Ireland: Green Finance beckons

Published in The Global Legal Post

November 05, 2012

Ireland, with all its resources, is increasingly lauded as the centre of excellence for green finance, says Angela MaddenIreland’s financial services industry is gearing up for a green future. With “a world class international financial services centre, innovative enterprise companies with global networks, one of the best business environments in the world, a wealth of natural resources and an emerging talent pool of green finance specialists, ” it has all the ingredients to emerge as a global leader in green finance, says BNY Mellon’s Brian Ruane, CEO Alternative and Broker-Dealer Services.

Certainly, The Cleantech Ireland report, launched in the past few months by Ernst & Young, estimates that the green sector, in general, has huge potential for the country and estimates it could create nearly 80,000 direct and indirect jobs through specific national schemes such as retrofitting, renewable energy and construction and boost GPD by €3.9 billion by 2020.

“The role of the Green IFSC is to facilitate and accelerate that growth by being the link between international financial services, green enterprise and Government policy,” explained Garrett Monaghan, a member of the Green IFSC Steering Group and Project Finance and Energy Partner in Arthur Cox.

Green IFSC – a Government-supported initiative that is an output of the Clearing House Group of the Department of the Irish Prime Minister, An Taoiseach – is a public private partnership to position Ireland as the global centre of excellence for green finance and green asset management.

Supported by global banks

The initiative is supported by all key participants such as the global banks – which nearly all have existing operations in Ireland – by fund managers and by the principal operators in the green enterprise sector working hand in hand with Government agencies such as the IDA and Enterprise Ireland.

Stephen Nolan, Green IFSC Executive Co-ordinator, said: “It is this collaboration between Government, Government agencies and private sector which makes Green IFSC so effective. This partnership means that Green IFSC working with green enterprise companies and international financial services companies can identify what needs to be done in order to grow business and jobs and then report and present to Government.

Green finance grows

Ireland has proved itself as a centre of excellence for green finance and “our job is to make sure that we have the optimum business environment to sustain and accelerate that growth,” Mr Nolan says citing the funds industry as one where green finance was rapidly forging ahead. Today some $16 billion in ‘green’ funds is managed, domiciled or serviced from Ireland.

The most impressive and significant aspect was  the speed of that growth. “Assets managed in ‘green’ funds now totals some €5billion – up 100 per cent in the past year and 300 per cent in the past four from just over €1billion four years ago,” added Mr Nolen

Funds go green

Managers operating from Ireland are responsible for some of the world’s leading ‘green’ funds such as Kleinwort Benson institutional water fund and BlackRock, the international fund management firm based at the IFSC recently announced its first fund focused on investments in renewable assets globally to be managed out of Ireland.

Dublin-based Jim Barry, Chief Investment Officer, Blackrock Renewable Power Group explained: “I believe Ireland can become a global leader in the green asset management space. We have an incredible pool of talent who has worked in this industry all over the globe. This was one of the key reasons why Blackrock came to Ireland to source a large part of its investment team for its renewable energy platform.”

Recently the Green IFSC announced that it intended to grow green assets in Ireland to $200 billion by 2017, in a bid to accelerate that growth, in March 2012 launched of the Global Green Asset Management Network at the New York Stock Exchange.

Ireland’s first for ‘green’ asset managers

The Global Green Asset Management Network – for the first time anywhere in the world – brings together traditional ‘green’ asset managers with the new enterprise asset managers in a bid to represent their needs on the global stage and campaign for the change needed to ensure the optimum business environment for growth and job creation while helping the world transit to a low carbon model.

“Irish green asset management and green enterprise firms are active all over the globe from China to Chile and Ireland to Africa and, with $10 billion in green assets managed or serviced, Ireland is already emerging as a world leader in green finance. The establishment of this network can only serve to accelerate the continued growth and copper-fasten Ireland’s growing reputation in this sector,” said An Taoiseach, Enda Kenny at the launch of the network on Ireland Day at the New York Stock Exchange this March. (*the figure now stands at $16 billion)

Green/cleantech investment opportunities

Mike Hayes, Chairman of the Global Green Asset Management Network, and a member of the Green IFSC Steering Group, explained that there were huge opportunities for global investment fund managers in the area of green/cleantech investment to establish operations in Ireland and to leverage off the benefits and reputation of Ireland’s existing investment management industry. “There has been remarkable growth in investment in cleantech by international funds made up of a diverse group of investors.  This represents a major shift in the type of assets such investors wish to acquire.

He added that there are various reasons for this including the increasing demand and recognition of the need for sustainability solutions and the fact that these assets are capable of delivering stable financial returns to investors.  ” “Also, many of the core technologies such as turbines and photovoltaic modules have shown dramatic performance improvement combined with significant cost reductions.”

Mr Hayes also said that the current difficulties with more conventional asset classes such as financial instruments and equities had been well documented leading to investors seeking new asset classes. “In short, global investors have identified green and cleantech assets as an ideal investment opportunity which are capable of producing stable returns commensurate with the underlying risks,” he said.

“The fact that many of these returns are available over a long period and are based on either sovereign or investment grade utility counterparties makes the opportunity even more attractive.This has become a global phenomenon.  Investors are located in the US, European Union, Japan, South East Asia and elsewhere and they are acquiring cleantech projects on all five continents using various types of Funds and collective investment structures.”

The relevance of all of this to Ireland is clear.  We have one of the most sophisticated investment management industries globally with expertise in Funds servicing, administration and asset management.

The legal infrastructure

Ireland also has the legal apparatus to establish the type of fund structures which would be attractive to these global investors.  At present, Ireland services more than $2 trillion in assets in its funds industry which represents an all time high and and continues to grow rapidly.

All this can be used to the advantage of those funds which are investing in the cleantech sector.  One critical advantage that Ireland has is the number of individuals who have operated in this industry at the highest levels globally for many years (represented by the number of leading Irish companies in this sector such as Mainstream and Glen Dimplex to name only two global palyers) with the result that Ireland has an unparalleled level of expertise to provide investment management services to this emerging industry.

“We are already seeing a trend of such funds establishing operations in Ireland and all indications would suggest that the scale of this activity will increase considerably in the short to medium term,” concluded Mr Hayes.
2012 is the 25th anniversary of the International Financial Services Centre, Ireland and today Ireland’s fund industry from a standing start has grown to close to €2 trillion.

In this context, and considering Ireland’s resources and the growth in green assets, it is natural that the jurisdiction is increasingly being seen as the global leader in green finance.

Greening the system

Tax changes:

In the past 18 months Green IFSC, working hand in hand with Government and private sector, has helped secure a number of supportive tax changes: These include:

  • inclusion of greenhouse gas emissions allowances within the existing securitisation regime. S110, TCA 1997
  • relief from stamp duty on transfers of greenhouse gas emissions allowances. S90A SDCA 1999
  • Corporation tax relief for investments made in renewable energy projects has been extended up to 31 December 2014. S486B TCA 1997
  • Inclusion of companies involved in production of energy from renewable sources within Income Tax Relief Scheme for Investment in Corporate Trades – Employment and Investment Incentive. S488 TCA 1997
  • The extension of the securitisation legislation in Finance Act 2011 to facilitate the securitisation of carbon credits has been further extended to include forest carbon offsets
  • a reduction in double taxation in the corporate treasury and aircraft leasing sectors, enhancing the tax regime for Islamic finance

Education

The last two years has seen the development of new high-level educational programmes in sustainable energy finance for recent graduates, as well as experienced industry practitioners.

All Green IFSC-supported courses have emerged from a collaboration of industry leaders, public sector representatives and academics.These new educational initiatives – many of which are world firsts – include:

  • DCU PostGraduate Certificate in Sustainable Energy Finance
  • DCU launching Masters programme in Sustainable Energy Finance this summer
  • DCU MSc in Sustainable Energy Finance;
  • UCD MSc in Energy and Environmental Finance

 

Greening the IFSC

Green IFSC, in partnership with the Sustainable Energy Authority of Ireland (SEAI) and Dublin City Council, has created the ‘Greening the IFSC’ initiative in a bid to ensure Ireland has one of the most resource efficient financial centres in the world.

The first of a kind project has also been designed to help companies operating from the IFSC measure their carbon footprint and come up with a plan to reduce resource consumption (waste, water and energy) – and ultimately reduce costs.

The project to be launched by Minister Rabbitte at Citi Bank on September 27 sees 10 companies in the IFSC – which collectively employ more than 7,500 people and have a total energy bill of over €5 million – come together in a pilot project to cut energy consumption and reduce costs.In recent months SEAI has measured the participating group’s collective energy consumption and carbon footprint.

A special Working Group is now being put together comprising Green IFSC, SEAI, Dublin City Council, sector specialists and company participants. This team will help determine the best way for the group to meet its objectives and collectively reduce the IFSC’s resource consumption and potentially cut hundreds of thousands of euros from energy bills.

The move is part of the Green IFSC’s mandate to promote Ireland as a centre of excellence for green finance and attract businesses and assets to the domicile and ultimately create jobs.

Angela Madden is  Green IFSC’s Director of Communications

 

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