EU must deliver investment grade green policy: HSBC

BRUSSELS Mon Feb 13, 2012 3:56pm EST

BRUSSELS (Reuters) - Energy efficiency and low carbon investment is gaining traction as a financial asset class, but to deepen confidence the European Union must deliver "investment grade policy" a senior executive at HSBC said on Monday.

He was speaking on the eve of a debate by energy ministers on the EU's draft Energy Efficiency Directive, on which Denmark, current holder of the rotating EU presidency, hopes to get a political agreement by the end of June.

Without policy reform, the EU is likely to only half meet a policy goal set in 2007 of a 20 percent improvement in energy efficiency by 2020 through measures such as better building insulation.

Nick Robins, head of HSBC's Climate Change Centre of Excellence, said the EU would be delivering clear signals, or "investment grade policy", provided it met Denmark's deadline.

Robins, who is also co-chair of the United Nations Environment Programme (UNEP) Finance Initiative Climate Change Working Group, said negative sentiment on green investment was "bottoming out" after being depressed by economic crisis.

"We have the beginnings of a case for being more quietly optimistic. We are recognizing the case for energy efficiency," he told Reuters on the sidelines of a conference.

European Commission figures have shown improved energy efficiency could create around half a million jobs and 34 billion euros ($44.94 billion) in Gross Domestic Product in 2020.

They also put the cost to the energy companies at only one euro cent for every kilowatt hour of energy saved.

HEATED DEBATE

Still the draft efficiency directive has attracted heated debate and environmental groups are worried it could be derailed by hundreds of highly technical amendments.

One of the proposed amendments seeks to address the weakness of carbon on the EU's Emissions Trading Scheme (ETS), which could fall further if improved energy efficiency added to a surplus of carbon permits caused by recession.

At less than 8 euros a ton, carbon prices are already far below the level needed to spur green investment.

Robins said the EU ETS had a role, but it was "just one of many tools" on green energy.

Other speakers at Monday's conference organized by the European Alliance to Save Energy underlined the significance of low carbon for the investment community.

A director from the BT Pension Scheme - Britain's largest with 36 billion pounds ($56.86 billion) under management - said the shift to a low carbon economy touched all assets.

"The issue of carbonisation is totally embedded into every single asset class," Donald MacDonald, a trustee director of the BT Pension Scheme, told Reuters.

"Failure to take this up in investment policies could be a failure of fiduciary duty."

(Reporting by Barbara Lewis; Editing by Tim Dobbyn)

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