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Offshore wind, green bonds opportunities grab attention
Tulsi Tanti, Chairman Suzlon Group pointed to offshore wind as a largely untapped opportunity area last Wednesday. Around 1000-5000 MW of energy can be generated within 50-100km from the sea, with minimal transmission losses. These comments were made as part of the High Level Corporate Dialogue pre-launch event to the Delhi Sustainable Development Summit.
Tanti also stated that technology is on the horizon which will simultaneously bridge water and energy access challenges, for example, by linking renewable energy generation with water desalinization or through projects involving wind turbines that harvest water content out of the air.
The green bonds market is an emerging space which garnered a great deal of attention at this year’s Summit. HBSC board member, Naina Lal Kidwai, remarked that the green bonds market will be worth an estimated $10 million in India in the next few years and could grow to a billion dollars.
According to Reuters, globally the ‘green bond’ issuance should more than double this year to a record $25 billion and has grown by a compound annual rate of 55 percent since it began in 2007 . Last month, the Indian Express reported that World Economic Forum is looking to create a $50 Billion global green bonds market by 2015.
Indeed, HBSC comments that green bonds issuance is being driven both by the capital needs of issuers as well as the commitment of institutional investors to climate finance and responsible investment.
Two weeks ago, Ceres announced that 13 investment banks — Bank of America Merrill Lynch, Citi, Crédit Agricole Corporate and Investment Banking, JPMorgan Chase, BNP Paribas, Daiwa, Deutsche Bank, Goldman Sachs, SEB, Mizuho Securities, Morgan Stanley, Rabobank and HSBC — have stated their support for an initiative to develop voluntary guidelines to promote transparency, disclosure and integrity in the development of the Green Bond market via the new ‘Green Bond Principles’.
While market opportunities and corporate interventions appear to be providing avenues for future action in the sustainability space, global policy making appears to have stalled. Assaad Razzouk, CEO at Sindicatum Sustainable Resources, reported that around $600 billion per year is spent on direct subsidies for fossil fuels worldwide; incorporating the costs of externalities, this figure rises to around $2 trillion per year. Spending associated with fossil fuels dwarfs the $80 billion spent on renewable energy globally.
The role of institutional investors in driving the sustainability agenda is critical as the relationship between governments and corporations worldwide appears to be an ineffective channel for advancing sustainability action in recent years. Institutional investors hold nearly $7 trillion worth of assets.
"Ninety percent of companies globally are responsible for all man made emissions", stated Razzouk, who believes that awareness building and empowering institutional investors globally will be the fastest way to expedite change. He concluded that it would not be sufficient to merely exert pressure on corporations via governments, citizenry or judicial channels.
Specific to the Indian context, the availability of capital for various interventions could be leveraged to drive sustainability action among corporates. Naina Lal Kidwai stated that this represented an opportunity to drive minimum banking standards, whereby the availability of credit would be contingent on the type/scope of impact the business will have, as 70% of banking is channeled by the government in the Indian banking sector.
Kidwai urged industry practitioners to collectively develop sustainability reporting metrics to enable good governance. For Kidwai, many senior business leaders, board directors and investors wish to manage resources sustainability but lack tools and data to enable decision-making, for example, well established reporting frameworks such as those for finance, operations and risk management. "Get the metrics in so that Board level action is enabled," advised Kidwai, while reflecting on the barriers for businesses on sustainability actions.
However, it appears that corporate governance, investor and regulatory pressure are not the only reasons for Indian businesses to take serious action on sustainability. Martin Wright, Director at Forum for the Future, has engaged with top corporate brands such as Hindustan Unilever on sustainable futures. A visiting judge for the Ashden Awards, Wright observes that a range of factors are bringing top brands and large conglomerates to the table to talk about sustainability.
“Indian businesses are concerned about issues that can have a very direct impact on their bottom line – such as water availability, energy reliability, etc. Many are targeting base of the pyramid customers, and obviously they are concerned about the ability of their customers to pay. So they have an interest in their customers being able to have decent water supplies, say, and access to energy, so that they are more prosperous. There is definitely an element of self-interest here.”