Sustainability-driven funding models for Green ICT investment case

Sustainability-driven funding models
for Green ICT
How to use carbon to support the
investment case
Innovation Dinner: GREEN IT
27 October 2011
Fritz Milosevic, with contributions from Jacoleen
Simpson
Off-Grid a reality, Carbon a reality
•
Off-grid locations pose an increasing challenge for Mobile
Network Operator in the developing world.
•
Grid connectivity in many locations is either unavailable or
unreliable.
•
An estimated 75,000 new off-grid sites will be built each
year in developing countries through 2012.
•
Nearly 500m people worldwide have a mobile phone
connection but no access to the electricity grid.
•
ICT sector contributes around 2% of global GHG emissions
•
Global carbon footprint of the ICT sector in 2002 was 0.5
GtCO2e*, emissions are forecasted to grow to 1.4 GtCO2e
by 2020.
Source: GSMA Development Fund, SMART 2020: enabling the low carbon economy in the information age, http://www.smart2020.org/
2
* GtCO2e = metric gigaton of carbon dioxide equivalent
Internet a major polluter
2007 electricity consumption, Billion kwH
US
3923
China
3438
Russia
1023
Japan
925
Cloud computing
662
India
568
Germany
547
Canada
536
France
447
Brazil
404
UK
345
0
500
1000
1500
2000
2500
Source: http://www.greenpeace.org/international/Global/international/publications/climate/2011/Cool%20IT/dirty-data-reportgreenpeace.pdf
3
3000
3500
4000
4500
Estimated GHG Emissions of ICT Sector
Explosive growth, a wide range of devices and energy sources, rapidly changing technology and
business models makes it difficult to precisely establish the carbon footprint of ICT.
116
257
407
 Access networks are the
largest power consumer
in a telco network.
358
 Even more so in mobile
307
815
Computers and devices
Computers and devices
Telecoms and devices
Telecoms and devices
Data centres
Data centres
Source: http://www.greenpeace.org/international/Global/international/publications/climate/2011/Cool%20IT/dirty-data-reportgreenpeace.pdf
4
networks (Base
stations).
Leading operators are committed to CO2 reduction
Examples
5

MTN Group is signatory to the
Copenhagen Communiqué on
Climate Change.

Telefónica commits to reducing
30% its energy consumption in
network by 2015

Tri-generation plant opened

O2 Eco rating for handsets

Reduce CO² emissions for
Deutsche Telekom Group by 20%
below 2006 levels by 2020

Reduce CO² emissions for FT
Group by 20% below 2006 levels
by 2020

Vodafones to cut own emissions
by 50% by 2020 (from the 2006/07
baseline).

Reduce UK CO² emissions in
absolute terms by 80% below 1996
levels, by December 2016
Focus areas in the “green” consideration
Three key areas emerge as important in the discussion around renewable energy and sustainability for
Operators – Base Stations, Data Centres and Handset Charging.
„Green“ focus areas for operators and major reasons for consideration
1. Base Stations
6
2. Data Centres
3. Handset Charging

Opex reduction

Opex reduction

Usage increase

Energy efficiency

Energy efficiency

ARPU increase

Power supply independance

Power supply independance

Social sustainability

Business continuity

Business continuity

Carbon footprint reduction

Carbon footprint reduction

Carbon footprint reduction
Indicative financial impact ICCP for MNO (example)
Indicative
Delta Case Financials (USDm)
Income Statement
Total Revenue Snyman + ICCP
% Increase in Revenue
EBITDA Snyman + ICCP
% Increase in EBITDA
Reported net profit Snyman
Reported net profit Snyman & ICCP
% Increase in net profit
Cash Flow Statement
Net Cash impact
Y/Y FCF Growth without ICCP
Y/Y FCF Growth with ICCP
Delta in FCF growth
•
Significant impact on Net Profit and Free Cash Flow
•
Shareholder value increase
Source: Company data and NedSec
7
2011
2012
2013
1,219
0.5%
547
1.8%
265
272
2.6%
1,353
1.4%
615
5.2%
316
338
7.0%
1,488
2.1%
688
8.8%
376
417
11.0%
2.5
98.0%
100.8%
2.8%
10.8
23.5%
26.9%
3.4%
26.1
19.6%
24.2%
4.6%
ICT is becoming serious about “green & clean”
ICT companies as clean tech investors
Example Google DC’s and RE
Who would have imagined 5 years ago
Google and IBM would be leading clean tech
investors, involved in Solar, Geothermal or
Energy Storage?
The 2010 Global Cleantech 100:
Corporations that are a stakeholder in two or more
Corporation
HQs
No. of
engagements
Google
USA
6
IBM
USA
6
Landis+Gyr
Switzerland
6
PG&E
USA
6
Source: Global Cleantech 100, A Barometer of the Changing Face of Global Cleantech Innovation, Cleantech Group; Google
8
The Investment Universe and “Sustainability”
Trends Globally

From 1999 to 2010, the number of sustainability indices being
offered by members of the World Federation of Exchanges
increased from 2 to more than 50

As of July 2011, the Carbon Disclosure Project has 551 financial
institutions as signatories with US$71 trillion AUM, worldwide

According to Eurosif (European Sustainable Investment Forum),
as of 7 December 2010, sustainable investment in emerging
markets topped $300bn

Global evidence for indices based on carbon and climate
change awareness outperforming the market: According to
PwC, companies in both the Carbon Disclosure Leadership Index
and the Carbon Performance Leadership Index generated
approximately double the average total return of the Global 500
Index (between Jan 2005 and May 2011).
Trends South Africa

In the latest report on emerging markets,
Eurosif has identified South Africa as a
preeminent destination for sustainable
investment, with transparent reporting and
above average integration of social issues.
Such a perception can only be enhanced
by companies adopting the King III
injunction to produce integrated annual
reports

As of July 2011, there are 26 local asset
managers who are signatories to the
United Nations Principles of
Responsible Investment

Nedbank Capital launched South Africa‟s
first Green Index in 2011
Environmental sustainability is increasingly prominent and mainstream
amongst global and South African investors.
9
International climate funds – an option?
•
Climate funds designed to support low-carbon and climate-resilient development
through scaled-up financing
•
Over 200 Climate Funds – e.g. GEF, Forest Carbon Partnership Facility, Clean
Technology Fund , etc
•
Mainly multi/bilateral funds, channelled through multilateral institutions/ DFI‟s
such as IFC, World Bank, African Development Bank, etc.
•
Important discussion at COP17: the Green Climate Fund (GCF), channeling USD
100bn p.a. from developed to developing countries by 2020.
•
Derived “nationally appropriate mitigation actions” (NAMA‟s) will direct
climate finance to projects that mitigate greenhouse gases
•
Private sector facility and participation still open – point of tense discussions
Source: http://www.climatefundsupdate.org/
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What can ICT companies do to lower the carbon
footprint and use carbon to compliment funding?
•
energy efficiency measures, demand side management
•
Renewable energy usage
•
carbon off-setting
•
carbon credit programmes for Base Stations, Data Centre‟s, etc
•
programmatic Micro-Carbon-Credit programmes for handset
charging with innovative renewable solutions
•
Nedbank Capital offers holistic, innovative financial solutions
addressing the needs of operators/ ICT providers and consumers by
adding value to their ambition to overcome the off-grid challenge and
reduce CO2.
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Highlight’s of Nedbank’s green credentials
•
13 July 2010 we have achieved carbon neutrality the first financial services organisation in Africa to
achieve this.
•
By following the 'reduce first and offset only what
we have to' approach, Nedbank has added real
credibility to its carbon neutral status.
•
Underwriter of world's first REDD project (Rukinga, Kenya)
•
Our new office block in Sandton, South Africa, is SA's first Green Star-rated building. A „green‟
building is one that has achieved a Green Star rating from the Green Building Council of South
Africa.
•
Nedbank Capital launched South Africa‟s first Green Index in 2011
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Thank You!
Contact details
Nedbank Capital
F block
135 Rivonia road
Sandown
2196
South Africa
Contact
Position
Office
Mobile
Email
Fritz Milosevic
Investment Banker Telecommunication
+27 11 294 1755
+27 82 902 9740
fritzm@nedbankcapital.co.za
High Level Overview Carbon Credits
Nedbank Capital aims to remove the need for telecom operators to have to deal with the complexities of the
compliance and voluntary carbon markets. The operator can focus on his core business: revenue generation.
Carbon credits



The Clean Development
Mechanism (CDM) as well as
voluntary labels allow for Green
House Gas emissions reductions to
be realised.
Emissions reductions

The small scale CDM allows for 0.8
to 1.4 kgs of CO2 per reduced
kilowatt hour of diesel generation
(depending on load factors).

Therefore a Megawatt hour of
diesel powered reduction would
reduce between 800 and 1400kgs
of CO2 worth approximately Euro
12 to 20.
Reductions of diesel usage
replaced by renewable energy
would constitute a project.
Methods exists for counting the
emissions reductions of such
projects.

Regulators

The UN Framework Convention on
Climate Change CDM Executive
Board oversees the compliance
market related to the Kyoto
Protocol.

The Gold Standard (GS) deals with
compliance and voluntary markets.

The Gold Standard is a high quality
standard looking to maximise
sustainable development and
attracts a premium in both markets.
To obtain credits compliance with
regulators is required.
Transaction costs

All methods for the realisation of credits have transaction costs associated with them.

The smaller the scale the lower the transaction costs (which favours GS Voluntary for telecom operators).

Project/programme participants must check the feasibility of credits versus transaction costs.
Source: Energy Transformation
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