAINABILITY Others have fared better. The city of Belo Horizonte used a public-private partnership with the Minas Arena group and $274 million (€200 million) to renovate the Mineirao stadium with enough green credentials to vie for LEED (Leadership in Energy and Environmental Design) certification.

According to City Hall, they recycled everything from seats to other stadia and the pitch to a local social project. All construction debris was re-used as street paving, and they only used certified wood and water-based paints. A scheme to give grants to local businesses who also make environmental changes has also been set up.

Marcelo Viana is the Environment Supervisor for the stadium, and oversaw the green alteration plan. He says the extra investment of up to 10 per cent of building costs wasn't a hard sell to the stakeholders:

“It’s worth it because we will make that investment back in just three years through savings in electricity and water. And at the same time we can make such a big positive impact inside the stadium and with the message the public takes home with them.We had to take the opportunity.”

FIFA never made any formal sustainability requirements on Brazil, so there is nothing to hold them to, but Federico Addeichi says he is “very happy” with their achievements.

To Dan Epstein that means the governing body has been too “hands-off ” and should have pushed harder for action. He believes the football authorities do not want to be associated with any factors that add to budgets, largely public money. His UK-based consultancy Useful Simple has run a series of workshops for officials for the 12 host cities.

“The Brazilian organisers are highly intelligent, they recognise best practice. But the issue is that they don’t hold onto power in these projects. They devolve responsibility to layers of contractors to deliver. The contractors have the skills, but not the motivation to innovate or develop sustainable ideas if they’re not built into the procurement process.” ¸

Judy Tzeng Lee is VP Global Marketing for World Cup sponsor Yingli Solar.

Photo: Yingli Solar.

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YINGLI SOLAR PAVES MARACANA WITH 15,000 SOLAR PANELS And what of the sponsors? Yingli Solar is the major environmental partner. The global leader in the production of photovoltaic cells, has provided the 15,000 solar panels which have been installed on the roof of the Maracana stadium - providing a third of the stadium’s energy needs. Vice President of Global Marketing, Judy Tzeng Lee says sponsors have a “critically important role” to work with FIFA and host countries on sustainability.

“Yingli partnered with FIFA to raise solar energy awareness and promote sustainability to a mainstream, global audience. It is our responsibility to bring this message to the world.

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“In countries like Brazil, which contain beautiful, fragile ecosystems, it is critical to carefully manage events so that their environmental impact is minimal. By prioritizing sustainability and pushing for the world to pay more attention to sustainability, we can help raise the profile of these issues on the global stage.”

After the 64 matches have been played - the last goal scored, the last cheer or commiseration given, FIFA has pledged to fund projects to off-set the final GHG emissions figure, guaranteeing this competition will ultimately be carbonneutral. In April, cleantech operators will have their chance to bid for a slice of the investment, estimated around €1.9 million ($2.6 million). Details have yet to be released, but the selected projects are likely to be in the wind energy and hydro-electric sectors, as well as reforestation plans.

“We have learned lessons,” admits Federico Addiechi. “The sooner you start on work on these issues, the easier, the cheaper, the more impactful they are. In the future, we will integrate more sustainability requirements into the bidding process.We want to do more, but I'm very positive about it - we are on the right track.”

150,000 solar panels on top of the Maracana stadium provide a third of its power.

Photo: Yingli Solar.

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“In countries like Brazil, which contain beautiful, fragile ecosystems, it is critical to carefully manage events so that their environmental impact is minimal”

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BUFFETT AND

GOOGLE CATCH from

MARK MCSHERRY

New York

WIND

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Ken Wolter / Shutterstock.com

THE

In

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oogle and Warren Buffett’s Berkshire Hathaway are among the smart investors leading the charge into renewable energy in the United States, seeing major commercial opportunities as well as environmental advances.

Buffett’s energy company emphasized its intentions when it announced it would buy Nevada’s largest utility, Las Vegas-based NV Energy for about $5.6 billion.

Buffet says of the deal: “This is a great fit for Berkshire Hathaway, and we are pleased to make a long-term investment in Nevada’s economy.”

“Importantly, we will have the opportunity to combine MidAmerican’s expertise in renewable energy with Nevada’s vast renewable resources for the benefit of our customers and our state,” says Michael Yackira, President and CEO of NV Energy.

MidAmerican Energy then agreed to buy wind turbines valued at more than $1 billion from Siemens Energy for five projects in Iowa, in the supplier’s biggest ever order for land-based wind equipment.

Buffett, America’s most famous and successful investor, famously said: “Rule number one: never lose money. Rule number two: never forget rule number one.”

Buffett, America’s most famous and successful investor, famously said: “Rule number one: never lose money. Rule number two: never forget rule number one."

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So when someone with that approach to every investment decision gets into the sustainability business in a big way, you know there is serious money to be made.

Berkshire Hathaway subsidiary MidAmerican Energy is a major investor in wind and solar energy and in the past year has announced two major deals that shook the industry.

Siemens Energy confirmed that the 1,050megawatt (MW) wind turbine order from MidAmerican is the largest onshore wind turbine order in the world.

Bill Fehrman, president and CEO, MidAmerican Energy, explains: “When the new projects are completed in 2015, MidAmerican Energy and Siemens will have provided more than 2.2 gigawatts of clean, wind-generated electricity in Iowa since 2008. ➳

Warren Buffet with President Barack Obama 54

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antb / Shutterstock.com

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MidAmerican says that in 2012, wind energy was, for the first time ever, the leading source of new electricity generation capacity and that more wind power capacity was installed in the US than any other form of power generation.

The company adds that a record $25 billion in private investment was added to the US economy in new wind farm construction, making wind the leading source of newly installed electric generating capacity, representing 42 percent of all new capacity.

MidAmerican says that since 2005, the wind industry has brought more than $105 billion of private investment into the US economy.

“Iowa is a leader in wind generation,” says Iowa Governor Terry Branstad. “It is great to have an Iowa-based energy company placing the world’s largest onshore order for wind turbines in a facility that has produced more than 9,000 blades since the plant began operations in 2007. Together, these companies continue to greatly benefit Iowa’s economy and demonstrate the state’s commitment to renewable energy.”

MidAmerican Energy’s order consists of 448 Siemens wind turbines for five project sites that will deliver 1,050 megawatts of additional wind generation in Iowa by the end of 2015.

Another famous Buffett quote is that owning utilities is “not a way to get rich … it’s a way to stay rich.”

And renewables obviously help.

Another world leader, GOOGLE has declared that it wants to eventually power its entire company operations with 100 per cent renewable energy and that it sees great business opportunities in sustainability.

And the company is putting its money where its mouth is, having committed more than $1 billion to wind and solar projects.

Google said recently it is already using renewable energy to power more than a third of its operations, and it continues to look for ways to increase this percentage.

Google, which has its headquarters for Europe, Middle East and Africa in Dublin, said its plan includes trying out innovative new technology at its offices and purchasing green power on a large scale near its data centers.

It believes a lack of financing for renewable energy developers has been a barrier in the past to the growth of this technology.

To remedy this, Google is buying power directly from utility providers and wind farms near its data centers around the world and said recently it had signed six contracts for over 630 MW of wind energy, enough to power 210,000 US households.

The company acknowledges the environmental benefits of such a policy, but stresses that it also sees renewable energy as a business opportunity.

“We’re keen to make sure that our data centers around the world use as much renewable energy as possible,” says a post by Francois Sterin, a director in Google’s global infrastructure team, on an internal notice board. ➳

Google said recently it is already using renewable energy to power more than a third of its operations, and it continues to look for ways to increase this percentage.

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“By entering into long-term agreements with wind farm developers over the past few years, we’ve been able to increase the amount of renewable energy we consume while helping enable the construction of new facilities.

Even when Google can’t find a new use for old equipment, it erases any components that store data, and then resells them.

“We keep signing these contracts for two main reasons: they make great financial sense for us, and increase the amount of renewable energy available in the grid, which is great for the environment too.”

In January this year, Google agreed to buy smart home devices company Nest Labs for roughly $3.2 billion.

Google says its data centers use 50 per cent less energy than the typical data center and that it drives down the cost and environmental impact of its data centers by designing and building its own facilities.

Even in the companies it buys, Google looks for an environmental edge.

Nest’s mission is to “reinvent unloved but important devices in the home such as thermostats and smoke alarms.”

The Nest thermostat has been a best selling product, and its more recently launched smoke and carbon monoxide alarm has had great reviews in the trade press.

Google installs smart temperature controls and uses “free-cooling” techniques like using outside air or reused water.

The company really aims to make cool products that save energy into the bargain.

The company recycles 100 per cent of the electronic equipment that leaves its data centers. Before it buys new equipment, it tries to find ways to reuse what material it already has.

The Nest thermostat saves energy and money for consumers.The device learns the temperatures that users prefer and turns itself down when they are away from the home – and it can be controlled from a phone.

Nest’s mission is to “reinvent unloved but important devices in the home such as thermostats and smoke alarms.”

Larry Page, CEO of Google lauded Nest’s founders,Tony Fadell (who oversaw development of Apple’s iPod) and Matt Rogers, saying: “They’re already delivering amazing products you can buy right now – thermostats that save energy and smoke alarms that can help keep your family safe.”

Nest’s founders (l-r) Matt Rogers and Tony Fadell

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INGENIOUS Irish ingenuity propels a new kind of turbine which could revolutionise the wind energy sector.

Airsynergy Founders David Smyth, Peter Smyth, Jim Smyth, Adrian Kelly, Gerard Smyth & Andy Smyth.

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The Airsynergy turbine

ometimes the greatest innovations are found at the intersection of technologies. Such is the case for the origin story of Airsynergy of Granard, county Longford, Ireland and its revolutionary new wind turbine. JOHN PUCCIO takes a closer look at this turbine technology and why it has attracted the interest - and investment of successful Irish American businessman and Ernst & Young Entrepreneur of the Year, Gerry Ryan.

S

But, it is not just Ryan who is putting his money and reputation behind Airsynergy’s wind turbine technology. The company has just closed its latest funding round valuing the company at some €40 million ($55 million). In fact, the company has raised €2 million ($2.7 million) from existing and new investors in its fourth funding round. This brings to more than €5 million ($6.8 million) the total amount raised by

Airsynergy from its directors and investors from Ireland and abroad in the past five years.

But what exactly has made Airsynergy attractive to investors and how did the story begin?

About six years ago, Jim Smyth (at the time an owner of a residential construction company) was considering buying a wind turbine to help power his own home.

Having developed considerable expertise in environmental, construction and air management engineering earlier in his career, he saw how the performance of the products available on the market could be vastly improved. Smyth believed that wind turbines could be designed to be more powerful and efficient by applying many of the techniques he had used in designing air conditioning systems.

Driven by the theory that the augmentation of wind velocity by use of a circular shroud around the rotor blade could result in exponential increases in energy output (compared to the more linear increase that result when relying on rotor blade size alone), Smyth went to work. Soon he developed an initial design for the Enhanced Wind Turbine and founded Airsynergy, a renewable energy product development and licensing company, with his brothers Andrew, Gerard, Peter, David and Adrian Kelly in 2008. While the so-called ‘shroud’ technology is not new, Smyth modified the design which allowed the Airsynergy turbine to succeed where others have failed.

Smyth believed that wind turbines could be designed to be more powerful and efficient by applying many of the techniques he had used in designing air conditioning systems.

“This technology really changes the wind turbine sector because it takes more wind into the system and accelerates the air across the rotor. Our turbines perform much better at lower wind speeds.This means the Airsynergy turbines can work efficiently even in low wind areas and can produce power more cheaply than fossil fuels as we scale up. Simply put, we don’t have to chase the wind to be viable,” says Smyth.“In addition, as we scale the size of the Airsynergy turbine upwards they can create the same power as traditional turbines at 60 per cent of the height.”

According to field test results, Airsynergy’s domestic/small commercial turbine (5kW) actually doubles the power output from a wind turbine for approximately 20 per cent capex.The shrouded enhancement unit (the cowl system in front of the wind turbine) uses the wind to move, redirect and accelerate itself while simultaneously alleviating the pressure build up problem that has blighted previous wind augmentation devices. ¸

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Airsynergy’s 5kW turbine is currently undergoing final power performance testing by the DNV GL Group, a leading testing and certification company based in Germany.

Interim testing DNV GL results show Airsynergy’s turbine’s superior performance at low wind speeds in comparison with other market leading turbines.

“Our turbine greatly increases the market of economically viable sites for wind turbine installation.We believe we can greatly expand the global geographic footprint of where this technology can be placed. That is a game-changer,” says Smyth. In other words the Airsynergy turbine is suitable even for low wind countries such as Germany and other central European countries.

These achievements have not been lost on the sustainability industry. In 2013, Airsynergy received the Engineers Ireland Technology of the Year Award and is currently a finalist for the Irish Times InterTradeIreland Innovation Awards for 2014.

“I am delighted about the recognition, but our key focus is the delivery of our first products to the market before the end of this year. Our vision for the company is to help shape the future of energy production in the world making the move to wind energy a much easier and cost efficient choice,” says Smyth.

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“This technology really is a game changer for the sector.

While the turbines using this technology are the world’s most powerful they are significantly smaller than traditional turbines and perform much better at lower wind speeds. This means the Airsynergy turbines can work efficiently even in low wind countries extremely cost effectively and, as we upscale, produce power even cheaper than fossil fuels.”

Airsynergy will not manufacture or distribute their turbines, rather they will licence their patented protected products to suitable partners in particular countries and regions. This license will allow them to promote, manufacture, install and maintain the Airsynergy products in global markets.

“The licensing business model allows for a global rollout of our product, by making it available to the entire energy industry and allows us to devote most our energy on where our strengths and passion truly exist, product design and innovation,” explains Smyth.“We will employ a ‘Partner Friendly’ license strategy in terms of promoting what we do and engaging with current and new market entrants. In this way, we believe we can enhance the value proposition of wind energy to end users, by giving existing market players and new entrants access to our cutting edge technologies,” Smyth adds.

The business model appears to be working.

In 2013, Airsynergy entered into an exclusive license agreement in the United States with New York-based Aris Renewables Energy, LLC. Airsynergy has granted Aris a royalty bearing patent license (up to 100 kW) to develop, manufacture and sell wind turbines and wind powered streetlights utilising Airsynergy’s patented enhancement technologies. The license covers the United States and the Caribbean. ¸

HOW AIRSYNERGY’S WIND TURBINE TECHNOLOGY COULD CHANGE THE MAP OF EUROPE FOR VIABLE SITES

(European Wind Energy Association Wind Data) 60

The above graphic is a broad representation of the increase in viable wind sites.

No direct correlation of the effects has actually being carried out.

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Aris is also acting as an agent for Airsynergy to secure other licensees in South America.

Aris is headed by Irish-American businessman Gerry Ryan, president and CEO of New York-based DGC Capital Contracting Group which he runs with partners Daniel Ahern and Brendan Ahern. DGC has an impressive clients’ list including Donna Karan (DKNY), Alexander McQueen, Bloomingdales, Macy’s, Saks Fifth Avenue, the Barclay Centre Brooklyn, Sears, Balducci’s Supermarkets, Stop & Shop, Starbucks and Dunkin Donuts – to name a few.

The Tipperary-born businessman, who moved to the US almost 30 years ago, is himself a recognised entrepreneur having won the prestigious Ernst & Young Entrepreneur of the Year Award in 2002 and being inducted into the Entrepreneur of the Year Hall of Fame. That same year, he received a second Ernst & Young Entrepreneur of the Year Award for his work with the Fulfilling a Dream Fund which he founded in 1994.

Ryan is a successful businessman who served for four years as Chairman of the Mount Vernon Chamber of Commerce and continues to serve on the Executive Board and Treasurer of the Mount Vernon Police Foundation since its inception in 2007.

The Tipperary-born businessman, who moved to the US almost 30 years ago, is himself a recognised entrepreneur having won the prestigious Ernst & Young Entrepreneur of the Year Award in 2002.

He is also well known for founding the Fulfilling a Dream Fund in 1995 which provides scholarship assistance for deserving young people from the Mount Vernon area who are unable to afford college tuition and for serving on the Board of Directors for the Make a Wish Foundation of the Hudson Valley.

Gerry Ryan, President and CEO of New York-based DGC Captial Contracting Group.

Ryan believes so much in the turbine technology that he has invested in Airsynergy and has joined the company’s board which includes businessman and TV personality Eddie Hobbs as a non-executive director.

He explained: “This technology really is a game changer for the sector. While the turbines using this technology are the world’s most powerful they are significantly smaller than traditional turbines and perform much better at lower wind speeds. This means the Airsynergy turbines can work efficiently even in low wind countries extremely cost effectively and, as we upscale, produce power even cheaper than fossil fuels.”

Ryan’s business partner in Aris is Dan Connors, a seasoned renewable energy entrepreneur who co-founded Aris Wind to introduce new patented wind turbine technology to the US and Caribbean markets. His background includes both technology and management roles across a range of energy technology sectors including Small Wind, Solar PV, Solar Thermal, Fuel Cells, Hydrokinetic Energy and conventional power generation.

The first product that Aris will bring to market in 2014 will be a 5kW turbine based on Airsynergy’s patented design.

SO WHAT’S NEXT FOR AIRSYNERGY? Smyth says the medium (150kW – 450kW) and large wind market (500kW plus) is a key objective of the company. Design of the enhancement unit for larger units has begun but the lead products to market in 2014 will be smaller turbines such as the 5kW turbine and the Airsynergy Streetlight. Component selection for these larger units will form the next phase of the design process and will commence after the products currently in development have completed their respective design phases.

Airsynergy turbines are currently installed on test sites in Ireland.

To see a video on Airsynergy: www.youtube.com/watch?v=6LYwN_KbnVA

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Your partners connecting you to the global media Specialists in the green economy, financial services and public policy

ANGELA MADDEN

JOHN PUCCIO

Head of Dublin Office angela@tempusmedia.ie

Head of New York Office john@tempusmedia.ie

www.tempusmedia.ie

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MANAGING THE

FUTURE Through the dust storm Jonathan Maxwell saw an opportunity and so SDCL was born, writes Editor-in-Chief ANGELA MADDEN.

Jonathan Maxwell, Founding Partner & CEO, Sustainable Development Captial LLP (SDCL).

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hile Jonathan Maxwell couldn’t see down the street for the dust and smog when he was travelling on business in 2006, the opportunity and the road ahead was clear.

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“When I first arrived in Beijing to develop HSBC’s real estate investment business in China, you couldn’t see down the street for the smog and the dust blowing into town from the Mongolian desert. While China was growing at an incredible rate, the pollution, energy, water, waste and land management issues were huge challenges.

“As I took all this on board, I became convinced that this level of growth was

simply unsustainable without major investment in environmental infrastructure.

It was clear to me that this was something that all business and governments would need to address – and quickly. I saw a huge business opportunity associated with helping to address these investment challenges and to develop infrastructure solutions based on being more efficient with the use of resources,” explains Maxwell.

SDCL was invited to take part in the largest-ever British business delegation to China led by UK Prime Minister, David Cameron.

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And, he was right. In the long-term, China is targeting to cut its greenhouse gas emissions by 40 to 45 per cent by 2020, compared with 2003 levels and to dramatically reduce energy intensity. So, naturally, Asia is firmly on his radar.

real estate and infrastructure investment arm to set up a fund management company with a difference, focused on energy efficiency, which is fast attracting the interest - and investment - of governments around the world.

You may not know of Jonathan Maxwell – but you will. He left what many might consider a plum job at HSBC as Director of Business Development for the company’s

He traded his certain position to enter the unknown by establishing a fund management firm based on the drive towards more resource efficient, lower carbon economies, based on the need to cut

costs, improve productivity and achieve more sustainable growth. But the trade is paying off. Today, Maxwell’s brainchild Sustainable Development Capital LLP (SDCL) is an advisor to governments, financial institutions, major project developers and a wide range of corporates on environmental investment. Maxwell has used the knowledge he has gained to serve as an adviser to the United Nations Environment Programme Finance Initiative and is a director and trustee of the Institute for Sustainability in the UK. ➳

Caption

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CASE STUDY: KINGSPAN

In 2012, Kingspan Group announced its Net Zero Energy initiative, which aims to have all of its facilities running on renewably sourced power by 2020, with an interim target to achieve Net 50 percent by the end of 2016.

SDCL provided 100 per cent of the funding required in retrofitting Kingspan's insulated panel manufacturing factory in Holywell, North Wales. Working in conjunction with Johnson Controls, the project's objectives are to reduce energy demand and create cost savings through lighting, compressed air and extraction fans, and metering and motor replacement. The project will save over 1.1 GWh of energy equivalent to a cut in carbon emissions of 593.3 tonnes per annum.

The project is the first of its kind in the UK, structured as a fully equity funded energy services agreement, requiring no capital investment by Kingspan, reducing future costs and achieving an off-balance sheet solution for a private sector client.

So, let’s take a closer look at SDCL. Established in 2007 the company, which is headquartered in London, also has offices in Hong Kong and New York and has, most recently, added Ireland to its expanding footprint.

But, what exactly was the idea that Maxwell conceived and what is it that makes SDCL different?

Well, it is a business worthy of a new asset class and while employing all the skills associated with traditional fund management mainly the ability to identify good investments and generate investment returns, it does a number of other things too; and it is those things that makes Maxwell different.

Essentially the business is based around the simple enough concept of working with governments and large companies to retrofit buildings and infrastructure to make them more energy efficient and reduce running costs for the future. Reducing energy demand reduces costs. Where the value of the cost reduction is greater than the cost of the infrastructure investment, there are positive investment returns and a win-win for investors and the owners of the buildings.

What makes SDCL stand out is the fact that it works with energy and technology companies to deliver energy efficiency solutions as a service rather than selling equipment. SDCL seeks to help with all aspects of a project from inception, designing a fully financed solution to ensure that a project can be delivered with no up front capital cost for clients, that the project is cash flow positive and that clients achieve enduring reduction in energy bills.

In essence – it is a one-stop asset enhancer drawing upon the diverse skillset of its team members who herald from a variety of backgrounds including property, operations, engineering, infrastructure financing, investment banking and law. “We have an exceptional and innovative team that makes our work possible” says Maxwell.

So, Maxwell saw that governments needed to transition their economies to more sustainable growth models but faced considerable challenges - particularly in the raising of the necessary capital to action change.

“Efficiency and doing more with less is the key to unlocking many structural barriers in our daily environmental challenges and to

identifying the growth industries of the future,” says Maxwell.

But, how does SDCL make its returns? The idea of a fund investing in a project, rather than investing it in a stake of another company, to make money is more unusual.

For once, it really can be said that this model Maxwell has honed is a win-win situation for all. And, it is worth pointing out that SDCL doesn’t get paid until the retrofit is complete and the savings known exactly. ➳

For once, it really can be said that this model Maxwell has honed is a win-win situation for all.

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CASE STUDY: NCP CAR PARKS

Future Energy Solutions (FES) began retrofitting NCP car parks in up to 149 locations across the UK with new energy efficient lighting systems. Switching to LEDs will deliver a high quality lighting solution that delivers a better customer experience whilst at the same time significantly reducing energy demand, maintenance costs and greenhouse gas emissions.

Following a £10 million deal ($14 million) with The UK Energy Efficiency Investments Fund, which is managed by SDCL and funded by the UK Green Investment Bank, the project is expected to save over 11,000 tonnes of CO2e per annum and generate energy savings of over 65 per cent in the car parks that are being retrofitted. The investment enables the project to be delivered for NCP at no upfront cost, with the project being financed by energy cost savings over time. This is the first transport infra-structure project to have qualified for a UK Guarantee and demonstrates the flexibility of this unique scheme.

In other words, any constructions/building challenges along the way are a problem for SDCL and not the end user.

“This is why governments and business like our model. If the contractors put in the wrong lights or something else happens then we have the responsibility of fixing it – and fixing it quickly - as we don’t get paid until the job is finished”.

It is easy to see why this model has obvious appeal to governments which are on the one hand under pressure to reduce carbon emissions and move to more sustainable ways of doing business, while at the same time facing fiscal challenges and in many cases severe austerity measures. And, this is really where Maxwell has made the single biggest impression as a visionary.

Three governments have launched energy efficiency funds and all three – the UK, Ireland and Singapore – have selected Maxwell’s SDCL to manage them.

Owen Lewis, Chairman of the Irish Green Building Council said that Maxwell’s company had huge potential: “Energy efficiency is the extraordinary opportunity that is constantly overlooked, as for some reason, more column inches and debate have been focused on renewable energy.

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“However, it is well and good saying that you will get your money back in a short period of time but if you do not have the money to invest in the first place it is a mute point. So, if SDCL is a mechanism to raising the money needed and seeing the project through to the end, it is very welcome indeed and will allow business to make the move to energy efficiency.”

SDCL’s story was really kick-started when it was awarded a £50 million ($83 million) mandate from the UK Government. Backed by the UK Green Investment Bank (UK GIB) which is designed to accelerate private sector investment in the UK’s transition to a green economy, the fund has attracted a further £50 million ($83 million) to support a £100-200 million ($166- $332 million) investment programme.

The fund, UK Energy Efficiency Investments, was designed to co-invest alongside other sources of private sector capital in projects that reduce the demand for energy in non-residential buildings, industrial facilities and urban infrastructure in the UK. ➳

SDCL’s story was really kick-started when it was awarded a £50 million mandate from the UK Government

CASE STUDY: FOUR SEASONS HOTEL, DUBLIN

SDCL has been working with the Four Seasons hotel in Dublin and its owners, London & Regional Properties, to deliver a deep energy efficiency retrofit, which is one of the Irish government's 'Exemplar' projects.

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CASE STUDY: NATIONAL HEALTH SERVICE OF UK

Guys and St Thomas' Hospital is where SDCL’s "Powering Health" collaboration with General Electric and the National Health Service (NHS) Confederation of the UK began. Hospitals consume nearly three times the energy of a typical commercial building.

After installing a 3MW natural gas Jenbacher engine to provide heat and power (pictured inset), the hospital saw £1.5 million ($2.5 million) energy savings in its first year. Additionally, over 11,000 tons of CO2 will be saved each year going forward.

Following the successful installation by GE and Guys and St Thomas’ Hospital, SDCL committed to work with GE and the NHS Confederation to offer similar solutions, fully financed, to other hospitals throughout the UK.

That deal is believed to have made SDCL the first in the world to manage a government-backed fund dedicated to energy efficiency.

More was to follow quickly as Maxwell turned his sights to the east and Singapore which has committed to achieving a reduction in carbon emissions from 2012 levels by between seven to 11 per cent in 2020. With energy efficiency identified as one of key ways to help meet this target, the market was open for Maxwell’s SDCL. So followed the company’s second government-backed fund. Last year (2013) Sustainable Development Capital Asia launched the Singapore Energy Efficiency Investment Programme for up to SGD $200 million to finance the transformation of manufacturing facilities with energy efficient systems and technologies.

Maxwell also knew that strategic partnerships with key local players in the market with a solid reputation in the area of sustainability would be a key to success.

Sustainable Technology Investments Limited, managed by UK financial services doyens Stephen Lansdown and Gordon Power, established a partnership with SDCL to launch its dedicated energy efficiency fund manager in the UK.

“Energy efficiency is good for business. It reduces costs, improves productivity and growth; it makes a real difference to the bottom line and can also go a long way to maintaining profitability.”

Similarly, SDCL Asia is a joint venture between SDCL and the First Eastern Investment Group - a Hong Kong-based investment group pioneering in the field of direct investments in China. Founded by Victor Chu in 1988, First Eastern and its associates have invested into over 100 projects in China covering infrastructure, light industries, real estate development and financial services, generating more than $7 billion of total investments.

More success was to come from Asia when in December 2013, it was revealed that SDCL Asia was launching the UK China Energy Efficiency Investments Fund, which would seek to invest up to $200 million in energy efficiency projects and opportunities.

This deal was announced when SDCL was invited to take part in the largest-ever British business delegation to China led by UK Prime Minister, David Cameron. But it has been years in planning. (See photo at beginning of this article).

Chairman of the First Eastern Investment Group, Victor Chu, says: “First Eastern established the UK China Fund partnership concept during the Prime Minister’s first visit to China in November 2010 to bring the best of British business to China. SDCL was our key investment in the green economy. Now is the perfect time for us to connect its achievements in the UK with the huge opportunities in China.”

But, what exactly does this fund aim to do?

Maxwell explains:“Essentially this is a major initiative to bring the best efficiency technology and service solutions from the UK to China, and visa versa.”

Following swiftly after that news was the announcement that SDCL was the Preferred Applicant for the creation of a €70 million ($96 million) Irish Energy Efficiency Fund announced by Energy Minister Pat Rabbitte – although, not surprisingly, Maxwell’s plans to grow the fund are much more ambitious. “This fund is structured in a way that we provide matched funding and initial commitment is up to €35 million ($48 million) each but I would hope that was just a starting ➳

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About the Irish Energy Efficiency Fund The primary objective of the fund will be to address one of the predominant barriers to economic activity in this sector – the availability of credit that is structured properly and of appropriate term.

This financing gap experienced across all sectors of the economy, not least the public sector, is precluding economically rational investments from taking place.

The implications for the public sector are stark – unless private sector finance is forthcoming, national energy efficiency targets will have to be financed entirely by the Exchequer.

point and that it would grow significantly beyond that expectation.”

But, perhaps Maxwell sums up the opportunity best when he says: “Energy efficiency is good for business. It reduces costs, improves productivity and growth; it makes a real difference to the bottom line and can also go a long way to maintaining profitability.

Simultaneously, energy efficiency also offers the most direct and affordable route to lowering greenhouse gas emissions.

“Energy efficiency represents the ultimate sustainable investment – and it pays for itself!”

To date SDCL has raised some $250 million for its energy efficiency funds - but somehow you get the feeling that that’s only the start of Maxwell’s journey.

Jonathan Maxwell, Founding Partner & CEO, SDCL, participates in the Sustainability Gathering in Dublin Castle, December 2013.

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The Fund will directly assist in: I Stimulating energy efficiency upgrades in the commercial and public sectors and; I

Providing initial finance to test new mechanisms for delivering the estimated public sector funding requirement of €1 billion ($1.37 billion).

It is envisaged that the fund will finance two main types of energy efficiency projects in public and commercial sectors, Energy Performance Contracts (EPCs) where funding is invested via an Energy Services Company (ESCO) and investment in projects.

Energy Performance Contracts are similar to PPP-type contracts in that they can allow for the services and measures provided by the contractor (the ‘Service Provider’) to be kept off the recipient’s (the ‘Host’) balance sheet if appropriately structured, which is generally considered

to be on the basis that the performance risk has substantially transferred to the Service Provider. This generally takes the form of a guaranteed energy saving, with the guarantee provided by the Service Provider to the Host. In effect, the contract structure is to use the energy savings, generated as a result of the measures taken, to pay for the cost of the works.

Projects considered likely for funding include public lighting and retrofits for improved energy efficiency in the public and commercial sectors, biomass district heating systems and water services (eg more efficient pumps).

The Government has committed up to €35 million ($48 million) as a cornerstone investor for investment into the Energy Efficiency Fund with a view to establishing a fund of over €70 million ($117 million) when matched with investment from the private sector.

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SUSTAINABILITY

SECTOR

LIFTS

OFF

Ireland’s rise as a global centre for the renewable energy and sustainability sector mirrors the leadership role the country has already taken in aviation, writes FEARGHAL O’CONNOR.

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hen John Alcock and Arthur Whitten Brown came spinning out of the clouds and crash landed their Vickers Vimy bomber in a Galway bog in 1919 they knew that they had made history as the first men to cross the Atlantic.

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But what they could not have foreseen was that their feat of daring would spark a transatlantic travel boom that would someday see the green and watery isle upon which they had barely made landfall become a world leader in global aviation. Irish people such as Ryanair’s Michael O’Leary, IAG’s Willie Walsh and AerCap’s Aengus Kelly are at the highest levels of the industry, while the country is the undisputed global centre for the booming aviation leasing business.

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Less well known is that Ireland has followed a similar blueprint to rapidly become a global leader in renewable energy, sustainability, cleantech and green asset management. The same pioneering spirit at the heart of the country’s proud history in aviation is now helping Irish companies to great success in the wind energy, solar energy, food, waste and water sectors. That in turn has allowed Dublin and its International Financial Services Centre (IFSC) to develop as a hub for financing sustainable industries.

Parallels with aviation industry success are increasingly recognised at the highest levels.

At Ireland’s Sustainability Gathering in December, Glen Dimplex chairman and chief executive Sean O’Driscoll spoke about the connection. His company is one of the world’s largest electrical heating businesses and a leader in renewable heating technology.

Said O’Driscoll: “In my lifetime the two big initiatives that have changed the face of Ireland from an enterprise perspective: one is the IFSC and the second is around the whole area of the aviation industry. Energy, renewables, financing of energy, financing of renewables we believe is that third opportunity.”

O’Driscoll’s linking of aviation success with the growing importance of the energy and renewables sectors in Ireland was no mere accident. Both have uncanny parallels: geographic advantages, government support, a highly advantageous taxation policy and a cluster of highly capable individuals to help drive growth.

Indeed, the story of the growth of both industries in Ireland each finds expression in the tales of two highly individualistic entrepreneurs – aviation guru Tony Ryan and renewables energy guru Eddie O’Connor. Both, in their own ways, helped ignite an explosion of talent that would transform their industries. ➳

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Ryanair’s CEO Michael O’Leary

Northfoto / Shutterstock.com

Irish people such as Ryanair’s Michael O’Leary, IAG’s Willie Walsh and AerCap’s Aengus Kelly are at the highest levels of the industry, while the country is the undisputed global centre for the booming aviation leasing business.

FLYING HIGH: Ireland’s aviation leasing sector I Nine of the top 10 global leasing firms have their headquarters in Ireland, including industry leaders located here include GECAS, SMBC, Aer Cap, ILFC, AWAS, Avolon, ICBC, CIT, Orix and Lease Corporation International.

I 40 per cent of the 20,000 commercial jets that fly today in the world are leased and that percentage is likely to soon hit 50 per cent. It is estimated that in excess of $100 billion of capital will be required every year to finance all the aircraft delivered by manufacturers.

I 40 per cent of all leased commercial aircraft is managed from Ireland but that percentage is about to rise dramatically. AerCap pulled off a $5 billion takeover of its huge Californian rival ILFC late last year, meaning its fleet will expand to 1,300 aircraft with orders for 400 more.

AerCap’s newly expanded fleet is expected to be registered as Irish, meaning that Ireland will now be ‘home’ to 55 per cent of the world’s leased commercial aircraft. The AerCap deal will create a company with $66 billion of total assets on its balance sheet.

I The Irish Stock Exchange is to create a specialist debt listing platform to enhance Ireland’s status as a global centre in aviation finance. The exchange is already home to 26 aviation debt listings with a total value of $12.7 billion.

I Irish leasing company Avolon has raised over $6 billion in capital since it started in May 2010, including a $300 million equity commitment from the Government of Singapore Investment Corporation in 2011.

Industry analysts expect the company to float on the stock market in the near future to allow it generate the capital it needs to continue expanding its fleet of over 180 airplanes.

I Ireland has placed orders for more new aircraft than the entire Latin American, African or South East Asian regions. Ryanair, on its own, is Boeing’s second largest customer globally.

I Ryanair ordered 175 next-generation 737-800 airplanes valued at $15.6bn at list prices. The order is Boeing’s largest ever aircraft order from a European airline.

I In January, Shannon-based GE Capital Aviation Services (GECAS) ordered 40 Boeing 737s with a listprice value of around $3.9bn.

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Sustainable deals blaze a trail I

I

I

Mainstream Renewable Power plans €3.1 billion ($4.2 billion) of new green energy projects in four countries. The planned projects in Chile, Scotland and South Africa will have a combined output of more than 1,000 megawatts, or enough to power a half-a-million homes, the company said.

Element Power has said that its €8 billion ($11 billion) Greenwire project could create over 2,000 full-time jobs with the development of 40 new wind farms across the Irish midlands. It has a deal to supply the UK’s electricity network with renewable energy and has identified potential sites in counties Meath, Westmeath, Kildare, Laois and Offaly.

Amarenco Solar plans to invest as much as €150 million ($206 million) in solar power projects in France and the UK, has just launched its first fund. The fund was founded by John Mullins, the former chief executive of state-owned gas supplier Bord Gais.

Where once aviators such as Alcock and Brown grabbed the headlines, these days, the real stars of the skies are the accountants, lawyers and financiers who drive the billiondollar deals that have put Dublin at the centre of an aviation leasing boom.

The seeds of that business were sown by one of Ireland’s greatest entrepreneurs, Tony Ryan, in the 1970s. Many of the key people who have ensured that Ireland remains at its heart can trace their involvement right back to Ryan’s original empire.

Like O’Connor, Ryan was a product of Ireland’s semi state portfolio - large state companies established in the middle of the twentieth century to manage crucial services such as aviation, energy, forestry and more.

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Irish-based electrical heating Glen Dimplex announced in December 2013 a €40 million ($55 million) investment in a second research and development facility in county Louth.

The company is a world leader in renewable electric heating.

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A new £81 million ($141 million) renewable energy power plant in Northern Ireland is expected to supply 25,000 homes when it begins operating in 2015. The Evermore 15-megawatt combined heat and power plant will increase the amount of sustainable electricity generated in Northern Ireland by approximately a tenth.

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Solar energy project developer BNRG has received planning permission for the first large-scale solar farm on the island of Ireland. The 5.1 megawatt photovoltaic park on the outskirts of Downpatrick in Northern Ireland, will be developed at a cost of €7.6 million ($10.4 million).

Previously, the company sold two solar parks in Bulgaria in 2012. The IFSC-based company did not reveal how much it sold the facilities for, but said that, on completion, they would have a value of about €25 million ($34 million).

In the early 1970s Ryan rose rapidly through the ranks of the national carrier Aer Lingus.

With the oil crisis looming, it was soon benefitting from his entrepreneurial genius as he found profitable homes for aircraft it could no longer fill. Ryan spotted a huge opportunity and left Aer Lingus to establish a new leasing company, Guinness Peat Aviation (GPA).

The seeds of the aviation leasing business were sown by one of Ireland’s greatest entrepreneurs, Tony Ryan, in the 1970s.

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Irish renewable energy generation and energy storage group, Gaelectric last year raised €65 million ($89 million) in funding for its Irish portfolio of on-shore wind energy projects. The projects comprise 164MW of generation capacity across 13 projects, which the group plans to develop by 2017. It represents a total investment in the region of €250 million ($343 million).

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Renewable energy firm Biotricity has agreed a deal worth €7 million ($9.6 million) annually to source straw feedstock for a new 16 megawatt biomass plant from the Irish Farmers’ Association. The deal will see more than 90,000 tonnes of straw per annum supplied to the renewable plant in county Offaly when it begins generating in 2016.

Its rise was phenomenal. Ryan convinced airlines to lease rather than buy aircraft and, from its base in Shannon, it became the world’s largest commercial aircraft leasing company, valued at $4 billion. But then disaster struck. In the wake of the Gulf War in 1992 the company’s Initial Public Offering (IPO) flopped. Others might have crumbled under the intense pressure — but not Tony Ryan.

The failure of the IPO allowed Ryan concentrate on another struggling project, a fledgling airline called Ryanair. He pumped money into the new carrier and lobbied government officials to relax rules that gave Aer Lingus an effective monopoly in Irish skies. He put his trusted young lieutenant Michael O’Leary in charge and, eventually, a ruthless focus on costs began to pay dividends. Legacy carriers could not compete. Aer Lingus, British Airways, Air France and Lufthansa watched in horror as the brash new arrival rapidly devoured short haul European traffic. Today it carries 80 million passengers annually and has reinvented air travel on the continent. ➳

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Glen Dimplex Chairman and CEO, Sean O’Driscoll.

O’Driscoll’s linking of aviation success with the growing importance of the energy and renewables sectors in Ireland was no mere accident.

As Ryanair was loudly marching to European domination, a quieter revolution was taking place in Ireland. Aircraft leasing was coming of age. Many key players in the industry’s new generation were GPA proteges who set up a myriad of new companies to feed a growing appetite for leased aircraft. Nine of the world’s 10 biggest leasing companies are located in Ireland, with half of all leased aircraft managed from the country.

Irishman Aengus Kelly is one such GPA protege. Just before Christmas, he led his company, the Amsterdam-headquartered AerCap, itself an offshoot of GPA, to a stunning $5 billion takeover of huge Californian rival ILFC. The deal will create a company with $66 billion of total assets on its balance sheet, a fleet of 1,300 aircraft and orders for 400 more.This fleet is expected to be registered as Irish, meaning that Ireland will now be ‘’home” to 55 per cent of the world’s 8,000 leased commercial aircraft, up from 40 per cent.

Why Ireland? Just as in the area of renewables and sustainability, the business and taxation environment is hugely beneficial and constantly evolving to retain a competitive edge. Yet as Aercap’s Aengus Kelly recently explained, that is not the only reason.

“Aviation leasing is one industry where Ireland has the intellectual capital, not just the financial capital. And intellectual capital is what you want.”An industry that creates a centre of excellence attracts “the best people in that region”, he says.

“Look at what came out of GPA and Tony Ryan’s businesses - Michael O’Leary, for example. There was a centre of excellence there that acted as a magnet for the best and the brightest.” ➳

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Like Ryan, O’Connor has a truly international vision and used Ireland’s geography merely as a starting point.

O’Connor was reported to have netted €45 million ($62 billion) from the deal allowing him to move on from Airtricity and form a brand new company, Mainstream Renewable Power. It is now the world’s largest, independent renewables company, with close Like Ryan, O’Connor has a truly to €2 billion ($2.7 billion) invested in projects international vision and used Ireland’s in Chile and South Africa. Last year it sold geography merely as a starting point. As chief wind farms in Ireland and Canada to IKEA executive of Bord na Mona, the state and it also plans to build a huge wind project company that manages Ireland’s peat bogs, in the Irish midlands to export energy to the O’Connor’s entrepreneurial flare soon UK. transformed a traditional, heavily unionised monolith. He quickly saw that old state- But perhaps an even more important owned peat burning plants had little future in outcome from the Airtricity sale was how it a modern world opening its eyes to empowered others to follow in O’Connor’s renewable energy. Just as Ireland’s geograph- footsteps. Just as GPA gave rise to a cluster of ical position on the edge of Europe made it highly trained aviation leasing professionals the ideal staging post for transatlantic travel, in Ireland, Airtricity did the same for the O’Connor saw that its windy shores were also renewables sector. With Airtricity staff and ideal for wind energy. shareholders enjoying a windfall from the sale, the cash, as well as the skills, were now O’Connor’s vision came a decade too soon present to feed into new start-ups in the for his state-owned employer and, like Tony sector.

Ryan before him, he looked to the private sector to fulfil his ambitions. Thus was born Irish wind companies, for example, are Airtricity, quickly becoming one of Ireland’s expected to spend up to €500 million ($687 most exciting and innovative companies. million) each year over the next seven years, Like GPA, it looked to expand far beyond according to the Irish Wind Energy Ireland’s shores. Unlike GPA, the company Association (IWEA), with wind routinely played its cards just right and was sold in generating a third of the country’s electricity 2008 to Scottish & Southern Energy for requirement. €1.8 billion ($2.5 billion). ddie O’Connor’s name may not yet sit as high in the pantheon of Irish business legends as Tony Ryan but he is certainly going the right way about putting himself in contention.

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As with the aviation sector the positive business environment taxation structures and talent base means that it increasingly also makes sense to fund the booming renewables industry from Ireland. For example, the Green International Financial Services Centre (GIFSC) has plans to increase Ireland-based assets serviced or managed in green funds from $24 billion today to $200 billion by 2017. And GIFSC is also tasked with upskilling some 10 per cent of the 33,000 or so professionals working in the International Financial Services Centre in the area of sustainable energy finance. Global fund manager Blackrock’s Renewable Power and Kleinwort Benson Ireland are just two of the key players ensuring that the aviation sector does not get to steal all of the limelight in Ireland.

If Alcock and Brown were to happen upon the Irish coastline today, they would see not just a great place to land their Vickers Vimy.

Through the soft Atlantic mist they would see turbines spinning on the horizon creating the energy and the industry of the future.

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BANK OF

AMERICA’S

$70 BILLION

BET ON SUSTAINABILITY Jack Aiello / Shutterstock.com

from MARK MCSHERRY in New York.

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MARCH / APRIL 2014

Miljan Mladenovic / Shutterstock.com

olar energy in Peru and geothermal power in Kenya.

Wind farms in Illinois and urban forests all over America. Green bonds and environmentally-friendly mutual funds. Bank of America, led by Irish American Brian Moynihan, is forging a $70 billion path in sustainability that leads right back to profits for shareholders.

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Bank of America is almost two years into a 10-year sustainable business initiative of $50 billion to address global climate change and the ever-increasing demands on natural resources – and promote lower-carbon economic solutions.

The $50 billion commitment takes its total to $70 billion over 16 years, following the early completion of an initial $20 billion environmental action plan. The $20 billion plan was exceeded four years ahead of schedule and the bank says it delivered more than $21.6 billion in lending, equipment finance, capital markets and advisory activities, and carbon markets finance to customers and clients.

“We continuously strive to improve and evolve our sustainability practices, which are incredibly important to customers, clients, employees and the communities we serve,” says Andrew Plepler, Bank of America’s global corporate social responsibility executive. ➳

“We continuously strive to improve and evolve our sustainability practices, which are incredibly important to customers, clients, employees and the communities we serve…”

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“There’s also a distinct shareholder benefit, as more and more investors consider sustainability when diversifying portfolios”.

Bank of America says it focuses on four areas in its overall sustainability efforts: transformational finance; operations; employee programmes and philanthropy and nonprofit partnerships.

In transformational finance, the bank said it committed more than $4.5 billion in 2012 alone towards underwriting, advising on and financing “a number of transactions that are expected to increase jobs by thousands and help our clients move closer to a lowercarbon economy.”

These projects included wind energy in Illinois and geothermal energy in Kenya.

In operations, BoA has ambitious goals to reduce its greenhouse gas (GHG) emissions and paper and water consumption, as well as to “increase our diversion of waste from landfill and the percentage of our occupied space that is Leadership in Energy and Environmental Design (LEED) certified”.

In employee programs, one example of its efforts is that in 2012, more than 12,000 staff took part in the bank’s “My Environment” program, which includes moves to make staff take a specific action to reduce their environmental impact.

In philanthropy and nonprofit partnerships, BoA says it committed more than $4.5 million in environmental philanthropy in 2012 alone. More specifically, Bank of America Merrill Lynch said it is one of the biggest underwriters of renewable energy projects for the Overseas Private Investment Corporation (OPIC), the US government’s development finance institution.

In 2012, BoA provided about $300 million of financing with OPIC for two solar projects in Peru.

The bank also supplied $220 million in financing for an OPIC project in Kenya, which hopes to double the generating capacity of the Olkario Geothermal Plant, which is owned by Nevada-based Ormat Technologies.

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“Bank of America viewed this issuance as an opportunity to expand its investor base and to support an important market as investors seek more socially responsible investment options…”

This is a bond in which the funds will be used to finance green investments including renewable energy and energy efficiency projects.

“Bank of America viewed this issuance as an opportunity to expand its investor base and to support an important market as investors seek more socially responsible investment options,” said the bank.

In January, 2014, a consortium of investment banks including Bank of America Merrill Lynch announced their support of the “Green Bond Principles” — which were developed with help from issuers, investors and environmental groups.

This expansion of the Olkario plant could mean it will provide at least five percent of Kenya’s demand for power.

These principles encourage “transparency, disclosure and integrity” in the development of the green bond market.

Bank of America Merrill Lynch was also involved in arranging about $150 million of institutional equity financing to E.ON Climate & Renewables North America in return for an interest in its Pioneer Trail Wind Farm in Illinois.

They are designed to give issuers some guidance on launching a green bond and to help investors by making information available that is required to evaluate the environmental impact of their green bond investments.

The Pioneer Trail facility supplies more than 150MW of energy, enough to supply clean power to at least 45,000 households. BoA said Pioneer Trail could generate more than $29 million in local taxes, $8 million in salaries and make more than $50 million for landowners.

Last September, Bank of America was recognized by the 2013 Dow Jones Sustainability Index (DJSI), the Carbon Disclosure Project (CDP) Global 500 Climate Change Report 2013 and the CDP S&P 500 Climate Change Report 2013 for its sustainability leadership.

Bank of America has announced some major financial product innovations in its sustainability efforts.

The DJSI were the first global indices to track the financial performance of leading sustainability-driven companies around the world. ➳

At the end of 2013, the bank said it had issued a $500 million, three-year, fixed-rate “green bond.”

“This issuance of bonds is part of the company’s ongoing commitment to advance renewable energy initiatives and promote energy efficiency,” the bank said in a statement.

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“We believe that corporations dealing effectively with environmental issues are poised to do well relative to their industry peers.”

Ben Bryant / Shutterstock.com

Also in financial products, Bank of America’s Merrill Lynch Wealth Management and US Trust units now offer almost 200 ESGthemed (environmental, social and governance) investments to individual and institutional investors, including mutual funds.

“One of the most pronounced trends we’ve seen in recent years is the call for wealth to have a productive impact on our environment, our communities, and our society broadly, in addition to earning an investment return,” says Andrew Sieg, managing director and head of global wealth and retirement solutions for Bank of America Merrill Lynch.

“This program offers opportunities for a wide range of investors with diverse interests and beliefs to help meet this need.”

These ESG-themed investments are organized around the three themes of

environmental stewardship, human capital practices and corporate governance. The environmental stewardship includes examining the use of water, alternative energy, climate change and cleantech.

Chris Wolfe, chief investment officer of Merrill Lynch Wealth Management’s Private Banking and Investment Group, explains many investors are adopting this valuesbased approach to managing their money.

He cites a 2012 study from the Forum for Sustainable and Responsible Investment that said values-based investing accounted for $3.74 trillion, or about one in every eight dollars under professional management.

That was 22 percent higher than the $3.1 trillion in the same group’s 2010 report.

“There is compelling evidence that investing according to one’s principles can generate competitive returns,” says Wolfe.

Bank of America’s US Trust has launched a new, proprietary investment strategy called Environmental Stewardship and Sustainability (E2S) with portfolio manager Jason Baron. This strategy finds conscientious “stewards of the environment” by analyzing energy practices and carbon footprint reduction.

“In creating this strategy, we responded directly to client demand,” says Chris Hyzy, US Trust’s chief investment officer. “We believe that corporations dealing effectively with environmental issues are poised to do well relative to their industry peers.”

This came after the launch of “Socially Innovative Investing,” also managed by Baron, for US Trust and Merrill Lynch Wealth Management. This strategy had grown to roughly $600 million in assets by March of last year.

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BRIAN T MOYNIHAN CHIEF EXECUTIVE OFFICER, BANK OF AMERICA

The Irish American at the helm of Bank of America helping instill best practices Brian T Moynihan is the chief executive officer of Bank of America. He was elected to his role by the board of directors on December 16, 2009, and took office on January 1, 2010.

Moynihan also is a member of the Bank of America board of directors.

Bank of America serves approximately 50 million consumer and small business relationships with approximately 5,100 retail banking offices, 16,300 ATMs, award-winning online banking with 30 million active users and the number one mobile bank with more than 14 million users.

Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a

“We have a strong commitment to environmental sustainability, which helps us better support our customers, clients and the communities where we do business…”

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broad range of asset classes serving corporations, governments, institutions and individuals around the world.

Bank of America offers support to some three million small business owners and serves corporate, institutional and individual clients through operations in more than 40 countries.

Under Moynihan’s leadership, Bank of America is building on its leadership position in community development, philanthropy and environmental initiatives. The company is working toward achieving three major public goals: a 10-year, $1.5 trillion community lending and investing goal; a 10-year, $2 billion philanthropic giving goal; and a 10-year, $50 billion goal for lending to and investing in environmental initiatives.

Moynihan has led Bank of America’s Global Diversity and Inclusion Council, a group of senior executives from across

On the ground, one smaller but very tangible example of the commitment to sustainable investment was a recent $250,000 grant from the Bank of America Charitable Foundation to conservation organization American Forests to carry out urban forest assessments in five American cities.

It has been estimated that urban trees in the lower 48 US states remove about 784,000 tons of air pollution a year and that the United States is losing urban forest canopy at a rate of four million trees a year.

The cities selected were Asbury Park, New Jersey; Atlanta, Georgia; Detroit, Michigan; Nashville, Tennessee; and Pasadena, California.

lines of business, since 2007. His direct support of diversity and inclusion initiatives across the bank has been instrumental in creating an inclusive work environment that is consistently recognized by third parties as one of the best in corporate America. The bank continues to gain recognition as a top employer by Working Mother, Black Enterprise, DiversityInc, G2 Jobs, Hispanic Business and LATINA Style magazines; scored a 100 percent rating on the Human Rights Campaign Corporate Equality Index for policies beneficial to lesbian, gay, bisexual and transgender associates; and was named an “adoption-friendly workplace” by the Dave Thomas Foundation for Adoption.

Moynihan joined Bank of America in 2004 following the company’s merger with FleetBoston Financial. In 2010, he was elected a trustee of the Corporation of Brown University.

“We have a strong commitment to environmental sustainability, which helps us better support our customers, clients and the communities where we do business,” says Cathy Bessant, chair of Bank of America’s environmental council.

“Our partnership with American Forests will help community leaders understand and respond to impacts occurring to the biological infrastructure on which our cities depend.”

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Sustainable building has been part of Bank of America’s agenda I

Filtered under-floor air distribution system and floor-by-floor air handling units allow for individual occupant control

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Carbon dioxide monitors automatically adjust the amount of fresh air when necessary

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Gray-water system captures and reuses rainwater, saving millions of gallons of water annually

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Waterless urinals and low-flow fixtures greatly decrease the use of water

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Thermal storage system at cellar level produces ice in the evening when electricity rates are lowest to reduce peak daytime demand loads on the city

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Daylight dimming and LED lights reduce electric usage

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Oversized electrical conductors reduce voltage drop in the feeders to 2 per cent

A NEW STANDARD

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The Bank of America Tower incorporates innovative, high-performance environmental technologies to promote the health and productivity of tenants, reduce waste and ensure environmental sustainability.

Recyclable and renewable building materials (steel, blast furnace, drywall)

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Green roof reduces urban heat island effect

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State-of-the-art onsite co-generation plant provides 4.6 megawatts of clean, efficient power

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95 per cent efficient air filtration

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Combined Heat and Power

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Continuous indoor air quality monitoring

Building features include: an urban garden room within the lobby, green roofs that utilize compost made from One Bryant Park tenant cafeteria waste, stateof-the-art advanced air filtration for exceptional indoor air quality, destination dispatch elevator controls, lobby turnstile systems, and a messenger center.

Building tenants also may purchase additional power capacity from a dedicated back-up generator to meet their needs during an emergency.

SUSTAINABILITY ACHIEVEMENTS I

An environmentally responsible highrise office building, focusing on sustainable siting, water efficiency, indoor environmental quality, and energy conservation

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First high-rise to achieve LEED Platinum certification

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Reduce energy consumption by a minimum of 50 per cent

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Reduce potable water consumption by 50 per cent

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Reduce storm water contribution by 95 per cent

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Utilize 50 per cent recycled material in building construction

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Obtain 50 per cent of building material within 500 miles of site

COLLABORATORS I

The Rocky Mountain Institute (RMI), which led a charrette on reducing power consumption in the trading and data-center environments

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The New York State Energy Resource Development Authority (NYSERDA), which helped sponsor the RMI charrette and will contribute almost $1 million for energy modeling, engineering and energy-saving equipment

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New York State, which through its Green Building Tax Credit will potentially contribute almost $7 million for the project

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US Department of Energy (DOE), which is offering training in support of their latest energy modeling software.

GREEN FEATURES I

Higher ceilings and translucent insulating glass in floor-to-ceiling windows permit maximum daylight in interior spaces and optimal views

Jack Aiello / Shutterstock.com

The Bank of America Tower at One Bryant Park, a 2.35-million-square-foot, 51-story office tower, houses Bank of America’s global corporate and investment banking businesses. Setting a new standard in sustainable commercial construction, this tower was the first skyscraper in North America to achieve LEED Platinum certification and ranks among the most environmentally advanced skyscrapers in the world.

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APPROACHING

ESG INVESTING:

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TIPPING POINT from MICHAEL SCANLON in New York.

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n February, the international consulting firm PricewaterhouseCoopers (PwC) issued a study predicting that by 2020, global assets under management will surpass $100 trillion, a compound growth rate of nearly six percent from today.

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They also project worldwide AUM in what we call alternative investments will more than double, reaching $13 trillion in 10 years.

The study is comprehensive and covers the universe of issues the asset management industry faces, but a certain passage caught my attention. When discussing the forward looking issues that must be addressed for asset managers to be best positioned in the future, PwC said the following:

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[Asset managers] will have to articulate the social impact of the value that they are providing for all customers. This includes providing specific examples of the impact of their investments in the areas such as sustainability, social policy and retirement advice. There will be a steady change in product demand and investment policies, due to increasing consciousness about natural resource risks and the scarcity of the natural resources in particular. As these risks become more material to the clients of Asset Management firms, so [these] firms will focus on them too. Going forward, asset managers will begin to consider natural resource risks in the same way as other risks they face.

This is an incredible acknowledgement of the impact Environment, Social and Governance (ESG) investing will have on the asset management industry and how it will conduct its business and raise capital going forward.

Today’s ESG investing is not your father’s socially responsible investing portfolio. As noted in a joint report by Mercer and the Asset Management Working Group of the United Nations Environment Programme Finance Initiative: Responsible investment is premised on the belief that ESG factors can enhance financial performance and should therefore be integrated into investment analysis and decision-making, including ownership practices. Consequently, shareholder activism/engagement is an approach increasingly being adopted. It is also noteworthy that the term ‘socially responsible investing’ (SRI) itself is evolving. While SRI is still widely used, it is now being redefined as ‘sustainable investing’, ‘responsible investing’ or ‘sustainable and responsible investing.’

Regardless of the term, this is not mere semantics, but a true reflection of the major shift in thinking associated with the huge environmental and social challenges our world is now facing, the corporate downfalls in recent memory, and the increasing belief that these changes have impacts on investment performance. ➳

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Responsible investment is premised on the belief that ESG factors can enhance financial performance and should therefore be integrated into investment analysis and decision-making, including ownership practices.

We are certainly a long way from the initial phases of ‘responsible investing’ that simply relied on negative screening, which set out to avoid offending companies or sectors.

While noble in approach, it raised legitimate questions and debate about fiduciary responsibility and comparative performance.

The greatest obstacle to ESG acceptance is the false narrative that it results in underperformance. The misconception is that ESG portfolios offer a more limited investment scope, and as a result of a screening approach, investors will suffer a performance penalty.

The joint report offers a counter argument.

It says: Unfortunately, responsible investment appears to have borne the stigma of its largely exclusionary past. Therefore, it is important to recognize that the new philosophy of responsible investment is proactive. It systematically integrates ESG factors into the investment process to enhance financial performance; and in doing so, identifies companies better positioned to benefit from investment performance over the long-term, and enhances the incentives for companies to align with the goals of sustainable development.

At the end of the day, ESG will only be viewed as viable if it garners the returns needed to sustain the demands of institutional investors. In this chicken and egg scenario, we are seeing a promising development with asset managers stepping forward and adapting ESG practices.

Private Equity firms like Carlyle and KKR are taking leadership position as Private Equity have a more direct ability to sway industry and investors on these initiatives.

But they are not alone.

Six principles of responsible investing I

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

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Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.

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Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.

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Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.

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Principle 5: We will work together to enhance our effectiveness in implementing the Principles.

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Principle 6: We will each report on our activities and progress towards implementing the Principles.

That is astonishing growth and further evidence of the emerging significance of ESG going forward. It is my personal belief that we have reached an inflection point in the industry where we will see managers to view ESG as not an aspiration but a practical business process that will allow them a competitive advantage in attracting assets from institutional investors.

Michael J Scanlon is a placement agent with Silver Leaf Partners, based in NewYork City.

The UNEP Finance Initiative and the UN Global Compact co-created the Principles for Responsible Investment (PRI) in 2006 with the goal of creating an international network of investors and managers who voluntarily adhere to its Six Principles of Responsible Investing. The first of which is to incorporate ESG issues into the investment analysis and decision making process. The PRI has seen tremendous growth over the last seven years. From a start of less than 200 institutions in 2006, the initiative has now attracted 1,245 institutions as of February 2014, including 795 asset managers with over $34 trillion in AUM.

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WATER

PROBLEM PRESENTS PLENTY OF

OPPORTUNITY

Just look at the recent picture of Nevada’s Hoover Dam and view the low levels of water. The white stone in the background marks the recent decline of water levels.

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TerraVerde Capital Partners LP is a New York based firm that manages a sustainable infrastructure hedge fund of funds focusing on sustainability investments in several sectors: water, waste water, clean tech, renewable energy, and energy efficiency.

As a result, they are active investors in the broad space of ESG/SRI. Here RICHARD S BOOKBINDER Managing Member gives his view on the opportunities and challenges.

ecently, the American Society of Civil Engineers (ASCE) 2013 five-year survey concluded that the US infrastructure system including roads, bridges, tunnels, dams, and airports have an average grade of D+. Yes, D+. (The good news is this is an upgrade from the D received in the 2008 survey!) In short, it points to high levels of sustainable funding required in the next several decades to upgrade America’s assets.

In fact, the ASCE estimated that $3.6 trillion is needed by 2020 to save America’s infrastructure.

Others are calling for increased levels of investment as well. A recent CERES report ‘The Clean Trillion’ calls for spending $500 billion a year by 2020, and then double again to $1 trillion by 2030. The International Energy Agency estimates that spending $1 trillion more each year by 2050 is needed to reduce the impact of carbon emissions.

Regardless of the source, all conclusions point to the need for clean energy investment by asset owners who fund these projects while also gaining greater portfolio diversification. At the same time, investing also minimizes exposure to climate risk.The CERES report concludes with 10 recommendations including engagement of companies on the business case for energy efficiency and renewable energy sourcing, standardising clean energy data, encouraging “green banking” to improve capital flows in clean energy, and “boost clean energy investments” to capitalize on the new opportunities across all asset classes of clean tech.

California is in the midst of the worst drought in 100 years, but the Golden State is not the only one facing a problem. The Western region including Colorado, New Mexico, Arizona, and Nevada are all facing shortages of water supplies because of overuse and reduced levels coming from one of the main sources: the Colorado River.

The US Bureau of Reclamation says that the flow of the river is lower than in the last 1,000 years. Just look at the recent picture of Nevada’s Hoover Dam (opposite) and view the low levels of water. The white stone in the background marks the recent decline of water levels.This poses a great risk on future electric power production from the dam. In other regions, fixing leaks will slightly improve supplies, but new water infrastructure investment is required.

In our view, water in the US is at an inflection point, but few outside of industry professionals are focused on the problem. ➳

Rather than look at plans or proposals, let’s look at what is actually being done (or not).

ESG investing is driven by several factors, but the two predominant main themes are growing global populations and natural resource constraints.

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Water is not just a US problem. Brazil’s reservoirs are running below average levels from reduced rainfall, and electricity prices have risen to record levels as the southeastern region, which houses the dams, suffers through a period of low rainfall with reduced hydro electric power output.

Goldman Sachs sees an opportunity. While making an investment decision following others and based upon the actions of other investors may not be prudent, it is worth highlighting that Goldman Sachs plans to invest over $40 billion in cleantech by 2021, according to recent press reports. While the major investment banks are not new participants in the clean tech market, Goldman and others are stepping up lending for project finance with the solar market as one of its major beneficiaries. Recently, Goldman also acquired a 15 per cent interest in Denmark’s state owned Dong Energy to extend its interest in wind power.

The good news is greater interest from players with deep pockets and access to large asset owners have helped to lower the cost curve for renewables.

Looking at companies such as Coca-Cola and Nike, one of the highest cost resources is water. Global droughts and unpredictable and extreme weather patterns have caused problems that disrupt their supply chains.

Both companies have responded with water conservation technologies and Nike’s greater use of synthetic material.

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INFRASTRUCTURE ALSO FACES CHALLENGES OF CLIMATE CHANGE Con Edison is conducting an analysis measure the benefits of preparing infrastructure to meet the challenges climate change and reduce the impact future extreme weather events.

to its of of

In a recent report, Bain and Company reported that the “simultaneous crumbling of infrastructure in advanced economies and surge of development in developing countries will drive a steady four percent annual growth on infrastructure investment well into the second half of this decade pushing total investment to a figure of $4 trillion”.

The report also states: “Infrastructure attractiveness will affect the mix of asset allocation significantly. Currently, the majority (roughly 75 per cent) of institutional investors allocate less than 5 per ent of AUM to infrastructure. But target allocations are quickly shifting. Bain expects the majority of investors to allocate 5 per cent or more of AUM to infrastructure in the coming years.”

On the asset owner side, an international group of 75 institutional investors representing more than $3 trillion in assets launched the Carbon Asset Risk Initiative to address the risks of climate risk.

CALPERS, New York State Retirement Plan, and other large investors support the efforts of greater transparency, reducing carbon emissions, and “green” investments.

At the same time, asset owners are utilizing new approaches for asset allocation to take account of climate change risk and look for new approaches to mitigate climate risk.

As asset owner awareness increases, we believe that investing opportunistically across the broad sector of sustainable infrastructure identifies a new universe of winners and losers: companies that have adapted their business models to reflect the challenges of climate change, and those that have not. As a result, specialized hedge funds that invest in the infrastructure supply chain are positioned to participate in this paradigm shift.

ESG investing is driven by several factors, but the two predominant main themes are growing global populations and natural resource constraints.

Asset owners continue to evaluate investment options to reduce the impact of these factors. ESG investing is driven by the same standards as the more traditional investing; it is expanding the scope of investment research to include factors including carbon risk, exposure to water resources, corporate governance, and CO2 emissions to achieve market returns in all asset classes.

Richard S Bookbinder is Managing Member, TerraVerde Capital Management LLC www.terraverdecap.com

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INNOVATION NEEDED TO REVERSE CLEANTECH DROP AND BRING IN INSTITUTIONS In 2014 investors running tens of trillions of assets gathered at the UN in New York to debate how to bridge the finance gap to combat climate change, writes KATIE GILBERT.

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espite a 12 per cent drop in cleantech investment last year and a still-unresponsive US government, institutional investors, state treasurers, and investment bankers appear to be finding reason for optimism.

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The various reasons for this optimism were the subject of much discussion at a recent United Nations-hosted Investor Summit on Climate Risk in New York, which brought together nearly 500 investors representing tens of trillions in assets. The summit, convened by Ceres, the Boston-based sustainability advocacy group, in collaboration with the United Nations Foundation and the United Nations Office for Partnerships, sought to explore how investors can mobilize the vast amounts of capital needed to fight climate change.

The cleantech dip for 2013 emerged in figures released at the conference by Bloomberg New Energy Finance (BNEF), which found global investment in clean energy was $254 billion last year, down from a revised $288.9 billion in 2012 and $317.9 billion in 2011.

“The US continues to lack the political will to put a price on pollution,” said Scott Stringer, who assumed the role of New York City comptroller two weeks before the UN conference.

But, he continued – in an argument that was echoed by various panelists throughout the day – investors and other business leaders can’t assume they are powerless to address the looming threat of climate change in the absence of a carbon tax or cap-and-trade system. Indeed, much of the day was devoted to discussions of actionable ways to mobilize significant private investment in clean energy in the absence of government action at the federal level.

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Stringer said that US states had been “inspiring laboratories of innovations,” citing California’s carbon trading market, and adding that for its part, New York is “anxious to do more”. Other panelists said the financial industry could sidestep the federal government’s sluggishness via financial innovation, citing the growth of the dynamic green-bond market.

“Let’s not just wait for policy,” said Mark Fulton, a senior fellow for Ceres:“Let’s get the cost of capital down, and appropriately price the cost of fossil fuels. I think that is the way forward.”

had allocated 5 per cent of its assets to infrastructure, with a bias to low-carbon projects, but it has only been able to invest a small fraction of that: “We’re competing against our colleagues to find appropriate clean energy investments. We’re not getting the right projects packaged up,” he said.

Cecilia Reyes, chief investment officer at Zurich Insurance Group, wished for “some intelligent way of breaking down the investments to give the risk to people who can absorb it, like development agencies.With that, we might be able to bridge the climate financing gap,” she said. ¸

Christiana Figueres, Executive Secretary UN Framework Convention on Climate Change addresses delegates.

Photo courtesy Ceres.

Michael Liebreich, CEO of BNEF, said 2013 had been a promising year for financial innovation, but that the industry would have to get more creative. He suggested that, for example, clean energy project investments could be packaged more like those in investors’ real estate portfolios, rather than mimicking infrastructure investment, as they more often do: “So many institutional investors are comfortable with real estate, but hold less infrastructure,” he noted.

Donald MacDonald, trustee director at the BT Pension Scheme, the UK’s largest corporate pension fund, echoed the complaint: “There are not sufficient vehicles.We need to think about how we share risk, how we set up new investment vehicles.” He said the fund

Investors and other business leaders can’t assume they are powerless to address the looming threat of climate change in the absence of a carbon tax or cap-and-trade system

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Michael Liebreich, CEO BNEF addresses delegates.

Photo courtesy Ceres.

Collectively, we need to invest in similar types of product, securitize them, and offer them to the market.

Rob McCord, Pennsylvania’s treasurer, said the state is working on forging public-private partnerships that address the gaps financial services don’t yet fill for cleantech. But the next place financial innovation needs to focus on, he said, was the creation of secondary markets: “Products are nice,” McCord said, “but without secondary markets, you can’t get scale. Collectively, we need to invest in similar types of product, securitize them, and offer them to the market.”

Several panelists expressed optimism that this type of financial innovation is underway. Lisa Carnoy, head of global capital markets at Bank of America Merrill Lynch, pointed to the first public REIT designed to invest in sustainable infrastructure, launched by Hannon Armstrong Sustainable Infrastructure Capital.

Frank Pegan, CEO of Catholic Super in Australia, said a registry had been created to track low-carbon investments in the country, maintained by institutions who are willing to share their investment ideas with their peers.

Jane Ambachtsheer, global head of responsible investment at Mercer Investments, added that in the US, a handful of investors are overcoming some of the obstacles inherent to the space via the Cleantech Syndicate, a network of 13 family investment offices designed to make direct investments into private cleantech companies.

Taken as a whole, the various conference discussions were an exhortation to investors and the other financial industry leaders present to work within their own industry and design methods of moving the vast amounts of capital necessary to combat climate change: “This is the key moment for that type of work to take place,” Ceres’ Fulton said. “And we’re calling on you all to engage in that.”

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Sustainability Gathering Dublin Castle,10th – 11th December 2014 Enabling, Financing & Delivering Sustainable Growth

Ireland’s foremost gathering of leaders in sustainability

Partnership opportunities TOM WILLIAMS tom@sustainabilitygathering.com Information & registration CARLA SORIANO carla.soriano@sustainabilitygathering.com Media & press enquires ANGELA MADDEN angela@tempusmedia.ie

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MARCH / APRIL 2014 Stephen Nolan, Chairman of the Sustainability Gathering, addresses the delegates at the event, December 2013.

SUSTAINABILILTY GATHERING 2013 SIOBHÁN CREATON reports from the event in Dublin. ublin Castle, the scene of many of Ireland’s most historic events, once again was the venue for a momentous gathering on December 12 when more than 300 innovators, entrepreneurs and policymakers came together to accelerate their efforts to put Ireland at the forefront of sustainability. Already their knowledge, skill and vision are rapidly creating new jobs and attracting investment from those clambering to be part of this green revolution.

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It is rare to find so many executives and business people who are all passionate about the same issue in one place. And even rarer for them all to be able to engage directly with the government ministers, and the key policy makers and agencies who want to learn how to support their efforts to create jobs and prosperity in the Irish economy.

But this was the Sustainability Gathering 2013 - the event that will become an annual summit and an important touchstone for this burgeoning sector.

The scale of the potential opportunities and what can be achieved was immediately reaffirmed as lively sessions were peppered with good news announcements welcomed by the participants and those closely following the event on social media. Indeed such was the level of interest far beyond Dublin Castle that by lunchtime #sustainabilitygathering was trending on twitter.

Ireland’s green asset managers set the tone by announcing that this industry, which manages investment in water and renewable energy sectors, won €3 billion ($4 billion) in new funds during 2013. This success augers well for Ireland to realise its goal of becoming a global leader in the fast growing $260 billion global green asset management sector that is expected to grow fourfold to over $1 trillion by 2020.

low-carbon economy and fund renewable energy generation, energy efficiency measures, the trading and management of carbon and cleantech/ sustainable funds.

This huge investment will also yield dividends in terms of jobs that are already coming on-stream.

BNRG, Power Capital, Mainstream and Gaelectric told the gathering that together they have already created significant job numbers in the past 12 months, with further construction jobs to follow over the next two years as they expand. ¸

The €3 billion ($4 billion) of new funds will go towards financing renewable projects being led by Irish companies here and across the globe. It will also support the development, finance and promotion of a Carol Murphy, Corporate Brand Manager, Coillte

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Meanwhile Irish consumer electrical goods firm Glen Dimplex announced a €40 million investment to establish a new research and development group in county Louth focused on smart heating technologies of the future. This new unit is seeking to capitalise on the world’s move towards a decarbonised electricity system driven by wind and solar PV-generated electricity.

Mainstream Renewable Power, the Irishbased group founded by Eddie O’Connor that is now the world’s biggest independent renewables companies, also brought welcome news to the Sustainability Gathering. It announced the establishment of Mainstream Capital, a vehicle that will create a new platform for the company to access capital at up to 20 percent less than current commercial rates. Mainstream Capital will target pension funds and insurance companies that want to benefit from Government-backed, long-term cash flows

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by investing directly in Mainstream's wind and solar projects.

Irish Minister for Jobs, Enterprise and Innovation Richard Bruton, said the announcements demonstrated Irish innovation and leadership in the moves to a low-carbon economy.“The Government has ear-marked the green economy as a core area for Irish economic recovery and growth” he assured the sector.

Speakers included Minister Bruton, former Taoiseach, John Bruton, who is the current President of the EU European Resource Efficiency Platform; Enterprise Ireland Chief Executive, Julie Sinnamon; Eugene O’Callaghan, Director Ireland’s Strategic Investment Fund, Angus McCrone, Chief Editor, Bloomberg New Energy Finance and Jonathan Maxwell, Founder and CEO of SDCL which manages the world’s government-backed energy efficiency funds.

Stephen Nolan, Chairman of the Sustainability Gathering said it was no surprise that Forbes had recently ranked Ireland the best country for business. The ambitious targets for Ireland to win a large slice of green assets under management is achievable, he said, “due to the combination of two additional key factors: a world-class renewables and cleantech enterprise sector and the existence of a world-class international financial services centre. This combined expertise is what sets Ireland apart from other competitors.”

Speakers at the Sustainabillity Gathering 2013 Clockwise from top left: Professor Diarmuid Ferriter, Modern History, UCD, RTÉ Business Editor David Murphy, Alex Ó Cinnéide, CEO Gore Street Capital, John Mullins CEO Amarenco Solar, Gerry Britchfield, Acting CEO, Coillte, Jonathan Maxwell, Founder & CEO, SDCL, Louise Wilson, Managing Director of Abundance Generation, Julie Sinnamon, CEO Enterprise Ireland.

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Announcements Sustainability Gathering Dublin 2013 I

Glen Dimplex to create 25 new jobs as part of a €40 million investment in a new new research and development unit focused on smart heating technologies in Co Louth;

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Maintream Renewables has established Mainstream Capital, as a vehicle to access capital at substantially better commercial rates targeting pension funds and insurance companies that want to invest directly in Mainstream's wind and solar projects;

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Dublin City University announced the establishment of a Water Institute;

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BNRG, Power Capital, Mainstream and Gaelectric have created more than 40 jobs in the past 12 months, with a further 120 construction jobs to follow over the next two years;

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SCDL has become the preferred bidder to manage the Government's €70 million Irish Efficiency Fund that would see a ¤35 million investment from the State matched by the world’s largest Government-backed energy efficiency fund manager;

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Minister for Jobs, Enterprise and Innovation, Richard Bruton launched the progress update on its policy document, Delivering Our Green Potential.

Pictured at the Sustainabillity Gathering 2013 Top row: Eugene O'Callaghan, Director, Ireland’s Strategic Investment Fund, Angus McCrone, Chief Editor, Bloombery New Energy Finance.

Second row: A full house of delegates.

Third row: Tempus Media managing director Angela Madden with John Bruton, former EU Ambassador to Washington and former Taoiseach (Prime Minister), All=ireland winning Dublin GAA manager Jim Gavin and Amy Walsh, Manager, Irish Banking Federation with the Sam Maguire.

Bottom row: Minister Richard Bruton meets the media with Tempus director Angela Madden.

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AFRICA WILL BE THE

EPICENTER of RENEWABLE INDUSTRY OVER THE NEXT 10 YEARS says MIKE HAYES AND LAURA HEUSTON KPMG Ireland, Africa Desk

he world has changed dramatically over the past 20 years with the global renewable energy industry expanding beyond all recognition from its modest beginnings.

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This expansion has involved not just technological change and significant cost reduction but also geographical expansion with renewable energy now being deployed across the globe with no signs of abating.

At one point, the geographical focus of renewable energy would have been limited almost exclusively to mainland Europe, North America and, to a more limited extent, parts of Australia and China.

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Why was this you may ask. Well, it made sense that these countries would be the drivers of the sector in its infancy given the favourable tariff/tax credit regimes in place and the underlying stability of the regions.

But, that was then. The world has changed.

Now in 2014, developers with global capactity are turning their sights to the entire African continent, right down to South Africa, and also to the Middle East, in particular Saudi Arabia (in addition to Central and South America).

This move into Africa by developers is due to a number of different factors.

On the one hand, the African continent is crippled with chronic power shortages coupled with frequent blackouts while on the other it has abundant natural resources particularly for solar, wind, hydro and biomass – and therefore is a natural target for development. ➳

Now in 2014, developers with global capactity are turning their sights to the entire African continent, right down to South Africa.

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Another reason why the African continent is the focus for many is as a result of the impact of developments in their traditional target markets.

For example, there is an ongoing reduction in feed-in tariffs in Western Europe.

Also, the impact of shale gas on the North American market has significantly reduced the opportunities for new renewable developments.

Thirdly, securing planning for renewable projects has become much more difficult in Europe.

All this has forced major players in the space to seek out new opportunitites outside what has been the norm.

MARCH / APRIL 2014

Other drivers of the new business opportunity include the rapid economic growth, particularly in the Central African basin from West Africa to Kenya and Uganda. Access to energy at competitive prices is an essential ingredient in maintaining and sustaining this economic growth.

Then, added to the potent mix is the importance of energy in reducing poverty across the continent and in providing access to education. Related to this is the direct connection between the availability of energy and food production with power needed for irrigation solutions and so on.

COMMERCIAL CHALLENGES However, the development of a long term renewables market in the African continent is not without challenges.

In addition to issues such as political instability there are other financial risks including the non availability of traditional funding sources, currency risks, exchange controls and high tax regimes.

Then there is the practical difficulty of the quality of the existing grid networks across Africa and, for many people, distributed or localised generation is the only practical solution to meet rural electrification requirements. âžł

However, the development of a long term renewables market in the African continent is not without challenges.

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Access to energy at competitive prices is an essential ingredient in maintaining and sustaining this economic growth.

The issue of funding deserves special mention as a key challenge. Even as more and more funding becomes available, it is important that the cost of it does not become prohibitive. This is why issues such as the stability of long-term power purchase agreements (and the related off takers) are of such fundamental importance.

Also, equity investors currently have high return expectations for any investment into Africa given the various and numerous risks involved. Hopefully, over time, as these risks become better understood and can be managed in different ways, we will see the emergence of more traditional investors into the market – in particular from the institutional community.

The issue of taxation is also important as it is potentially an inhibitor to inward investment into the continent. There are two fundamental differences between the taxation regimes in Africa and those in other parts of the world.

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Fristly, withholding taxes are typically applied to development fees and technical payments to related parties which can potentially add another layer of cost to projects and would not be typical for such payments in Europe or North America.

Secondly, a capital gains tax liability can arise for a seller of a project in the relevant African jurisdictions even where the seller is resident in Europe. While this issue does arise in a number of other jurisdictions such as Canada, it is much more prevalent in Africa and needs to be managed carefully.

However, there are some tax incentives with a number of African jurisdictions prepared to enter into special arrangements with inward investors which might involve favourable tax arrangements for a period of time, including tax holidays and reduced withholding taxes. This has been a feature of other emerging economies in the past and can act as a useful tool for attracting investment.

GROWTH OF RENEWABLES IN AFRICA There is now growing evidence of African governments recognising the importance of renewable energy and its role in the provision of a stable and affordable energy supply to support economic growth.

Consequently, many different nations across the continent and in the Middle East are implementing feed-in tariffs or similar schemes to attract investors, developers and utilities into the region. Take, for example, the Saudi Arabian government which has recently announced a programme to facilitate the building of 54GW of renewable energy projects - one of the largest developments in the world.

The need for such a large-scale move is clear.

Saudi Arabia has a growing population with energy demand increasing by up to 10 per cent each year. âžł

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In addition, the use of fossil fuels to satisfy local demand in Saudi Arabia is seen as economically counterproductive given the high price that such fuels can achieve on the global oil markets.

Various African countries now also have renewable energy programmes in place including Kenya, Nigeria, Rwanda and Cameroon.

South Africa has been the frontrunner in the region and has the longest running wind and solar programme resulting in the successful deployment of international capital in building significant wind and solar facilities across the country.

It is also to be noted that companies such as Google have started investing in renewables in the region. In 2013, Google announced a R103 million ($9.5 million) investment in the Jasper Power Project, a 96 MW solar photovoltaic plant in the Northern Cape province of South Africa. On completion, this will be one of the largest solar installations on the continent, capable of generating enough electricity to power 30,000 South African homes.

South Africa has been the frontrunner in the region and has the longest running wind and solar programme resulting in the successful deployment of international capital in building significant wind and solar facilities across the country.

ACCESS TO FUNDING There is a general perception that raising funding for African projects is going to be significantly more difficult than would have been the case in Western Europe and North America. While this is correct, the funding environment is developing as quickly as the emerging renewable energy industry.

There are a number of examples of potential funding sources.

There are various debt and equity programmes led by global organisations such as the United Nations Environment Programme (UNEP), the World Bank and various other not for profit organisations.

Another potential funding source is international banks which have a strong African presence including Standard Bank, Standard Chartered, Rand Merchant Bank and Investec. âžł

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In addition, there are global infrastructure funds with a focus on emerging markets and utilities which wish to expand into the African sub-Saharan region.

Other examples of funding sources include local investors who understand the significance of the opportunity, various global private equity funds who are prepared to allocate a percentage of their funds to emerging economies and even The World Bank insurance arm, Omega, which provides certain protections against political risk.

In addition, there are global infrastructure funds with a focus on emerging markets and utilities which wish to expand into the African sub-Saharan region.

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INVOLVEMENT OF IRISH DEVELOPERS Irish developers have been quick to seize the potential opportunities and have already made some significant inroads. Mainstream Renewable Power, the world’s largest independent renewable energy company, has been operating in South Africa since 2009 and has had incredible success in securing mandates to build wind and solar projects.

CONCLUSION In conclusion, it is clear that there is now an infrastructure boom across the continent of Africa and renewable energy is very much a key part of this and sustaining this.

Provided access to competitive funding can be secured, we are only at the very early stages of what is likely to become the epicentre of the renewable energy industry over the next 10 years.

Then, Irish solar developer BNRG is developing one of the largest ever solar projects in Nigeria which is expected to go into construction in 2015.

These moves have not gone unnoticed by other Irish players, with numerous other developers now starting to focus on the potential opportunities available in Africa and the Middle East and closely monitoring opportunities and developments in all of the other relevant markets.

Mike Hayes

Laura Heuston

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IRELAND HAS TWO THINGS IN ABUNDANCE:

RAIN&

SMART,YOUNG As Ireland gears up to take its place as a world leader in sustainability innovation, international investors know that a country is only as good as the talent it produces, writes ANGELA MADDEN.

PEOPLE Past participants from Dublin City University's Grad Cert in Sustainable Energy Finance with the Sam Maguire (the cup that is awarded to winners of the All-Ireland Senior Football Championship) Deirdre Timmons, Bank of Ireland; Arlene Allen, Bank of New York Mellon; Garrett Monaghan, Arthur Cox (lecturer); Stephen Nolan, CEO, GIFSC; Tom McGovern, CAF; Amy Walsh, Irish Bankers Federation and Charlie Moore, Caloris Consulting.

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reland has two things in abundance; rain and smart, young people – and it is generally for the latter reason that companies invest or set up operations here as well as the ease of doing business.

I

The country recently won a resounding vote of confidence from US financial bible Forbes, which named it the best country in the world for business, placing Ireland first in its ranking of 145 nations for the first time since the annual list began in 2006.

And, according to The IMD World Competitiveness Yearbook Ireland is first in the world for availability of skilled labour, flexibility and adaptability of workforce, and for attitudes towards globalization.

Bucking the trend, more than half the Irish population is under the age of 35 (Euro stats) and Dublin ranks highly for human capital, and ahead of the US, according to the IMD. It is also a fact that 60 per cent of the country’s students go on to third level education.

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Ireland has a good base from which to plan for the future and ensure that it continues to have the talent to attract investment in the years ahead. However, it is crucial that it continues to develop educational offerings and create the people with the expertise to service the future economy and that the courses and learning experiences provided match the needs of tomorrow, say leaders in sustainability.

And the opportunity is significant. Irish Minister for Jobs, Enterprise and Innovation Richard Bruton points out that the green economy is worth $5 trillion globally and is projected to grow at 3.7 per cent per year – with the ability to generate an additional 10,000 Irish jobs (not including those in related areas such as green finance) And, so ensuring that Ireland continues to build the expertise needed to be a key player in supporting growth in this sector is vital.

The solution lies in marrying the technological skills with the number-crunching skills required to fund ambitious sustainability projects, which can be very capitalintensive, explains Padraig Rushe, Director of Corporate Banking at Bank of Ireland.

He explains that the bank takes a holistic approach to green financing. “Understanding carbon markets, technology, finance, tax, and knowing there are educational structures adequate to grow people to support the industry are vital.

“A development project needs technical skills, certainly, but a capital investor needs those skills too to assess risk,’’ Rushe adds.

“These are all talents important to both attracting domestic investment and new business in the sector to Ireland.”

For its own part, the bank has been investing in wind technologies since 2000 knowing there was an abundance of talent in the area.

In fact Ireland’s Mainstream Renewable Power is now the world’s largest independent renewable energy company. ➳

Irish Minister for Jobs, Enterprise and Innovation Richard Bruton points out that the green economy is worth $5 trillion globally and is projected to grow at 3.7 per cent per year.

Irish Minister for Jobs, Enterprise & Innovation Richard Bruton addressing the Sustainability Gathering, Dublin Castle, December 2013.

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Rushe says that the broad variety of skills involved shouldn’t be underestimated: “There’s an obvious and natural crossover between green tech renewables and the International Financial Services Centre (IFSC) – it’s really now about bringing them together even more.”

Ireland’s credentials in the world of international finance are well known and today it is home to the number one hedge fund center in the world responsible for servicing more than 40 per cent of the globe’s assets.

Brian Motherway, chief executive of the Sustainable Energy Authority of Ireland (SEAI) says attracting investment is two fold with talent being key: “It’s good people and a place where you can get things done with a minimum amount of fuss. Regulation, policies and incentives have to move with the times.”

Part of that moving with the times means that educational establishments need to adapt. Universities, the enterprise sector and the policy-makers all need to work together to provide the expertise needed to deliver on a low carbon future, he explains.

Professor Brian MacCraith, president, Dublin City University, says: DCU’s fundamental role is to develop the human and intellectual capital required to meet the needs of the emerging global green economy.

“There is an urgent need for all sectors to prepare for the necessary, low-carbon future.

Within DCU sustainability is firmly on our agenda. It is the single most pressing global grand challenge facing mankind.”

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For decades DCU Business School – the largest in the country – has collaborated closely with Ireland’s main banking, accounting, investment and finance companies. Take, for example its Graduate Certificate in Sustainable Energy Finance which was designed with and delivered with a high level of input from senior executives in international financial services. The Graduate Certificate gives an overview of sustainable energy finance to support new business streams in developing renewables.

Ireland’s Mainstream Renewable Power is now the world’s largest independent renewable energy company.

The students come from across the innovation, finance and policy sectors so each constituent part of the sustainability eco-system can understand what drives the other and the need to speak the language of funding and finance.

As a result of a strong intellectual base in both innovation and technology and an attractive business environment married with initiatives like this from DCU, Ireland is rapidly garnering a reputation abroad as a go-to place to find those who understand both the technology and the financial side of sustainability innovation.

Taoiseach (Irish Prime Minister) Enda Kenny knows the importance of continuing that trend and has tasked Ireland's Green International Financial Services Center (GIFSC) with up-skilling 10 per cent of the professionals already working in international financial services – or almost 3,500 people, in green finance, placing this front and centre of the plan for the financial services sector strategy for 2011-2016.

So, all in all it would seem that the Emerald Isle has set its sights on a sustainable future – and is ensuring it has the talent to service it in the years ahead. ➳

Dublin City University has been leading the way in offering programmes that provide the requisite skills for those on the finance side along with those on the green side.

Perhaps though, what they do which is even more valuable is provide the space for quality interaction with other finance and technological experts in the field. That is something money can’t buy.

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A snapshot of others who have completed the DCU Grad Cert in Sustainable Energy Finance.

ARLENE ALLEN MD, BNY Mellon Corporate Trust

CHARLIE MOORE Director, Caloris Consulting

DEIRDRE TIMMONS Senior Equity Fund Manager, Private Banking, Bank of Ireland

FIONA GASKIN Director, Advisory, PricewaterhouseCoopers

FRANK KELLY Project Manager, ESB International (Wind Energy Solutions)

MAEVE THORNBERRY Owner, Maeve Thornberry & Associates

Mark Bennett, Dublin City Council's Green Business Officer.

THE STUDENT’S VIEW Mark Bennett was already Green Business Officer at Dublin City Council, looking after policy, clean technology and green finance for the capital when he decided to undertake the Graduate Certificate in Sustainable Energy Finance at DCU. He had been involved in its formation and decided the best way to assess its effectiveness was to undergo it himself.

“It was an extraordinary chance to network, along with the chance to up-skill again,” says the recent graduate, who already holds a Masters in International Management. He says he was “a natural fit” to undertake the course and his expectations were to learn current best practice with as little ‘filler’ as possible.

This proved to be the case. “It was all practitioner based and I was immediately given the tools to apply in my role. It made me realize the opportunities that weren’t on my

radar and directly led me to be more confident and competent dealing with international investment banks.”

After planning and strategy, Bennett says that funding is the next key step. “Previously I was networking; now I’m networking and doing.

Since graduating I’ve been invited to Seoul to discuss Ireland’s role in this area. Cities, competitiveness and climate are our alliterative bywords. There’s great energy in Ireland, they can see that abroad.

It resonates with people. It’s all very good to be well-intentioned, but you need to talk their language also.”

In a recent interview with Silicon Republic, Bennett likens it to an “eco-system approach.” You have the stable policy environment in place first, bring small businesses up through the Green Way and then get the finances in place before finally test-bedding the change.

“It creates a green place to do green business.”

“There’s great energy in Ireland, they can see that abroad. It resonates with people. It’s all very good to be well-intentioned, but you need to talk their language also.”

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Natural Capital People

ON THE MOVE Thomas Williams

Tom Hanly

Carla Soriano

Julian Seymour

As newly appointed Director of Partnership Relations & Events, Williams brings over a decade of experience in event management and business development to Natural Capital News & Events. Williams has proven to be successful in developing strategy for large scale events and conferences to ensure the objectives of both the host and their sponsors are achieved.

His considerable experience in event management has led him to understand that events and conferences can be used to achieve goals on many platforms for companies and organisations. Policy development, brand awareness, future strategy, market position, training, and networking along with one to one engagement with clients, prospects and peers are some of the elements that he considers vital to create success around an event. He managed the Sustainability Gathering 2013 in Dublin Castle, and has worked with, amongst others, various government departments including the Taoiseach’s office, the Department of Communications, Marine & Natural Resources, Department of Foreign Affairs, BIM, DCU, Nike and Fintel Publications. Tom is a Fellow of the European Institute of Communications.

Recently taking up his role as an Investment Executive with BVP Investments, one of Ireland's foremost green and clean technologies investment companies, Hanly has project responsibility for all activities pre and post investment. His role also includes analyzing new and emerging technologies.

He is a qualified engineer (Dublin City University) and chartered accountant, having worked as a mechanical engineer in Intel and then later training as an accountant with Deloitte. Hanly has significant experience in the cleantech sector having worked on both project and financing teams.

He spent the initial part of his career working as a mechanical engineer for Intel and during this time he developed a keen interest in clean technology and energy efficiency. After gaining an exposure to cleantech funds in Deloitte, Tom went on to work as a project analyst with Green Island Capital, where he focused on examining various green technology projects such as Advanced Thermal Treatment, Anaerobic Digestion, Heat Recovery and Small Combined Heat and Power.

Hanly also has Postgraduate qualifications in both renewable energy & energy management and environmental engineering.

Brazilian native Soriano, now based in Dublin, project managed the Sustainability Gathering December 2013 event that saw leaders across innovation, finance and policy come together for a one-day summit at Dublin Castle.

Soriano, who has a background in Environmental Management, has just joined Ireland’s Green International Financial Services Centre (GIFSC) initiative as Project Manager. GIFSC is a public private partnership tasked with positioning and promoting Ireland as a leading global center for sustainability innovation and finance.

In addition, Soriano also supports a number of community-based projects and volunteers for organisations such as ECO-UNESCO. Having worked as Community Officer in Junior Chamber International (JCI) Dublin and JCI Ireland, she was recognized as the “Best Member” of JCI Ireland in 2013. Soriano has also four years experience working with the Brazilian National Quality Foundation overseeing the National Quality Awards - the highest recognition of Brazilian Management Excellence.

Seymour has recently joined The Green Way, Dublin’s Cleantech Cluster as Head of Business Development. He previously worked as Global Business Operations Manager in ECDL Foundation, and in senior sales roles in Telecom New Zealand, Ericsson and Diageo-Germany. The Green Way is an initiative of Dublin Airport Authority, Dublin City University, Dublin City Council, Dublin Institute of Technology, Fingal County Council and the North Dublin Chamber of Commerce to attract cleantech companies to Ireland and the region. The Green Way is connecting practitioners to create a cleantech ecosystem for Ireland, a rich ecosystem comprising of corporations, entrepreneurs, policy makers, investors and institutions, all working together to achieve a shared vision of the development of the cleantech sector.

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