$100 million green fund to fight climate change - and make money
Monday, 3 December 2018
The Government will channel $100 million into a 'green' fund to marry private investors with climate change solution start-ups.
It's a key part of a promise to tackle global warming, which Prime Minister Jacinda Ardern has described as her generation's 'nuclear-free moment'.
The New Zealand Green Investment Finance fund is part of a suite of measures to steer the economy towards carbon neutrality in the next 30 years.
It will act as a magnet to attract investors - like pensions, KiwiSaver funds, domestic and foreign companies or iwi - to fledging companies with greenhouse gas busting ideas.
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'The mission is to create the low carbon economy for New Zealand. So, one of the things that has got to happen is that we have got to direct private finance and financial flows towards new technologies, new businesses, innovations that help us get our green house gas emissions down to as close to zero as we can,' Climate Change Minister James Shaw told Stuff.
'Some of that stuff is already happening but it is not happening at nearly the speed, or the scale that we need it to happen, and so this is a catalyst for that investment.'
The fund's managers will seek out investment opportunities in electric vehicles, manufacturing processes, energy efficient commercial buildings and farming practices. But it's not aimed at energy projects.
'We have said that it shouldn't invest in large-scale electricity generation, because that investment has no trouble getting access to capital. It wouldn't add anything,' Shaw said.
The projects must be past the development stage, and ready for up-scaling, commercialisation or use. The fund can structure deals, create financial products, and offer flexible repayment terms.
Eventually, the fund will be paid back, or its stake in the project will be sold off for a profit.
The policy was one of the Green Party's big wins in post-election negotiations.
Money for the initial capital injection was announced in May's Budget, and Shaw shared the stage with Ardern to announce further details on Wednesday.
'We are putting $100m of start-up capital into it. I know that that sounds like a lot of money but when you consider the size of the overall economy, comparative funds, it is actually quite a small amount. It is what you would describe as the minimum, viable amount to get a fund like this going and because we want to attract private capital in, essentially the size of the investment should be several multiples of that over time.'
It will be a Schedule 4A entity - like City Rail Link Limited, Ōtākaro Limited or Predator Free 2050 Limited - which means it is a commercial operation with a 'mission.'
Similar green investment funds and banks exist in Britain, Europe, Australia, Japan, Malaysia, United Arab Emirates and some US states. They have raised between $2 and $10 for every $1 of government contribution, Shaw said.
Some of those funds have established criteria for investing, such as high impact on emissions or job creation.
'There is a range [for return on investment] but it is reasonably low, about two per cent overall … we have given them a very simple and clear mandate,' Shaw said.
'That is to generate a commercial entity and that is really to provide credibility to the private finance market place, that they know if they put money into this fund that it will get a return. Where it can get co-benefits, all the better.'
Shaw said the fund will also have higher operating costs than other funds because of the need to attract climate investment experts.
The first two appointments to the fund's board have also been made. Cecilia Tarrant is Chair of the Government Superannuation Fund Authority and David Woods is a former ABN AMRO banker.