Mastering energy’s link with environmental finance
Published in The Irish News
April 16, 2012
INNOVATION PROFILE UCD Michael Smurfit Graduate Business School: IN SEPTEMBER 2012, UCD Michael Smurfit Graduate Business School will offer what is believed to be the first Master of Science in Energy Environmental Finance.
The programme is aimed at those who want to pursue a career in the energy and environmental markets sector and is suitable for graduates from a wide variety of disciplines including finance, economics, engineering, environmental science and mathematics.
The new programme is aimed at advancing understanding of finance theory, with specific focus on the practical aspects of energy-environmental financial markets. “It encourages students to develop creative and analytical approaches to problem solving in the energy-environment sphere and to enhance their interpersonal and leadership skills,” adds Dr Don Bredin, director of the MSc in Energy and Environmental Finance.
“I have been working on research in this area for the past six to eight years, and during that time, I noticed a dramatic growth in green energy investments worldwide,” he adds, explaining the origins of the programme. “Investment has increased almost fivefold, from $52 billion to $243 billion in 2010. At the same time, green investments managed out of Ireland have been growing very rapidly and have doubled to $2.3 billion over the past two years. And these are managed funds we are talking about – not just funds which are administered here.”
It was this growth coupled with rapid changes in energy markets that led to the creation of the MSc. “When we looked around we found that there was no programme at masters level encompassing both energy and environmental finance,” he recalls. “We have been developing it for the past two years and spent the last year getting academic approval for it. We knew we were the first in Ireland to offer such a programme but we were quite surprised to learn that we were the first in the world.”
The first programme begins in September, and students can opt for a 12-month full-time or a 24-month part-time course.
Students will acquire a detailed understanding of the financial processes and procedures associated with the energy and environmental markets sector. They will also develop skills and knowledge necessary for a career in the area of energy and environmental finance.
“The programme focuses on all of the ongoing developments in the oil, gas, electricity and other energy markets, as well as all of the instruments traded such as spots, futures and options,” Bredin explains. “Crucially, we focus on the new instruments which are being developed on the environmental finance side.”
This takes in the policy side as well. “We don’t just look at developments in the trading and finance areas – we look at policy developments around the world as well,” he adds. “If you look at the UK, for example, the government has imposed a feed-in tariff regime and a system of contracts for difference to encourage the development of the renewables sector. Policies like this can have a significant impact on the financing of renewable energy infrastructure projects.”
The course will help develop an understanding of energy market events, and forces driving them. “We will look at all of the different types of instruments and understand who the key players are – hedgers, investors looking for arbitrage opportunities, speculators and so on.”
He looks back to 2007 when oil reached its all-time high of $147 per barrel on the back of speculative buying rather than any increase in demand over supply. “We will look at the role played by the hedge funds in the events of 2007,” he points out. “But it is important to understand that speculators do play a crucial role in the market. It is not possible to hedge against price changes without speculators being in the market – they are the other side of the transaction.
“What we will be looking at is the key financial tools which underpin the energy and environmental finance markets. Students will learn how to manage environmental risk and determine suitable prices for instruments,” Bredin adds.
After completing the MSc, students will have a comprehensive understanding of companies’ financial management decisions in the context of how they contribute to maximising shareholder value, along with the scarcity of energy resources and liberalisation in energy markets.
Students will also develop a critical awareness of the operation and functions of energy commodity markets and the pricing implications; an enhanced knowledge of the principles and developments in the area of environmental finance; a critical awareness of the risk-return trade-off and its importance in assessing environmental investments, energy risk management and companies’ environmental decisions; and an applied knowledge of quantitative methods required for modelling energy-environment markets.
The programme involves a number of separate modules including markets the environment; commodity finance; quantitative methods; financial econometrics; capital markets and instruments; portfolio and risk management; financial asset valuation; environmental finance; climate change and energy economics; and green business. Students also complete an internship in energy and environmental finance.
“We see the programme as a real opportunity for the UCD Michael Smurfit Graduate School of Business to lead the way again with a high-quality programme in an emerging area in Ireland and internationally,” says Prof Ciarán Ó hÓgartaigh, dean of UCD’s School of Business.
“As Ireland’s global business school, the programme also fits with our mission of contributing in real and meaningful ways to Ireland’s economic and social recovery. The programme has been developed to help drive the Green IFSC initiative, a key element of the next cycle of growth in the IFSC.”
Graduates will be prepared for careers in areas including commercial and investment banks, carbon funds, hedge funds, carbon brokers, energy and environmental exchanges, the compliance community and insurance companies.
“As with our other masters programmes, we will have students coming to us from UCD, other Irish universities and overseas,” says Bredin. “And they will be prepared for a variety of career opportunities. For example, we have been talking to Kleinwort Benson Investments here in Ireland and they are extremely positive about the new programme. They see this as a very important area with a lot of demand for qualified people.”
The opportunities are by no means restricted to Ireland. “We have also been speaking to the big international players such as Star Supply Commodity Brokers,” Bredin continues. “They are the largest broker for biofuels in the world and they are extremely interested in the programme.”
Graduates will also find opportunities in the public sector in areas such as national governments and multilateral banks such as the World Bank and the European Investment Bank. “Policy formation in this area is crucially important to national economies and there is huge demand for people with qualifications in energy and environmental finance in government departments and public bodies throughout the world,” Bredin adds.