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Copenhagen blog: 10 December

10 December, 2009

For Carbon Finance, today was all about looking for the financing.

It started with a press conference from George Soros, who is proposing an innovative $100 billion climate fund, funded by Special Drawing Rights, issued by the International Monetary Fund (IMFs) and described even by Soros himself as “arcane financial instruments”.

Soros has reinvented himself as a philanthropist and clean-tech investor, but Brits remember him best for making billions in 1992 from the Bank of England (and therefore the UK taxpayer) by shorting the blazes out of the pound on ‘Black Wednesday’.

Despite the involvement of a multilateral financial institution, chucking around a virtual currency, proposed by a self-confessed former hedge fund manager, Greenpeace was guardedly enthusiastic. It stated that “every world leader should study this proposal,” but also called for levies on aviation and shipping and a “small tax” on financial transactions.

Friends of the Earth (FoE), however, spotted the fly in the $100 billion of ointment – the fund would generate returns through the carbon market, which FoE now describes as “a scam”. So that’s that, then.

Meanwhile, the multilateral development banks (MDBs) held a full-day event – opened by UN climate head honcho Yvo de Boer – to discuss their role in financing climate change adaptation and mitigation. The organisers took the precaution of hosting the event in Copenhagen’s impressive – but somewhat distant – Opera House, thus successfully deterring the attentions of any anti-capitalist activists.

Unfortunately, this precaution also successfully discouraged many of the day’s potential audience from making the trip from the main event at the Bella Centre.

Nonetheless, the sessions were full of practical information about, and encouraging examples of, the good work the MDBs are doing to leverage private finance to deal with climate change, including a panel on carbon finance.

It also featured a couple of gems from Ken Newcombe, carbon market pioneer and – for those who fancy a few days in Miami in January (and who doesn’t?) – the keynote speaker at the Carbon Markets North America conference.

Newcombe – who is now running environmental fund C-Quest Capital – built the World Bank’s carbon finance unit into a $1 billion carbon asset manager, before most private sector carbon investors had got their shoes and socks on. He then helped raise about the same amount into Climate Change Capital’s first carbon fund.

Despite – or perhaps because of – these experiences, he cautioned about raising too much money. “Capital raising is really not the challenge,” he said. “There’s plenty of capital – it’s the risks we need to focus on.” He warned of the temptations and dangers of accumulating assets which then can’t be profitably invested. Instead, the role of MDBs should be about “smart capital ... at the edges, it became dumb capital.”

This last contention was politely disputed in the next session by the World Bank’s Benoit Bosquet.

The other revelation was that Newcombe – who, as he pointed out, found himself for a while trading for Goldman Sachs – was a “student revolutionary leader”. Unfortunately, he departed before Carbon Finance could quiz him on his past life as a left-wing firebrand.

It does beg the question of whether the World Bank is, in fact, a nest of leftists – a suspicion often heard from some of the more rabid US think-tanks. If so, would that go any way towards reassuring FoE about the Bank’s role in climate finance?

Mark Nicholls

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