Banking on a Low Carbon Economy in UK and Australia

As the UK Labour government was about to unveil in London a 2 billion pound (A$3 billion) “green” investment bank in the budget to help Britain’s transformation to a low carbon economy, at the 6th AustralAsian Cleantech Forum in Melbourne David Hunt of Sustain Asia Australia and Carinya led a panel discussion on investment where the outlook was seen as decidedly buoyant for the sustainability sector.

David Hunt reports from AustralAsian Cleantech Forum:

The subject of the panel discussion was all about bridging the investment gap that is inhibiting the growth prospects of Cleantech companies and creating opportunities for investors in private equity to gain more exposure to the Cleantech market.

It was obvious from the excellent presentations given, as well as the questions from the floor, along with the intelligent answers, that this is a great growth business that is heading in the right direction.

After the perils of the Global Financial Crisis which effectively dried up funding for this and most other sectors, Cleantech investment is starting to happen here in Australia as it is elsewhere. And the market is decidedly buoyant.

The panel discussion covered the spectrum:

• Contrasting global trends in private equity investment with what we are seeing in the Cleantech sector

• A timeframe for the emergence of more pure play Cleantech private equity investors

• Macro economic factors supporting strong returns – how is this translating in the present?

• How to get good ROI on your investment and strategies for Cleantech companies to access capital in the expansion stage

• Identifying emerging high growth businesses

• Investment trends and gaps in the investment cycle

• Accessing LP’s and finding an equity model that suits your expansion strategy

As moderator of the session, I had a great panel of presenters:

Jo Hume, Investment Analyst, CVC Sustainable Investments; Chuck McDermott, General Partner, Rockport Capital Partners;  Tom Martin, Senior VP, Pacific Corporate Group Asset Management, USA and Donald Hellyer, Head of Fund Manager Relations, National Australia Bank

Overall, the Cleantech forum and exhibition organisers have done well to not only bring together serious players in the investment game, but also a host of businesses that are ready, willing and able to capitalise on opportunities in the sustainability sector, hopefully made possible by the ready availability of good advice, incentives and funding.

Reuters Report (22 March 2010):

The UK Labour government will unveil a 2 billion pound ($3 billion) “green” investment bank in Wednesday’s budget to help Britain’s transformation to a low carbon economy, a government source said on Sunday.

Finance minister Alistair Darling has said there will be no pre-election giveaways in the budget, with polling day expected on May 6, but he wants more investment to encourage future sources of economic growth after an 18-month recession.

The green bank, designed to help finance projects such as railways, offshore wind power generation and eco-friendly waste management, will be half-funded from government asset sales with the remaining one billion pounds coming from the private sector.

“The high risk profile of these investments, which are in new and unproven technologies means an initial government investment is needed to draw in investors,” the source said.

“By providing an initial investment of government capital it will reduce the risk profile for investors and increase the incentive for the private sector to enter the market at the scale and pace needed.”

It is estimated that Britain needs well over 150 billion pounds to modernize its energy mix. It also has to meet climate change targets — cutting greenhouse gas emissions by a third and sourcing 15 percent of its energy from renewables by 2020.

The government could sell the rail franchise from London to the tunnel linking Britain to mainland Europe, the student loan book, a toll road crossing near London or betting company, the Tote, to finance the investment bank, the source said.

SUSTAINABLE RECOVERY

Policymakers have grown increasingly concerned that companies are still struggling to secure finance for investing in innovative areas even though the worst of the credit crunch is over and the banking system has stabilized.

Getting credit flowing freely again is regarded as crucial to engineering a sustainable recovery. Bank of England figures last week showed lending to firms shrunk at its fastest annual pace in at least a decade in January.

With government borrowing for 2009/10 expected to come in as much as 10 billion pounds below December’s 178 billion pound forecast, the budget on Wednesday could contain further small, targeted measures aimed at new industries.

However, with the budget deficit heading for a record 12 percent of gross domestic product this year, Darling is expected to bank most of the undershoot.

“A little bit of government help can unlock a lot of private sector investment, and that is going to be the focus this week,” Darling told BBC television on Sunday.

Source: www.reuters.com