Mobilizing Capital For the Environmental Economy Rotman School of - - PowerPoint PPT Presentation

Mobilizing Capital For the Environmental Economy

Rotman School of Management November 21, 2007

“We either don't see, don't experience, or choose to ignore the impacts our lives have.”

"We are drawing down resources that took millions

• f years to create in order to supplement current

consumption."

Tragedy of the commons

Tragedy of the commons

Tragedy of the commons

Tragedy of the commons

Tragedy of the commons

“Each man is locked into a system that compels him to increase his herd without limit…in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom

• f the commons”

Garrett Hardin, 1968

We need a shift in thinking Short Term

Me “ism” Consumption Instant Gratification Low Capital - High Operating Entertainment

Long Term

We “ism” Savings/Investment Long-term Health Low Operating - Higher Capital Education

We need a shift in thinking Short Term

Me “ism” Consumption Instant Gratification Low Capital - High Operating Entertainment

Long Term

We “ism” Savings/Investment Long-term Health Low Operating - Higher Capital Education

Leadership

Concentrated Elite Distributed and Collaborative

People will choose how far and how fast? Capital

Consumer

Governments Business

Voter Investor

Policy - “What is the most critical issue facing the country?”

Source: Globe and Mail, January 26

Canadians are ready to pay the price

91% of Canadians believe individuals will need to make changes in their lifestyle to reduce their production of climate changing gases 72% feel it will be necessary to increase the cost of the types of energy that contribute most to climate change. 80% favors raising taxes on these energy sources to discourage use if tax revenues would be devoted to promoting energy efficiency and developing alternative energy sources. 81% favor raising taxes on energy sources that cause climate change if other taxes would be reduced by the same amount so that their total taxes would remain the same.

Source: GlobeScan Incorporated July 26th, 2007

Environmental Fiscal Reform “We need a predictable and consistent market that recognizes the true, full costs of doing business and reassigns them to the marketplace, where they belong.”

• Tax Shifting
• Cap and Trade Programs
• www.sustainableprosperity.ca

Consumers: Expanding Consciousness “the cash register is the daily voting booth in democratic capitalism.”

• Energy

– Alternative energy, energy conservation – Reduction in high carbon products: packaging

• Water

– Water conservation

• Food

– Local – Healthy

“If not now, then when? And if not us, then who?”

Greg Payne Summary Environmental Economy Drivers Emerging Industries Investment Considerations

Three driving forces will create historic challenges and economic opportunities Environmental Stresses Resource Scarcity Demographics

Demographics

Source: UNEP

Billions

Globalization and Demographics: enormous environmental pressures

3x today’s amounts of energy consumed Energy 2.5x the total amount of meat consumed Meat 4x the number of cars on the road Cars Effect Good/Commodity

Source: WRI

Effect of equalization with developing world

Emissions Continue to Grow

Source: EPA, New Scientist, IEA

Stern Recommendation

Resource Scarcity - Peak Oil

Source: UNEP

Crude Oil

Source: Moore Research Centre

The Environmental Economy Pollution reduction and mitigation Renewable energy and resources Efficiency and conservation

Pollution Control and Mitigation $1.3 Trillion by 2030

Air pollution control

– Coal scrubbers – Industrial emissions cleaning

Water treatment

– Municipal systems – Industrial discharge

Carbon control

– Carbon capture and sequestration (CCS) – Carbon trading or carbon tax

Pollution Control and Mitigation Market ($US billion)

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Today 2030 Air Pollution Control Water Treatment Carbon Capture

Sources: Government of Canada, Siemens Inc., IPCC, IEA

Renewable Energy $600 Billion by 2030

2% of global electricity today

– <1% of global energy

IEA expects 6% by 2030

– New additions already more than 10%

Stern calls for 60% of electricity carbon free by 2050 Wind competitive, solar costs falling

Renewable Energy Market ($US billion)

$0 $100 $200 $300 $400 $500 $600 $700 Today 2030 Wind Solar Other

Source: IEA, Solarbuzz, Vestas Wind

Efficiency and Conservation $600 Billion by 2030

Low-hanging fruit

– High returns – Immediate results

Utility metering and smart tariffs Building insulation, heating and cooling Auto fuel economy (hybrids) Recycling and waste-to-energy Grid and pipe upgrades

Source: Itron, Badger, Wharton School, Waste-to-Energy.Net, Tomsa

Adding It Up A massive $2.5 trillion industry by 2030

Booz Allen: “Global infrastructure needs $40 trillion over 25 years” ASCE: “American infrastructure $1.6 trillion

• ver 5 years

Cleantech Group: “Water investment $20 trillion over 25 years”

Total Environmental Sectors Market ($US billion)

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Today 2030 Pollution Control Renewable Energy Efficiency and Conservation

Source: IMF

Where Will We Get $2.5 trillion? In context

– 5% of global GDP of nearly $50 trillion – 25% of global investment of $10 trillion

Potential for investment to be diverted

– Residential structures – Commercial structures – Transportation, infrastructure, technology

It’s time for an investment mentality

Source: IMF

Energy Return on Energy Invested (EROEI)

Source: ASPO, EROEI.com, The Oil Drum, Energy Bulletin.Net

70s 80s 90s 00s 2010

Big Oil

• North Sea
• Alaska
• Gulf

Japan

• LBO
• Real estate

Technology

• Internet
• Biotech

BRIC

• Credit
• Housing

Environment

• Investeco sectors

Tight commodity markets Rising inflation Excessive credit Large trade imbalances Shifting economic powers

Capital’s next home?

Globalization Financial expansion Asset inflation

“Anyone who thinks that infinite growth is possible in a finite universe is either a madman or an economist”

Kenneth Boulding

Building companies that matter

www.investeco.com