Archive for the 'Environment' Category

Africa Progress Panel urges triple energy win – for people, power and planet

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Africa is a potential low-carbon superpower and can show the world how to fight poverty, grow economies and fight climate change at the same time. It is a crucial message for 2015, when critical climate talks will set the future direction of the world’s weather and world leaders commit to achieving sustainable development goals.

Kofi Annan’s Africa Progress Panel today (5 Jun) issues its report Power, People, Planet: Seizing Africa’s Energy and Climate Opportunities. It calls on governments, private investors, and international financial institutions to unlock the Africa’s vast potential for renewable and a low-carbon energy and fight poverty by delivering universal access to electricity by 2030. The report is available for download here.

Source: Africa Progress Panel

Source: Africa Progress Panel

The report says Africa does not have to choose between economic growth and low-carbon energy development. Just as the continent leapfrogged decades of telecoms development with cheap rollout of mobile telephony, Africa has the sun, wind, water and geothermal resources to fire up energy without damaging the world climate.

Power against poverty
Many Africans cannot escape poverty because 621 million of them do not have access to electricity and they pay a heavy price in resources, time and environmental decline for energy such as firewood, which they use for lighting and cooking. A rural woman in northern Nigeria spends around 60 to 80 times more per unit of energy consumed than a resident of New York or London.

“Our report calls for a 10-fold increase in power generation by 2030,” said Mr Annan, adding: “Africa needs to utilize all of its energy assets in the short-term while seizing the opportunity to put in place the foundations for a competitive, low-carbon energy infrastructure.”

The Africa Progress Panel report highlights the scale of Africa’s energy deficits. Power shortages cut the region’s growth by 2-4 per cent a year, holding back job creation.

Electricity consumption in sub-Saharan Africa (excluding South Africa) is less than that of Spain. On current trends it will take until 2080 for every African to have access to electricity. The APP report identifies Ethiopia, Kenya, Rwanda and South Africa as emerging front-runner countries in the global transition to low-carbon energy.

There is a $10 billion-a-year opportunity in tackling deficits and the report authors estimate that households living on less than US$2.50 a day collectively spend this amount on energy-related products, such as charcoal, candles and torches.

Source: Africa Progress Panel

Source: Africa Progress Panel

“This is market failure on an epic scale. Low-cost renewable technologies could slash the cost of energy, benefiting millions of poor households, creating investment opportunities, and cutting carbon emissions,” said Mr Annan. “African governments should take responsibility for tackling corruption in energy utilities, strengthening energy governance to facilitate private investments, and increasing investment in energy infrastructure.”

The report urges African governments to redirect the US$21 billion spent on subsidies for loss-making utilities and electricity consumption for the rich, towards connection subsidies and renewable energy investments geared towards the poor.

It estimates the energy-sector financing gap will be US$55 billion each year until 2030. The panel members call for strengthened international cooperation and a global connectivity fund to reach an additional 600 million Africans by unlocking private investment and expanding public investment in on-grid and off-grid energy provision. Aid donors and financial institutions can do more to unlock private investment through risk guarantees and mitigation finance.

Time to end “climate negotiations poker”
Africa brings a message of hope for December’s climate talks, set for Paris. The world’s leaders must commit and act to implement agreements to cut emissions and limit global average temperature increase to 2OC above pre-industrial levels. Africa contributes the least to man-made climate change and already endures the worst effects such as droughts, floods, falling crop yields and rising temperatures. A bigger increase would mean these changes could spiral out of control within a few years.

The African Progress Panel report challenges African governments and the international community to scale-up the level of ambition ahead of the summit. It recognizes that the EU, the US and China have raised their levels of ambition but says current proposals fall far short of a credible deal for keeping global warming within the 2ºC limit. It condemns Canada, Australia, Russia and Japan for effectively withdrawing from constructive engagement of climate.

APP member Bob Geldof contrasted the “comfort blanket mood music” surrounding the Paris climate summit with current policies: “G7 and G20 governments tell us they want a climate deal. Yet the same governments – the UK, the United States, Germany, China, Brazil and India – are spending billions of dollars of taxpayer’s money subsidizing the discovery of new coal, oil and gas reserves. They should be pricing carbon out of the market through taxation, not subsiding a climate catastrophe that threatens the lives of millions of Africans and jeopardizes our children’s future.”

“This is a moment for bold global leadership and decisive action by governments around the world,” said Mr Annan. “Playing poker with our planetary and the lives of future generations is not a smart move.”

Launch of Africa Progress Panel report 5 June

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For more information, see Africa Progress Panel. The ground-breaking Africa Progress Report Power, People, Planet will launch 5 June – energy poverty, the effects and future of climate change, and Africa’s vast sustainable energy.

Getting Africa to use more carbon financing – COP 17 workshop

Africa is using much less than its share of global financing available for carbon reduction projects, but the process to apply is complicated and a special facility has been set up to help. The African Carbon Asset Development facility has funded successful projects to reduce carbon emissions in Africa. A workshop was held last weekend for sharing practical lessons, attended by about 30 developers, investors, and local experts and bringing together African carbon asset development partners and financiers and beneficiaries including entrepreneurs on how to make carbon finance work for Africa.
The workshop highlighted successful carbon investment projects in Africa supported by the African Carbon Asset Development facility (www.acadfacility.org), formed by the United Nations Environment Programme (www.unep.org) in cooperation with Standard Bank Group (www.standardbank.co.za) and funded by the German Federal Environment Ministry (www.bmu.du/english). The ACAD partnership addresses key barriers that have stopped more people in Africa benefitting from carbon financing on projects as it provides technical assistance, seed capital, and specialized advisory services to both green entrepreneurs and to banks across Africa.
Although carbon financing is growing in importance worldwide, Africa’s share remains very low. According to ACAD facility’s website, in 2009 around $84 billion was invested in 684 emission reduction projects in emerging markets, but African nations got only 2% of the global total. The aim of ACAD is to help increase Africa’s carbon markets.
The workshop was held (somewhere) in Durban as part of a Conference of Parties (COP 17/CMP7) to discuss the United Nations Framework Convention on Climate Change (at sometime) over the weekend 3-4 December. It was organized by Standard Bank and UNEP.
Two examples of successful projects were cited. Johannesburg-based AAP Carbon (www.aapcarbon.com) has developed a technology that can generate heat and electric power from furnace waste gases emitted during ferrochrome smelting. The development was piloted with a financing plan which included carbon credit revenue.
A plant near Rustenberg, South Africa is already operational for London-listed International Ferro Metals (www.ifml.com) and is reducing greenhouse gas emissions by over 200,000 tons a year. Alex Berger, Director of AAP Carbon, explained how the project benefited from UNEP support so that it could tackle challenges in registering for a Clean Development Mechanism (CDM), which is a global framework allowing industrialized countries to fund carbon emissions in places where this can be done more cheaply. The AAP Carbon project is now in the final stages of registration and has apparently been certified with the premium Gold Standard. Several investors are interested in using the climate-friendly technology for other plants, after IFM and AAP Carbon showed that it works.
Kevin Fruin, a South African small business owner, said there is scope to make bricks in a way that is more efficient with energy. He said that construction accounts for almost 30% of South Africa’s greenhouse gas emissions and 200 small and medium enterprises (SMEs) in South Africa make clay bricks. He is one of the small businesses piloting a cleaner production technology called “Vertical Shaft Brick Kiln”. This can save manufacturers at least 50% of coal use and reduce carbon dioxide (CO2) emissions and air pollutants such as soot and black carbon. ACAD is supporting the development of a national programme using the CDM to scale up these demonstration projects so that other businesses can use the technology. It is giving financial advisory, legal due diligence, and a customized carbon-auditing tool for participating SMEs.
The session also provided some 30 participants an opportunity to learn more about how to benefit from grants from ACAD and training.

OPIC invests $285m in 6 impact investing funds

The Directors of the U.S. Government’s development finance institution, the Overseas Private Investment Corporation (www.opic.gov), decided on 27 October to provide financing up to $285 million to equity funds. These in turn should raise more than $875m, representing the largest commitment by the U.S. Government to impact investing in emerging markets so far.
“Impact investing” usually means private investing looking for investments that deliver social and environmental benefits while generating profits, and is a very fast-growing area of investment. OPIC called for impact investing proposals in March and received 88 applications from which it picked 6 funds. According to a OPIC press release, the response was “so positive that OPIC expects to announce additional approved facilities in 2012.”
OPIC President and CEO Elizabeth Littlefield commented in the press release: “This is a watershed day in the evolution of impact investing. These new funds, and the additional investment facilities we announce in 2012, will help to fill financing gaps and introduce more innovation into the impact investing space, helping it grow and mature.”
The 6 funds are:
Investment Fund for Health in Africa II (IFHA II): A private equity fund investing in companies that improve health for Africans with low and middle incomes. It expects to target investments in companies that operate in small and medium-sized hospitals and clinics, healthcare products import, distribution and manufacturing, insurance and supporting industries such as water and sanitation, food and nutrition, education and environmental services. The fund manager is Africa Health Systems Management Company B.V. The International Finance Corporation in 2007 invested in the Netherlands-based IFHA I. OPIC: $83m, target capitalization: $250m.
ManoCap: This fund will invest in small and medium enterprises (SMEs) in Sierra Leone, Liberia and other West African countries, with a focus on post-conflict nations. It will invest in sectors including agriculture, agro-processing, sustainable fisheries, services, healthcare, sanitation, construction and building materials, tourism, light manufacturing, and financial services. These SMEs are expected to have a direct effect on the standard of living of “base-of-the-pyramid” communities by providing employment and access to goods and services. Fund manager is ManoCap LLC. OPIC: $34m, target: $100m.
Latin Idea: Growth capital to Mexican SMEs within the technology, media, telecomms and services sectors. Fund manager Latin Idea Ventures III LLC. OPIC: $25m, target: $125m.
MPOWER Ventures: Unbanked and the under-banked populations in emerging markets through providing prepaid debit cards (or GPR cards), and related alternative financial services, starting with Mexico, Brazil, Colombia, Peru and Bolivia. Fund manager MPOWER Ventures III L.P.,OPIC: $15m, target: $50m.
Sarona: Fund-of-funds will invest in 12-18 private equity funds that target market-based returns while investing in SMEs in frontier markets. Fund manager Sarona Asset Management, Inc. OPIC: $87.5m, target: $250m
Terra Bella: Private equity fund will invest in projects that generate carbon credits through protecting and enhancing forests while generating valuable social and environment co-benefits. Terra Bella will generate returns through the sale of carbon on the growing voluntary, compliance and pre-compliance markets that are emerging in the forest and land-use carbon sector. Fund manager Terra Global Investment Management LLC. OPIC: $40m, target: $100m.
According to Ms. Littlefield: “Each of them promises a strong development impact —be it mobile banking for the unbanked, investing in small businesses in the post-conflict countries of Liberia and Sierra Leone, improved health care in Africa, preservation of highly vulnerable forests, or growing small businesses in Mexico. OPIC has a long history of investing for both social and financial returns and we believe impact investing will gain significant traction in the coming years. We are proud to support its development.”

2 African stock exchanges among world ESG leaders

Two African stock exchanges are among leaders in requesting companies to report on Environmental, Social and Governance (ESG) issues, including South Africa’s JSE Ltd (www.jse.co.za) which this year became the first exchange in the world to require listed companies to move towards integrated reporting which includes ESG reports along with profit figures, as reported on this blog in June. The Egyptian Exchange (www.egyptse.com), Brazil, China, Indonesia and Malaysia are other exchanges discussing with the United Nations Principles for Responsible Investment initiative (www.unpri.org) through its sustainable stock exchanges dialogue.
According to an article in the Financial Times (www.ft.com) today (20 Dec), many investors are still slow to understand how to value the ESG reporting companies are giving them. Both Unilever and Rio Tinto have complained that investors are still only interested in short-term performance. Investors’ reasons for not taking interest could include because their holdings are very short-term, because they only work quantitatively, or because they believe that ESG is about imposing one’s own politics on the investee company. The article quotes John Wilcox, of corporate governance consultancy Sodali (www.sodali.com), as saying: “In the US, in particular, ESG is very politicized. Wall Street is not that comfortable with non-numerical issues, so it tends to focus on the financial results. Because these are half-yearly or quarterly, it tends to reinforce short-termism. Yet long-term success is a function of many things that do not lend themselves to quantification such as culture, long-term planning, environmental and social responsibility, human rights and even human resources issues.”
In general, it is more visible when investors penalize companies for poor ESG, such as when Deepwater Horizon, a BP oil rig, exploded. Some investors in India’s mining group Vedanta have publicly sold out their shares over concerns about the company’s human rights record (see for instance this article in the Guardian newspaper).
Wilcox is quoted that it is the wrong question if investors ask whether good corporate governance increases economic performance: “The real question is: does poor performance on governance increase risk – and the answer is clearly yes.”
However, there are cases where good governance is rewarded by investors. The example given is Brazil’s Novo Mercado of the Bovespa exchange (www.bmfbovespa.com.br), which demands higher governance standards than the main market. Wilcox says “Companies voluntarily agreed to higher governance standards to list on a more exclusive exchange on the basis that this would attract more capital. It worked extraordinarily well and is the best example we have that good governance is equted with better performance – companies listed on the Novo Mercado have tended to outperform their peers.”
In addition to ESG reporting to investors, there is also a requirement to be accountable where companies are stepping up sustainable procurement policies – the article cites governments, Tesco and Wal-Mart as examples.
Stock exchange and fund management investors are starting to believe that if they take more notice of ESG reporting, they will have a better understanding of how the company is run. Some funds believe there is a way to quantify ESG and Risk reporting as a contributor to excess returns, future competitiveness and long-term increase in relative value.

GEF Africa sustainable forestry fund.

British development finance institution, CDC (www.cdcgroup.com) has committed US$50 million to the GEF Africa Sustainable Forestry Fund (GASFF), the first private equity fund to focus solely on sustainable forestry in sub-Saharan Africa. The fund is to be run by the investment team of Global Environment Fund (GEF) which has a long history of investing in sectors that make a positive impact on the environment and quality of life.
It is a pioneering investment to help develop and grow businesses in Africa’s expanding forestry sector and bring jobs to those communities, as well as broader potential ecological benefits.
The first close of GASFF is US$84 mln, which is being committed principally by development finance institutions. Private investors are expected to invest later, and this should eventually bring the fund to its US$150 mln target size.
The fund is targeting commercial returns and is expected to invest in and develop 5-10 forestry businesses across sub-Saharan Africa, with a particular focus on “greenfield” and existing plantations. The forestry businesses will grow, process and market timber products to meet the growing global demand from industries including construction, energy, furniture and bio-fuel.
GEF has around US$1bn funds under management, including an emerging markets forestry fund which has invested in businesses in South America, South-East Asia and Africa. In 2009, GEF received the Financial Times’ award for Sustainable Investor of the Year. GASFF is managed by John Earhart, one of the creators of the Forestry Stewardship Council (FSC), and Ole Sand, who joined GEF from the forest investment team at the International Finance Corporation. Their combined experience and that of their team in the forestry industry in emerging markets will mean that the fund and its investments will be subject to world-class environmental, social and sustainability standards.
The GASFF fund closed on 24 May and planned to start to make investments immediately, with an investment size typically between US$15 mln and $30 mln. There are several countries within sub-Saharan Africa that provide good opportunities for forestry investments including Mozambique, Tanzania, Swaziland, South Africa, Uganda, Ghana, Malawi and Zambia.
The fund’s investments will drive economic improvement in the communities in which it invests through direct employment, local taxes, support for local schools, and other community projects. The fund’s investments will also support the basic needs of employees and families, including housing, schools, clinics, clean water, nutrition programs and job training.
GASFF’s forestry assets will also sequester significant quantities of carbon dioxide, and will avoid deforestation and degradation through its sustainable management of plantations and natural forests.

Comments from CDC’s Chief Executive Richard Laing (per press release):
“The climate and conditions in sub-Saharan Africa give it a compelling natural advantage in developing sustainable forestry, but the continent has traditionally failed to attract investment because of high perceived risks. An improving political and economic backdrop, combined with growing local and global demand for timber and increased attention on climate change issues, means that African forestry is now well placed to receive the investment its people and governments are calling out for.
“As well as the economic impact that this investment can bring, plantation forests also provide important environmental benefits, including reducing carbon emissions, protecting soil and reducing pressure on natural rainforests. Sub-Saharan Africa has the potential to reap these rewards.”
“CDC has been instrumental in the creation of this fund, the first of its kind in Africa. From identifying the need for a sustainable forestry fund, selecting the manager to run it, through to providing the US$50m cornerstone investment that is essential to getting it off the ground, CDC continues to play its part in bringing innovative and vital investment to developing countries.”

UN-REDD
The international community has realized the importance of protecting African forests in order to fight against global warming of the planet. Talks had stalled on an initiative called the UN-REDD programme (The United Nations Collaborative Programme
on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries – www.un-redd.org) which aims that rich countries should provide an international fund to finance developing countries who manage to preserve their forests. Africa supported this.
On 27 May, in Oslo, the rich countries announced they would contribute about $4 billion on their fight against deforestation by 2012, mainly United States ($1 bln), Norway ($1 bln), Japan ($500 mln), the United Kingdom ($480 mln), France ($375 mln) and Australia ($120 mln), joined by Germany ($464 mln) and Denmark.
It could mean more funding for forest protection in the Congo Basin, which is reportedly 26% of global tropical forest.

Consensus Business Group launches $92 million “clean tech” fund for Southern Africa

South Africa’s first, specialised, private equity clean technology fund, Evolution One Fund, has reached its final closing after raising R700 million (US$92 million) from local and foreign investors, including development finance institutions, a family office and sovereign wealth funds. This capital is to be invested into equity in clean technology projects and enterprises including new energy and environment focused technologies in South Africa and across the Southern African Development Community. Evolution One will concentrate on long-term equity and equity-related investment based on active management and adding value after investing.

The fund will prioritise investments in expansion capital but will consider earlier-stage environmental infrastructure projects when there is clear evidence of early revenue streams and profitability. The fund will also invest into proven technology or projects that clearly demonstrate market adoption. The minimum investment size is R10 million ($1.3 million) and its maximum investment is R100 million into any one project or technology.

Consensus Business Group (www.consensusbusiness.com), the London-based advisor to The Tchenguiz Family Trust, has played a leading role in establishing and advising the fund. Consensus owns or manages 300,000 UK residential units and £4 billion of commercial properties, as well as extensive “clean tech” investments. As founding cornerstone investor, Consensus has secured the participation of 7 other leading international organisations.

Vincent Tchenguiz, Chairman of Consensus said: “We have extensive experience and a long track record in global clean technology investing and this has given our partners the confidence to join with us in setting up Evolution One in South Africa. We are delighted to have successfully achieved final closing of this ground-breaking fund.

“Evolution One Fund is the first dedicated clean technology private equity fund to be established for Africa and its value proposition is to bring Consensus’s active financial modelling and specialist insights together with expertise to projects and technology enterprises in South Africa and the SADC region. In addition, the investment capital of this network of leading investment institutions inherently leverages access to specialised knowledge and skills in the broader global clean technology sector.

“The Fund is advised by a fund management team comprising 9 principals and analysts who collectively bring their unique breadth and depth of commercial, financial and sustainability credentials. This is combined with strong black empowerment credentials and the ability to structure broad-based black economic empowerment transactions.”

Consensus is joined in the Evolution One partnership by IFC, a member of the World Bank Group; the Finnish Fund for Industrial Cooperation (Finnfund); the Swiss Investment Fund for Emerging Markets (SIFEM); fund of funds the Global Energy Efficiency and Renewable Energy Fund (GEEREF- www.eif.org), a compartment of the European Investment Fund; the African Development Bank (AfDB); the Norwegian Investment Fund for Developing Countries (Norfund); and the Industrial Development Corporation of South Africa (IDC).

The local South African fund advisor is Inspired Evolution Investment Management (IEIM – www.inspiredevolution.co.za), which aims to support and guide target invested companies and provide long-term capital growth. The Evolution One fund is a 10-year fund is committed to investing into clean technologies in the new energy and environmental sectors, including cleaner energy generation such as wind and solar energy, and energy efficiency, cleaner production and more efficient manufacturing processes, air quality and emissions control, water quality and resource management, waste management, agribusiness, natural products and materials and related services for sustainable buildings.

Michael Brooks, CEO of IEIM, says the fund management team has already appraised numerous deal opportunities and within weeks would announce details of the first 3 investments to be undertaken by the fund: “In the past 2 years we have seen significant positive shifts in the commercial thinking underpinning the roll out of clean technology projects and enterprises, both within the public and private sectors.

“The South African government’s recent adoption and implementation of the Renewable Energy Feed-in Tariffs and Co-Generation Feed-in Tariffs are evidence of the state’s support for regulatory drivers to underpin the development at scale of commercially viable renewable energy projects here and in our neighbouring countries. We are currently actively engaging with a range of promoters of clean technology enterprises and with developers of renewable energy projects.”

The first close of the fund was announced in July 2008 when $54 million had been raised from the initial 4 investors: IFC, Castleway Properties (owned by Tchenguiz Family Trust), SIFEM and FinnFund.

Wilderness Safaris public offer aims for BSE and JSE Africa Board

Conservation tourism pioneer Wilderness Safaris (www.wilderness-group.com) is aiming to get a primary listing on the Botswana Stock Exchange (www.bse.co.bw) and a simultaneous secondary listing on the Johannesburg Stock Exchange’s Africa Board (http://www.jse.co.za/Markets/Africa-Board) on 8 April. The share offer in Botswana and South Africa closes on 26 March. If successful, it will be the Africa Board’s second listing.
The company opened its offer on 26 February. According to Botswana’s Sunday Standard newspaper, the public offer is for 3 million ordinary shares at P4 ($0.5765 in today’s rate on www.xe.com) in Botswana and R4.56 ($0.6167) in South Africa and is fully underwritten. It closes on 26 March. Before the public offer, the company placed 56.3 million ordinary shares by way of a private placement, also at a price of P4 per share, says the newspaper.
According to an announcement on the company website it is “a strategically significant step in its evolution, designed to enable it to take full advantage of growth opportunities, to give the public an opportunity to participate in its future success, to develop a broader shareholder base and to simplify corporate structure.” Wilderness aims to use its tourism model to the fullest in contributing to conservation in Africa.
Growth in this manner is designed to allow the company to fulfil its objective of using its tourism model to the fullest extent possible in contributing to conservation in Africa.
Andy Payne, the CEO of Wilderness Holdings, says: “We believe that our unique positioning, iconic international brand and management’s long track record of financial and operational delivery present investors with an attractive growth and performance platform.”
Wilderness Safaris’ core philosophy is one of building sustainable conservation economies through responsible tourism, which shares the benefits of tourism with local communities and ensures that pristine wilderness areas are protected profitably.
The 26-year-old business is invested in 7 southern African countries and operates specialist travel businesses in 6 countries and 49 aircraft. It employs more than 2,700 people, most of whom come from remote rural communities.
The Chief Executive Officer, Andy Payne was reported in Sunday Standard as saying the company’s strategic objective was to double the number of owned Wilderness bed-nights by 2015, as well as to double the area under its influence by expanding into regions that complement its biodiversity and experience. It owns 53 destinations comprising of 930 beds and further manages 17 destinations with 280 beds.
The website says that Wilderness is “run by a group of likeminded wildlife enthusiasts who came together to build a successful safari business, delivering a unique experience for guests, fair returns for shareholders and stakeholders, while ensuring that southern Africa’s pristine wilderness areas remain sustainably protected.”
Thanks also to www.southafrica.info.