News November 1999 UBS plans carbon fund UBS, Switzerland's biggest bank, plans to launch the world's first private sector carbon fund next year. The Zurich-based bank believes such a fund is one of the new business opportunities arising from the Kyoto Protocol - the international agreement to control global warming by reducing emissions of greenhouse gases. UBS hopes the fund will raise SF100 million ($65 million) and will open for subscriptions by May 2000, says Heinrich Hugenschmidt, the bank's head of environmental risk. The basic idea is that the fund will invest in ventures which are expected to qualify as Joint Implementation or Clean Development Mechanism projects - two of the market-based mechanisms proposed in the Kyoto agreement. UBS is currently working on identifying a suitable portfolio of projects and is discussing the detailed structure of the fund with potential investors. UK unveils hybrid greenhouse gas trading scheme Eagerly awaited proposals for a UK scheme to trade emission permits for greenhouse gases have been broadly welcomed by politicians and some likely participants but attacked by others as unwieldy and impractical. The proposals were developed by the Emissions Trading Group, a collection of some 30 companies and institutions, under the auspices of the Confederation of British Industry and the Advisory Committee on Business and the Environment. They were presented to government on October 27 and set a target launch date of 1 April 2001. US social funds top $2 trillion One out of every $8 under professional investment management in the US is now invested in a socially responsible manner, according to a new study. The US Social Investment Forum's (USSIF) 1999 Trends report* shows an 87% increase on their 1997 levels - to $2.16 trillion - in assets held either in screened portfolios, by investors who engage with companies to improve their social performance, or invested in community finance initiatives. "It is clear that the strong performance of social investing in recent years has played a major role in the influx of assets," says USSIF president Steve Schueth. "A growing number of American individuals and institutions are insisting that their money be invested in line with their values." Social investing involves incorporating moral, social or environmental criteria into investment decisions. * 1999 SRI Trends Report, at www.socialinvest.org Canada gets appetite for US carbon credits The fledgling market in carbon credits (or more accurately, carbon emission reduction credits) is poised to take off, US traders say. Two record-breaking cross-border deals were announced in late October and those involved say they plan many more deals next year. Between them, the two trades involve Canadian electricity utilities, US farmers, a US alternative energy company; an insurance company, a Wall Street brokerage, a boutique investment bank and one of the big-five accounting firms. First, on October 19, came news that at least 2.8 million tonnes of emission reductions had been bought by a consortium of ten Canadian power utilities (Greenhouse Emission Management Services) from IGF Insurance, the fourth largest crop insurer in the US. IGF will acquire the credits from farmers and landowners initially in Iowa, but later nationwide. Brown slashes UK climate levy Intensive lobbying by UK industry has paid off - Chancellor Gordon Brown has announced what he claims is a 90% discount on the planned climate change levy. But despite a more complete climbdown than most analysts expected, Confederation of British Industry (CBI) says Brown has not gone far enough, and many industry lobbyists say the details need to be clarified. "We think the Chancellor has gone a significant way towards answering our concerns, but we'd asked for more," says Michael Roberts, head of industrial policy at the CBI, the main employer's association. "Some industry sectors will still be out of pocket to the tune of several million." Weather brokers eye Europe Weather derivatives brokers are expanding into Europe on hopes that the market is set to mirror that of the US. UK-based Euro Brokers announced what it claimed were the first two brokered non-US weather trades in October, and US competitor Natsource say it is planning to open a London-based weather desk. In September, United Weather Products claimed the first brokered transatlantic deal. But some participants say that the European market is currently not suited to brokered trades, and is likely to develop differently to its US equivalent. Funds offered new eco-rating tool Safety and Environmental Risk Management (SERM) has completed the first wide-ranging environmental risk-rating of UK companies, and plans to begin assessing the environmental risk of UK investment funds in the New Year. The environmental rating agency has published ratings on over 130 UK companies, representing 38% of typical UK equity portfolios, it says. "This gives traditional fund managers the ammunition to decide what they want to invest in with regard to environmental risk," says Jonathan Barber, managing director of the UK-based rating agency. "It has application for the whole fund management industry," he adds. UKSIF presses for green ranking The UK Social Investment Forum (UKSIF) is lobbying the Financial Services Authority (FSA) to incorporate socially responsible investment criteria in the regulator's proposed league tables of retail financial products. "We would like to see an indicator of whether or not a financial product takes account of socially responsible investment (SRI) issues," says Penny Shepherd, executive director of UKSIF. "There's an opportunity here to follow the government's approach in requiring pension funds to disclose their SRI policies." Europeans take to "simple" carbon trading Trading emissions is "simple" and helps companies meet reduction targets effectively, according to participants in a major European emissions trading simulation carried out over the summer. The organisers are now calling for participants to lobby national governments to introduce trading schemes. "Every member of our associations now have to go to their governments and convince them that this is a good system," Jean-Pierre Bourdier, chairman of the Unipede/Eurelectric climate change working group told a packed side event at the annual United Nations conference on climate change in Bonn in October. FOR THE FULL STORY EVERY MONTH, SUBSCRIBE TO ENVIRONMENTAL FINANCE, OR CONTACT info@environmental-finance.com FOR OUR BACK ISSUES SERVICE