Mac banking on EUAs, the Spring Crush and mega trends

26 October 2011 – According to the grapevine Macquarie Bank is the latest financier to be lured to the potentially lucrative world of Environmental Upgrade Agreements.

The Fifth Estate gleaned this from the select group that  attended the first official function hosted in Melbourne by Verdigris Capital, the Napier & Blakeley owned adviser on EUAs, although we understand the Mac Bank’s interest is still at early stages.

There will be plenty of opportunities, though, despite the race by some outfits to jump ahead of the crowd. Keynote speaker at the event Kim

Scott Bocskay, Sustainable Melbourne Fund, left with Peter Frith, Verdigris Capital

Lawrence who is director business development at federal government agency Low Carbon Australia Ltd said she received 50 inquiries in the week following the announcement of the first EUA deal.  (See our coverage )

Lawrence gave a run down of business so far and elaborated on some of the finer details that the emerging market players want to hammer out. With her background in finance Lawrence is well placed to handle what the bean counters want to know. Yes, the finance arranged for these agreements will be at a marginal discount and yes it will have a fixed life of up to 10 years or so with 3-5 years the typical pay back period.

The best news is that it’s a “win win” situation, she says, for tenants, owners and the financier.

Does LCA aim to make a profit, Lawrence was asked? “We are seeking to be financially sustainable, but we’re not in the business of undercutting the existing market participants,” was the answer.

Lawrence said her outfit is asked to assist not just on finance questions – it has $100 million in initial funding, partly to help establish the mechanism and partly to direct fund some prototypes ­– but in general advice around tenant engagement.

Also interesting at the event were the quiet questions after, especially to people such as Scott Bocskay who heads the Sustainable Melbourne Fund, which administers the EUAs for the City of Melbourne and the pointy questions fired at him by Aurecon’s Jeff Robinson.

What’s the difference between EUAs and energy efficiency contracts for instance and how will the listed property trusts deal with the options (We’ll bring you these answers and more in future issues.)

Kosta Stefanu

The spring crush
Kosta Stefanu (pictured) could be the essence of a sustainable, creative and ethical future. Or not. Today, this open smile and idealistic hope it portrays could well be wrecked. Stefanu was part of the Occupy Melbourne/Sydney/Wall Street movement at the Melbourne City Squre and photographed by The Fifth Estate on the way to a function, just hours ahead of an aggressive and at times violent move by police to shift the protesters. Stefanu may have been one of the scores of people who were injured by the action. It was ordered by Melbourne Lord Mayor Robert Doyle.

In Sydney too the movement was shut down soon after Melbourne called time, although Lord Mayor Clover Moore emphatically denied to daily newspapers that she had ordered it.

Stefanu’s view was poignant and has connections to the broader notion of sustainability. He told The Fifth Estate that he was there as an artist and musician, trying to organise a creative response to the pervading “system” because he believes art has the power to shift culture and that it is “cultural values that allow the political system to exist and allows the economic systems to stay as they are.”

Melbourne City Square, the day before the clearout

It’s a value judgement that each day brought him the square, he said.

“I’m a musician and I’ve been here every day but I need to pay the rent. If I’m here I can’t work, which means I can’t pay the rent. I have to decide, should I work and uphold the system, or come here and change it?”

Stefanu cited the work of French artist JR in his argument of the power of art to shift perspectives.

See an article from The Guardian on this here Here and from TED

Property ‘s  front line
All this is relevant because of the discontent caused by the rampant financial engineering and profiteering of the global financial crisis. In most places the anger was inflamed by the corporate bailouts at public cost.

Smart property players need to see the writing on the wall and understand this could lead to a shift in how business will be conducted in future.

The biggest danger is from the weakening of governments worldwide.

There was a particularly interesting observation in relation to this in the Jones Lang LaSalle report October issue of the quarterly quarterly Global Sustainability Perspective. It cited the need for greater transparency in corporate dealings, something that goes to the core of sustainability.

In part this is driven by the digital age and the power of social media. We’ve written about how blogs and social media can be used to hoodwinked unsuspecting readers but the flip side is that this power can destroy brands in an instant, too – earned or not earned.

The answer is to be as transparent as possible, says the JLL report. It gives some examples of companies that are super transparent and proposed some actions:

  • Inviting stakeholders to post direct feedback on a company’s website
  • use stakeholder panels composed of external experts, inviting members of the panel to provide critical feedback in a sustainability report.
  • when it comes to reporting, readers do not expect perfect performance but they are impressed when companies tackle sensitive issues “head on” rather than avoiding them. A leading example here is Marshalls  a British landscaping company, which has taken a “very honest and upfront approach to child labour.”

The other interesting trend is that in Europe private companies will be increasingly called upon to pick up where the austerity measures have left off.

Watch out property companies: property is the asset that can’t run, can’t hide. That’s why it’s always been the mainstay of all tax bases everywhere and for all time. So add to regular tax all the other goodies that our diminishing, dis-empowered (disembowelled?) governments are supposed to provide, and we could have a whole new meaning for sustainable property.

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