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Ian Thomas

With historic poor investment returns and a lack of faith in governments’ commitment to renewable energy, it seems that ‘cleantech’ has become a dirty word.

At an individual level, this may be due to rising household energy costs, antipathy towards onshore wind farms, a resistance towards government subsidising industry or simply no clear understanding of the wider issues. For investors, it is the underperformance of cleantech funds that creates the problem. In either case, the conclusion remains the same – the sector’s reputation is an issue that needs to be addressed.

Here, Ian Thomas, director at Turquoise International, the leading London energy and investment merchant bank, discusses how a new approach is needed in order to drive much-needed investment.

The problem

Ian Thomas

Ian Thomas

The term ‘cleantech’ began life as an imprecise but convenient label for a wide range of innovative technologies across the environmental space. However, it rapidly came to be associated with government-driven, public policy measures to combat climate change, with all of the implied dependencies and risks for businesses operating in such a system. Latterly, it seems to have become a proxy for an expensive way of producing technological solutions which few people wish to pay for. Unfortunately, it’s not difficult to understand why.

Over-focus on narrow industry segments (particularly solar), assuming that cleantech was the same as information technology (the Silicon Valley approach), overestimating customer tolerance for risk, ignoring the near-term transitional solutions in favour of the ‘moonshot’ technology – there is a lengthy list of past mistakes from which to learn.

But it shouldn’t be this way. Although many people consider the term ‘cleantech’ to focus around renewable energy technology; in reality, it is a broad theme applicable to any product or service that improves operational performance, productivity or efficiency while reducing costs, inputs, energy consumptionwaste or environmental pollution. So, cleantech is really just industrial tech or, maybe, simply tech ….

Looking towards a solution

For example, is Tesla a cleantech company? Given that electricity from the grid is not significantly less emissions-intensive than oil-based transport fuel, perhaps not. However, the company certainly does embody industrial-scale technology and innovation – both in the workings of its cars and its business model.

An increasing number of consumers worldwide now have access to distributed solar energy at, or close to, the same retail cost as grid electricity. As well as the pure economic drivers, one of the great attractions for many is a reduced dependence on monopolistic utilities; increasingly perceived to offer poor service and to exploit their pricing power. Again, it is far from clear that the environmental aspect is the only, or even a, key driver.

Addressing the issue of government support, we need to move away from the idea that renewable energy tariffs approximate the value of avoided CO2 emissions, a purpose that would be much better served by a carbon tax. Instead, we should regard them as a temporary form of ‘launch aid’ to create a more diverse, more secure and ultimately more sustainable energy generation base. This means we are free to apply different forms and levels of support to each technology; taking into account both technical factors, such as baseload tidal energy being more valuable than intermittent solar, as well as non-technical factors, such as the visual impact of onshore wind.

Obviously, reorienting perceptions isn’t by itself going to make such technologies more investable. For that, we need to focus on business models. The archetypal customer of a cleantech company has been a utility, despite the fact that they are among the least receptive of any corporates to being ‘disrupted’. While there will be opportunities in this space going forward (like Smart Grid), technology developers must be more realistic about the prospects for selling to the utility sector and look for other customer types that have more appetite for innovation.

We saw at the turn of the century that many dotcom businesses thought that they could displace ‘bricks and mortar’ incumbents overnight, simply through the perceived power of the web. That turned out to be incorrect in most cases, just as the cleantech companies of the mid-2000s failed to commercialise a range of blue-sky technologies because global concern about the environment did not translate into a second Industrial Revolution in the space of a few years.

These lessons are already being learnt. We are seeing a new wave of technology development, often involving software and other ICT solutions, that focuses simply on reducing cost throughout the industrial supply chain, in a variety of ‘unsexy’ but effective ways. These incremental technologies, geared towards the needs of established customers rather than seeking to turn whole industries on their heads, are a large part of the future of cleantech.

Investors need to deliver

Investors face their own particular challenges in addressing the cleantech sector.  In a world where institutional investors seek to classify their portfolios according to pre-determined descriptions – early stage vs. growth stage, pre or post-revenue, venture capital or private equity, infrastructure or technology – being too rigid sometimes acts as a constraint on good investment selection. Moreover, investment time horizons need to be extended in order to take advantage of some technologies.

Another key challenge is to build a sustainable investment ecosystem, which allows specific types of investor to operate along different parts of the spectrum. At present, later stage investors do not provide seed and early-stage funders with the opportunity to take money out of deals and recycle it into new opportunities. Given the extended timeframes of some cleantech investments, this starves the early stage arena of much-needed capital and, ironically, restricts the volume and quality of deal flow for those same growth-stage players.

Non-institutional sources of capital, such as individuals, family offices and corporates, generally have more flexibility than institutional investors and, therefore, may be better placed to exploit the opportunities presented across the spectrum of renewable energy, water, resource efficiency, waste recovery, process improvement, pollution reduction and environmental remediation.

A new dawn

It is encouraging that there is a continuing improvement in the overall quality of investment propositions being presented in the sector. The opportunity remains huge and all of the participants now have the opportunity to learn from past experience. In order for this to be fully realised, however, we need to develop a new understanding of what cleantech means – to dispel the negative myths and encourage a pragmatic investment approach to regain confidence in the sector.

Ian Thomas is a director at Turquoise International, a merchant bank specialising in energy and the environment. Established in 2002, the London-based organisation offers in-depth industry knowledge and extensive capital raising, transactional advisory and investment management expertise.


Sunak warns of bill to be paid to tackle Britain’s ‘exposed’ finances – FT



Sunak warns of bill to be paid to tackle Britain's 'exposed' finances - FT 1

(Reuters) – British finance minister Rishi Sunak will use the budget next week to level with the public over the “enormous strains” in the country’s finances, warning that a bill will have to be paid after further coronavirus support, according to an interview with the Financial Times.

Sunak told the newspaper there was an immediate need to spend more to protect jobs as the UK emerged from COVID-19, but warned that Britain’s finances were now “exposed.”

UK exposure to a rise of one percentage point across all interest rates was 25 billion pounds ($34.83 billion) a year to the government’s cost of servicing its debt, Sunak told FT.

“That (is) why I talk about leveling with people about the public finances (challenges) and our plans to address them,” he said.

The government has already spent more than 280 billion pounds in coronavirus relief and tax cuts this year, and his March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown.

He is also expected to announce a new mortgage scheme targeted at people with small deposits, the UK’s Treasury announced late on Friday.

Additionally, the government will also announce a new 100 million pound task force to crack-down on COVID-19 fraudsters exploiting government support schemes, it said.

(Reporting by Bhargav Acharya in Bengaluru; Editing by Leslie Adler and Cynthia Osterman)

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G20 promises no let-up in stimulus, sees tax deal by summer



G20 promises no let-up in stimulus, sees tax deal by summer 2

By Gavin Jones and Jan Strupczewski

ROME/BRUSSELS (Reuters) – The world’s financial leaders agreed on Friday to maintain expansionary policies to help economies survive the effects of COVID-19, and committed to a more multilateral approach to the twin coronavirus and economic crises.

The Italian presidency of the G20 group of the world’s top economies said the gathering of finance chiefs had pledged to work more closely to accelerate a still fragile and uneven recovery.

“We agreed that any premature withdrawal of fiscal and monetary support should be avoided,” Daniele Franco, Italy’s finance minister, told a news conference after the videolinked meeting held by the G20 finance ministers and central bankers.

The United States is readying $1.9 trillion in fiscal stimulus and the European Union has already put together more than 3 trillion euros ($3.63 trillion) to keep its economies through lockdowns.

But despite the large sums, problems with the global rollout of vaccines and the emergence of new coronavirus variants mean the future path of the recovery remains uncertain.

The G20 is “committed to scaling up international coordination to tackle current global challenges by adopting a stronger multilateral approach and focusing on a set of core priorities,” the Italian presidency said in a statement.

The meeting was the first since Joe Biden – who pledged to rebuild U.S. cooperation in international bodies – U.S. president, and significant progress appeared to have been made on the thorny issue of taxation of multinational companies, particularly web giants like Google, Amazon and Facebook.

U.S. Treasury Secretary Janet Yellen told the G20 Washington had dropped the Trump administration’s proposal to let some companies opt out of new global digital tax rules, raising hopes for an agreement by summer.


The move was hailed as a major breakthrough by Germany’s Finance Minister Olaf Scholz and his French counterpart Bruno Le Maire.

Scholz said Yellen told the G20 officials that Washington also planned to reform U.S. minimum tax regulations in line with an OECD proposal for a global effective minimum tax.

“This is a giant step forward,” Scholz said.

Italy’s Franco said the new U.S. stance should pave the way to an overarching deal on taxation of multinationals at a G20 meeting of finance chiefs in Venice in July.

The G20 also discussed how to help the world’s poorest countries, whose economies are being disproportionately hit by the crisis.

On this front there was broad support for boosting the capital of the International Monetary Fund to help it provide more loans, but no concrete numbers were proposed.

To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by Trump.

“There was no discussion on specific amounts of SDRs,” Franco said, adding that the issue would be looked at again on the basis of a proposal prepared by the IMF for April.

While the IMF sees the U.S. economy returning to pre-crisis levels at the end of this year, it may take Europe until the middle of 2022 to reach that point.

The recovery is fragile elsewhere too. Factory activity in China grew at the slowest pace in five months in January, and in Japan fourth quarter growth slowed from the previous quarter.

Some countries had expressed hopes the G20 may extend a suspension of debt servicing costs for the poorest countries beyond June, but no decision was taken.

The issue will be discussed at the next meeting, Franco said.

(Additional reporting by Andrea Shalal in Washington Michael Nienaber in Berlin and Crispian Balmer in Rome; editing by John Stonestreet)

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Bank of England’s Haldane says inflation “tiger” is prowling



Bank of England's Haldane says inflation "tiger" is prowling 3

By Andy Bruce and David Milliken

LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, potentially requiring the BoE to take action.

In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.

“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online. “But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”

Haldane’s comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.

“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.

He pointed to the BoE’s latest estimate of slack in Britain’s economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.

Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government’s extensive fiscal response to the pandemic and other factors.

Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.

But in Haldane’s judgement, inflation risked overshooting the BoE’s 2% target for a sustained period – in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.

Haldane’s comments put him at the most hawkish end among the nine members of the MPC.

Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.

“I see inflation expectations – whatever measure you look at – well anchored,” Ramsden said following a speech given online, echoing comments from fellow deputy governor Ben Broadbent on Wednesday.

(Editing by Larry King and John Stonestreet)


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