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European Investment Bank going green May 30, 2007

Posted by James Webster in : finance, environment , 1 comment so far

Continuing my recent environmental and sustainability themes, I would like to point you towards the European Investment Bank’s Climate Awareness Bond. This product is available to investors across the European Union; that includes me since moving back to the UK just under a month ago!

This zero-coupon bond aims to raise funds for ‘dedicated use in sectors key to climate protection’ to the sum of €600,000,000. The redemption value of the bond is guaranteed at 100% of the initial investment with an excess yield between 5% or the performance of the FTSE4Good index, whichever is higher. The FTSE4Good index is comprised of European companies that have been judged to have a high degree of environmental awareness compared with their peers, although the skeptical might scoff at the inclusion of firms such as BP and Royal Dutch Shell. More information on the FTSE4Good index can be found here. One would hope that with the backing of the EIB the funds raised will be put to appropriate use.

The particularly interesting feature is that the product includes an option upon maturity to use excess yield above 25% to buy and cancel EU carbon dioxide allowances.

It is good to see capital markets introducing products such as this to help raise funds to address climate change whilst hopefully providing investors with a return above the market beta.

Virgin Blue going green April 5, 2007

Posted by James Webster in : environment , 2 comments

Although there had been a press release (PDF) from the Australian Government Department of the Environment and Water Resources about this last week, I just saw an ad in today’s Financial Review talking about Virgin Blue’s (a major Australian airline for the international readers) new Carbon Offsetting program. For my last few domestic flights around Australia I have been purchasing carbon offsets from Neco as I have decided to make all my air travel from this point on carbon neutral. I applaud Virgin Blue’s efforts towards making it easier to purchase offsets but I think we will soon need to just build carbon offsets into the price of air travel.

One thing I am a little confused by is the disparity in pricing; the Government/Virgin Blue press release claim that carbon offsets can be purchased “for an average of a dollar a trip” whereas Neco’s short distance domestic flight offset (covering return flights of up to 1600kms) is $12. Admittedly for that you get posted a couple of luggage tags to proudly trumpet your carbon neutral status over your fellow passengers but I think that itself is an additional use of resources we could do without. If we are not going to force people to pay to offset their carbon footprint through taxes or higher airfares then at least the various carbon offset providers should be singing the same tune on price in order to minimise cynicism amongst the population.

Perhaps true price transparency will only be achieved when Australia implements an emissions trading market.