How we use CDP data at Merrill Lynch Abyd Karmali Managing Director, Global Head of Carbon Emissions

Transcription

1 How we use CDP data at Merrill Lynch Abyd Karmali Managing Director, Global Head of Carbon Emissions CDP-5, New York, 24 September 2007

2 Opportunities for financial products Investors have a variety of options across asset classes Equities Bonds Portfolio screening, carbon funds, low-carbon technology funds, SRI funds, Low-carbon technology stocks, CO2 emission trackers Portfolio screening, Low-carbon technology bonds Private Equity/Venture Capital Carbon venture capital, carbon-driven principal investing Real Estate Energy efficiency-linked real estate investment trusts Hedging Instruments Weather derivative products, emission indexes, catastrophe bonds, insurance products 2

3 Offering investors a complete suite of carbonrelated products Commodities & Fixed Income Investment Banking Global Private Client Other Activities Emissions desk provides trading, brokerage, and intermediation services for EUA market Carbon credit origination of CER and ERU provides business from investors and compliance buyers Carbon-driven debt/equity financing for projects that reduce emissions Achievements Underwrote European Investment Bank s new Climate Awareness Bond in 2007 focused on renewable energy Investors in Core Carbon Group, company undertaking projects that reduces emissions in Russia, and off-takers of carbon credits New weather derivative product focused on temperature increases affecting Italian agricultural clients Activities Financial advice and due diligence where carbon value is material in cash flow forecast Raising capital for low-carbon technology Leveraged M&As, advising sales of low-carbon technology companies. Executing IPOs for companies in the low-carbon technology space Achievements Global coordinator for upcoming 20 billion Iberdrola Renovables IPO $35 million principal investment in Vulcan Power, California based geothermal power development company Activities Global Private Client is a leader in wealth management for high and ultra high net worth individuals; offers a product distribution channel Blackrock, in which ML has an almost 50% stake, has assets of over $1.3 trillion Achievements Blackrock manages the marketleading $5 billion New Energy Technology Fund that GPC clients can invest into In 2007, Research launched a new Energy Efficiency Index and a new ML Renewable Energy Index. GPC clients access these themes via various structured products Carbon Emission Tracker structure issued for GPC clients Launched a firm-wide Environmental Initiative on 17 September Member of International Emissions Trading Association (IETA), which designed the Voluntary Carbon Standard (VCS) Member of Carbon Markets Association in UK and Investors and Business for US Climate Action Lead sponsor of the Carbon Disclosure Project 2007 Sponsor of the MIT Joint Program on Science and Policy of Climate Change Research teams including SRI research develop climate changerelated reports of interest to investor clients Designing Carbon Leaders Index 3

4 Variety of forces drive corporate approaches Policy Makers Investors Consumers Influencing corporatedecisions Long Term Strategy on climate change issues Product & operations innovation Sustainable Development Carbon Leaders 4

5 EU Policy view A swift transition to a global low carbon economy is the central pillar of EU integrated climate change and energy policy Adaptation to climate change in Europe options for EU action, June

6 But EU is not on track to meet Kyoto target Kyoto target -8% from 1990 base by 2012, on track for -5.5% Voluntary Target -20% by 2020, on track for -6.7% EU-15 and EU-25 emissions and projections* Source: The European Climate Change Programme, EC; Note the EU 15 are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom. 6

7 Carbon exposure as a liability Carbon emissions represent an off balance sheet financial liability to companies Investors are increasingly viewing this as a higher risk, and starting to value it Sector cost to offset total emissions ( bn) Utilities Oil & Gas Construction Ind Goods & Services Basic Resources Telcos Chemicals Technology Leisure Food Autos' Retail Household Goods Financials Healthcare Insurance Media Carbon data provided by Trucost Source: ML SRI Research, Trucost 7

8 Carbon exposure as an opportunity Carbon footprint provides proxy for environmental credentials going forward Carbon costs set to be internalised, the leaders will have lower costs and thus limited negative earnings drivers Investors already requesting carbon data Number of Institutional Investor Signatories Assets under management $ trillion CDP 1 CDP 2 CDP 3 CDP 4 CDP CDP 1 CDP 2 CDP 3 CDP 4 CDP 5 Source: Carbon Disclosure Project Source: Carbon Disclosure Project 8

9 Backing low carbon footprint companies; win- win idea Companies with a carbon strategy, and low carbon footprint within their sector, are more likely to have a higher quality overall strategy for the business Quality (defensive) idea Investors lower carbon footprint 9

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