Carbon trading vs Carbon tax

There is much discussion these days about the value of a carbon emissions trading scheme, as opposed to imposing a tax on carbon. While both instruments can in theory achieve similar outcomes, they are different, in both their intentions and their outcomes. Here is a good article which explains the difference between the two instruments, and argues for a global carbon emissions trading scheme as the best mechanism for reducing greenhouse gases.

Article in ‘The Age’ newspaper link here.

Here’s support for a carbon tax from the Productivity Commission. Link here.

ANZ mill funding under pressure

The ANZ Bank is under pressure from environmental critics not to fund the construction of a proposed $2 billion pulp mill in Tasmania. The mill is to be sited upstream from the historic city of Launceston, in the Tamar Valley, one of Tasmania’s most valued landscapes. The critics argue that in funding the development the Bank is breaching its commitment to the Equator Principles, an international policy framework intended to govern bank funding of major projects.

Report from ‘The Australian’ link here.

UK CO2 emission rise

CO2 emissions in the UK rose last year by 1.25%, driven largely by higher international gas prices which produced a switch to coal. This provides additional confirmation of the central role of coal-fired electrical generation in increasing greenhouse gas emissions and driving climate change.

Report from ‘The Guardian’ newspaper link here.

Melbourne Financial Services Symposium presentation

Download slides and text of the presentation I gave to the Melbourne Financial Services Symposium March 6th 2007 on sustainable investment.

The audience was composed of analysts and executives from superfunds, asset consultants, fund managers, banks, insurance companies and consultants.

The main idea that I wanted to convey to this audience was this: The impact of sustainability factors–environmental, social and governance–on corporate performance is usually assessed through checklists, called ‘screens’. For example, does a company’s use of energy and water, and its production of waste and emissions, meet the targets it has set for itself? But this information is, in my view, largely hand-waving: it has more to do with reputation and branding than actual performance. In particular, it doesn’t yield anything like the rigorous data that investment and risk analysts require of everything else they look at in valuing a company.

I’ve argued that there are many more sustainability factors influencing a business than is usually assumed. Moreover, they have a big impact on valuation: running the numbers yields variances to the usual valuations of up to 50%, or more. This kind of quantitative work is difficult: it’s multi-disciplinary, and deals with large, complex, highly volatile systems. But I’ve argued we can’t walk away from it. And we do have the tools we need, if we’re prepared to cross boundaries and open ourselves to learning about things we never thought we’d have to know.

Valuation frameworks underpin both management and investment. They are the core of modern business decision-making. They are fundamental to the conduct of modern business. Now it’s critical that they include sustainability factors. It can be done. This is the thrust of my presentation.

Link to my presentation here.