Monday, January 25, 2016

This Week: Climate Events Worth Watching

I don't normally post upcoming events in this blog, but there are two this week worth considering.  Both are free to watch online.

Wednesday all day: Investor Summit on Climate Risk


Climate leaders and financial experts will gather on Wednesday, January 27 for the Investor Summit on Climate Risk.  The event  will take place at the United Nations and is co-hosted by Ceres, the United Nations Foundation, and the United Nations Office for Partnerships.

Participants include United Nations Secretary General Ban Ki-Moon, COP21 Executive Secretary Christiana Figueres, Michael Bloomberg, Al Gore, CERES President Mindy Lubber and many others.

Michael Bloomberg at COP21


Californians on the agenda include California Treasurer John Chiang, California State Controller Betty Yee, CalSTRS CEO Jack Ehnes and DBL Investors head Nancy Pfund.

A copy of the agenda is here.  The event can be viewed via a live broadcast on the United Nations TV website at http://webtv.un.org/.


Friday 11-12:30 Pacific Time: The Road from Paris: Climate Solutions Investment


Building on the ideas from the UN Investor Summit on Climate Risk, an interactive forum on finance for a west coast audience will take place on Friday, January 29 from 11 to 12:30 Pacific Time.

One of the participants in the CERES/UN Investor Summit, Ken Locklin of Impax Asset Management, is joining California Clean Energy Fund Managing Director Danny Kennedy in hosting the Friday event, The Road from Paris: Opportunities and Challenges in Climate Solutions Investment.

Experts in climate investment and risk will discuss the policies, financial models and investment flows needed to make Paris a success for both the climate and the economy.

Registration is free at http://voicevoice.com/calcef/.

(Disclosure:  I am one of the presenters at a breakout session in the Friday event)

Thursday, January 7, 2016

Governor Brown Releases New Cap and Trade Expenditure Proposal

Includes $20 million for IBank CLEEN program


California Governor Jerry Brown has released proposed 2016-17 state budget, including a new expenditure plan for Cap and Trade funds.  The budget includes $20 million to enhance an energy finance program at the state Infrastructure and Economic Development Bank.

The Governor's budget will now go to the legislature for review and possible revision before it is adopted in June.

According to the Governor's budget documents (available here),

The $3.1 billion Expenditure Plan reflects the balance of auction proceeds that were not appropriated in 2015‑16, as well as the expenditure of projected proceeds in 2016‑17. This Plan is consistent with the second triennial investment plan for Cap and Trade auction proceeds and was informed by public comments received through 11 public meetings and workshops as part of the development of the second investment plan. The proposed plan expends at least 10 percent of the proceeds within disadvantaged communities and at least 25 percent of the proceeds to projects that benefit those communities
An overview of the proposed expenditures is included in the following chart:

Source:  Summary of proposed budget, page 99 (source here)

Within the budget proposal is "$20 million for the California Infrastructure and Economic Development Bank (I Bank) to leverage private investments in energy efficiency and renewable energy projects in public buildings that will save money by using less energy. These innovative financing mechanisms will accelerate the utilization of clean energy projects throughout the state."

The $20 million will be used in the new IBank CLEEN program, previously described in California Green Finance here.  It is expected that further details on how the funds will be used will be provided soon.

In addition to the IBank proposal, Governor Brown is proposing the following "significant adjustments" to existing expenditures:


• $100 million for the Strategic Growth Council to administer the Transformational Climate Communities Program to support local climate actions in the state’s top 5 percent of disadvantaged communities. Funding will support projects that integrate multiple, cross‑cutting approaches to reduce GHG emissions. The program will combine climate investments within a local area for catalytic impact, including investments in energy, transportation, active transportation, housing, urban greening, land use, water use efficiency, waste reduction, and other areas, while also increasing job training, economic, health and environmental benefits.


• $100 million for the Department of Resources, Recycling and Recovery to provide financial incentives for capital investments that expand waste management infrastructure, with a priority in disadvantaged communities. Investment in new or expanded clean composting, anaerobic digestion, fiber, plastic, and glass facilities is necessary to divert more materials from landfills. These programs reduce GHG emissions and support the state’s 75‑percent solid waste recycling goal. 

• $150 million for CAL FIRE to support forest health programs that reduce GHG emissions through fuel reduction, reforestation projects, pest and diseased tree removal, and long‑term protection of forested lands vulnerable to conversion. Funds will also support biomass energy generation projects.

• $30 million for the Department of General Services to implement Executive Order B‑18‑12 that requires state agencies to reduce GHG emissions by 10 percent by 2015 and 20 percent by 2020. The Department will assist state agencies in the construction of zero‑net‑energy state buildings, reduction of grid‑based energy purchases at state‑owned buildings, and the use of clean, on‑site power generation, such as fuel cells, solar photovoltaic, solar thermal, and wind power generation 

• $15 million General Fund on a one‑time basis for the Energy Commission to initiate research on innovative and emerging technologies for low carbon transportation fuels. The Energy Commission will engage experts from state universities, research laboratories, other California‑based research institutions, and key private sector partners. The results will inform California climate policy and allow planning to continue to be based on science. 

Monday, January 4, 2016

Green Bonds: California Treasurer Chiang Explores Expanded Role

California Treasurer John Chiang will be embarking on a nationwide "listening tour" later this month to explore actions California might take to enhance the green bond market.

“We want to see what we can do at the California State Treasurer’s Office to unlock the potential of the green bond market and create a bigger market for these investment tools," said Treasurer Chiang.

California State Treasurer John Chiang

Treasurer Chiang is well positioned to enhance green bonds.  The Treasurer's office is part of the international standards setting body on green bonds, it has served as both a green bond issuer and purchaser and it is a well respected national and international leader on government finance and institutional investment.


Climate Bond Standards


Treasurer Chiang is a member of the international governance body overseeing standards for the green bonds market (the Climate Bond Standards Board).  In that role, he works with other experts to assure the integrity of the green bond and climate bond marketplace. The standards developed help issuers, investors and intermediaries to assess the environmental benefits of environmentally labelled bonds.  The standards also aim to provide common definitions of green projects across global markets.

Overview of Climate Bond Standard (more detail here)


To date, standards have been developed for several project types, including low-carbon buildings, solar, wind and bus rapid transit.  Future standards will be developed for other project types, including bioenergy, geothermal and others.


COP21 and Green Bonds


Treasurer Chiang's interest in boosting the green bond market is timely.

I attended a number of sessions on finance and energy solutions at the COP21 climate summit in Paris last month.  Green bonds were frequently mentioned as an important tool in generating the funds needed for climate action.  National and subnational governments were anxious to learn how they might tap the green bond market for local projects.

At COP21, 27 investors, ranging from CalSTRS to Calvert Investments to Zurich Insurance issued "The Paris Green Bonds Statement" pledging to support policies to improve the green bond market.  Frederic Samana of the giant international asset management firm Amundi summed up the state of the market:  "The green bond market is surging everywhere."



The London-based Climate Bonds Initiative is the de-facto hub for green bond activity worldwide.  According to their CEO Sean Kidney, there is enormous potential to use green bonds to improve infrastructure and develop clean energy projects.




California Green Bonds


California has already played a significant role in developing markets for issuing and purchasing green bonds.

By purchasing over $1 billion in World Bank green bonds, California showed there is significant demand for quality issuances. “We appreciate the California State Treasurer’s Office’s continued interest in World Bank Green Bonds," said Doris Herrera-Pol, Director and Global Head of Capital Markets at the World Bank.  "They were the World Bank’s first USD investor back in 2009 when we issued our first USD green bond. Now with over USD 1 billion invested in green bonds, they have been instrumental in helping grow the green bond market,”

California is also an issuer of green bonds.  A $300 million bond issuance in 2014 is being used primarily for clean transportation projects.  The bond was originally expected to be $200 million, but was raised to $300 million due to market demand. “California’s first green bond sale produced an outstanding result, generating such a strong demand that we expanded the sale by $100 million," said then Treasurer Bill Lockyer in September, 2014.



Treasurer Chiang released the first annual report on the use of proceeds from the bond.  The report (available here) shows that almost all of the proceeds have been disbursed (see chart below).  Similar annual reports will be issued until all proceeds have been disbursed.



Green Bonds Listening Tour and Next Steps


Treasurer Chiang plans to meet with municipal bond retailers, environmental-friendly investors and large investment funds in San Francisco, New York City, Boston and Chicago.  While in New York, he'll also serve as a Co-Convenor of the Investor's Summit on Climate Risk at the United Nations.

According to Treasurer Chiang, more analysis, fine-tuning and market research needs to be done before a green bond market can really take off.  “Greater use of green bonds could provide a secure and growing funding stream for governments and private industries to meet the challenge of curbing climate pollution."

In addition to the Climate Bonds Initiative, investors and bond industry representatives, Treasurer Chiang can expect active interest in his green bond activities from local governments and non-governmental organizations.  Several local government entities in the San Francisco Bay and Los Angeles areas have already issued green bonds.  And, organizations ranging from the Natural Resources Defense Council to As You Sow to CERES to CalCEF are expected to become increasingly engaged in green bond issues.