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Climate Change Capital raises USD 830m, makes major investment in China

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UK investment banking group, Climate Change Capital (CCC) has created the world’s largest private sector carbon fund, with USD 830m already raised.

UK investment banking group, Climate Change Capital (CCC) has created the world’s largest private sector carbon fund, with USD 830m already raised.

CCC took only three months to raise the money and expects the total to top USD 1bn by the second close.

Investors include ABP and PGGM, two of the world’s top five pension funds, plus the UK-based international energy group Centrica and a global emerging markets banking group. The money raised will be invested in projects principally in developing countries that will lead to dramatic reductions in the amount of greenhouse gases (GHG,) and specifically carbon being emitted into the atmosphere.

James Cameron, vice-chairman of Climate Change Capital, said: ‘This is further proof that the so-called ‘green economy’ has arrived, as the world realises that combating global warming is an economic opportunity as well as a necessity.  The profile of the investors backing this new asset class, created due to the Kyoto Protocol, confirms this, reflecting very real progress in the development of the carbon market.’

The largest ever private sector syndication of a Clean Development Mechanism (CDM) project in China, arranged by CCC, is also the first investment for the new carbon fund. The transaction will achieve 29.5 million tonnes of carbon dioxide equivalent certified emission reductions (CERs) over 6 years, the equivalent of more than 1/3 of the annual greenhouse gas (GHG) emissions for UK households.
The investment is in the carbon credits generated by Zhejiang Juhua Co Ltd, a Chinese chemical company. Its refrigerant process generates a GHG (HFC-23) that is rated 11,700 times more powerful in global warming potential (GWP) than carbon dioxide.  The gas is among those considered pollutants by the Kyoto Protocol, and is currently released into the air, but now, using proven technology, will be incinerated. These CERs can then be sold or traded on the European Union Emissions Trading Scheme (EU ETS.)

CCC structured the pioneering syndicated deal with assistance from Deutsche Bank who financially guaranteed the underlying payment structure. The syndication members include CCC’s Carbon Fund 1 and Carbon Fund 2, Centrica, Deutsche Bank, Morgan Stanley Commodities Group, investment funds managed by Och-Ziff Capital Management Group and Stark Investments.

Mark Woodall, CEO of Climate Change Capital said: ‘This type of transaction is exactly why we created our funds within this new global asset class. Without our involvement, the equivalent of nearly five million tonnes of extra CO2 would enter the atmosphere every year. This is an example of the ‘green economy’ playing its part to combat global warming. A tonne of carbon is a tonne of carbon wherever in the world it is taken out of the atmosphere.

‘Climate Change Capital, with our combined talents of advisors, investment bankers, environmentalists and significant capital has the capability to pull this type of deal together.’

Kevin Rodgers, Managing Director Global Head of Currency and Commodity Complex Risk for Deutsche Bank said: "Following the signing of the Kyoto protocol, organisations have become more aware of their environmental responsibilities, which has created a new market for commodity players.  Deutsche Bank was one of the first banks to participate in the World Bank’s ground-breaking Prototype Carbon Fund, which was launched in 2000. This new Chinese transaction underlines Deutsche Bank’s growing expertise in environmental finance and our commitment to the environment and sustainability".

Background notes: The objective of CCC’s Carbon Fund is to generate attractive levels of returns by acquiring a diversified portfolio of different types of carbon assets and derivatives. The fund also has the power to invest in projects and companies which develop and generate GHG reductions.

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