IPPC Report to drive capital investment in Clean Tech
The compelling conclusions from the latest United Nations report on climate change are likely to spur a wave of corporate investment, capital partnerships and bonds in the infrastructure, energy, water and agriculture sectors, James Cameron (pictured) , non-executive Chairman of Climate Change Capital, told Clean Energy Pipeline. Intergovernmental Panel on Climate Change report (31 March ) warned of an increase in violent conflicts, inequality, food shortages, droughts, flooding, heat waves and infrastructure damage if global temperatures continue to rise at current rates. Read More
INTERVIEW by Jessica Mills-Davies in Clean Energy Pipeline:
IPCC report to drive capital partnerships, bonds and corporate investment in cleantech
1 April 2014
The compelling conclusions from the latest United Nations report on climate change are likely to spur a wave of corporate investment, capital partnerships and bonds in the infrastructure, energy, water and agriculture sectors, James Cameron, non-executive Chairman of Climate Change Capital, told Clean Energy Pipeline today.
The report, released yesterday and delivered by the UN’s Intergovernmental Panel on Climate Change (IPCC), warned of an increase in violent conflicts, inequality, food shortages, droughts, flooding, heat waves and infrastructure damage if global temperatures continue to rise at current rates.
The verdict followed an IPCC report released last September that said scientists are 95% certain that human beings have been the dominant cause of climate change since the 1950s. The latest report concluded that “human interference with the climate system is occurring,” which the IPCC said, “poses risks for human and natural systems”.
The IPCC cited ‘high confidence’ that climate change was to blame for melting glaciers and some of the extreme weather events seen across the world over the past year. It also cited emerging evidence of the impacts of ocean acidification.
“The conclusions are reliable and hopefully dependable,” said Cameron. “Can you imagine anyone doing [such an exhaustive investigation] for finance? Anybody who makes decisions in the more affected areas should read the document.”
Cameron forecast that the report findings will boost innovation in new clean energy technologies, as investors and companies alike identify new opportunities for innovation in order to adapt to the carbon emissions risks associated with fossil fuels and high energy-consuming industries.
“This will encourage a reappraisal of risk, particularly in energy,” Cameron said. “For all investors, there is something to be [gained]. The fact we have underestimated the risk associated by fossil fuels is [likely] to command more attention.”
Corporate investment in the clean energy sector is also likely to increase as companies look to decrease their exposure to risks associated with climate change, which poses material threats to infrastructure that manifest in capital expenses.
The IPCC report, which will be followed by a supporting document in the summer, is likely to have a direct impact on the international United Nations climate negotiations due to take place in Lima, Peru, and Paris, France, over the next 21 months.
Climate Change Capital is involved in another UN climate change summit due to take place in September 2014 that will link investors to governments in a bid to develop new financing structures for climate mitigation technologies.
“If, in September, you get commitments to deploy capital in a more resource efficient economy, it will come in the form of bonds and new corporate structures to restructure existing companies,” said Cameron. “All are likely in the next few years.”
Although the IPCC’s findings will likely shape future energy policies, Cameron insisted that legislation is not necessary for investment in the sector. He predicted that investors are likely to experience the greatest shift as a result of the findings, as they become drawn to lower-risk assets and technology.
“Funding opportunities have to be acted on with optimism,” he said. “[We are likely to see a substantial] change in finance coupled with technology and market demand. Markets can be built by governments, but they have to be alluring. More investment is needed in both technology and marketing.”
Cameron highlighted that cleantech requires new financing structures to replace scarce and outmoded venture capital and private equity contributions.
“It’s true that the private equity sector has suffered several blows,” Cameron said. “I’m thinking of corporate direct investing and more capital partnerships. [Money will be deployed] in water, [agriculture] and infrastructure to make it able to cope with climate change. A better energy system can be created.”
He predicted that bonds will also be increasingly used in the infrastructure and energy sectors, in addition to a rise in capital partnerships and future innovation in finance structures used to support the sector.
“I think more finance [structures] will emerge,” he said. “People will think in an instrumental way. Where are the resources? Where is capital and where do I deploy it? Demand in assets will have to change. There are a lot of costs associated with how capital is managed.
“There will be more special purpose vehicles and corporates investing alongside other corporates. It’s happening. Expect more to happen. It’s evolving now. You can sense the will, but it’s difficult to break a pattern in finance.”