Download Finance and Investment seminar

Adapting the city
Investment & Finance
Overview Charlie Parker, Lead Chief Executive
AGMA’s Environment Commission

Absorb information

Prepare for the future

Seek opportunities

Adapt the City

Adapt our thinking
Overview - finance and investment workshop
Climate change adaptation: opportunities and threats to Greater
Manchester, Helen Seagrave/Becca Heron (Envirolink & New Economy)
(10 minutes)
Overview of climate finance, Caroline McGill, Corporate Finance Director,
Deloitte (20 minutes)
Setting the GM scene (10 minutes)
Greater Manchester Investment Sara Todd, Assistant Chief Executive
Regeneration – Manchester City Council
Low Carbon Investment Mark Atherton, Director of Environment for
Greater Manchester (AGMA).
Discussion led by Caroline McGill.
Adapting the city
Climate Change Adaptation:
Opportunities and Threats to Greater Manchester
Rebecca Heron, New Economy
Helen Seagrave, Envirolink
Purpose of research
— Provide an overview of GM’s priority sectors and the impact of
climate change on those sectors
— Identify size and scope of GM’s climate change adaptation
sector
— Provide an understanding of potential opportunities regarding
job creation in that sector
Priority sectors
— Priority sectors
—
—
—
—
Financial & professional services
Health
Retail
Manufacturing
— Key sector concentrations (higher than national average)
— Creative industries
— ICT digital
— Key sector productivity
— Bio-technology (£140,500)
— Environmental technology (£65,900)
Risks
— Increasing energy and fuel prices
— Security of energy supply
— Effects of climate change legislation
— Carbon pricing, trading and emissions reductions targets
— Falling demand for high carbon footprint goods and services
— Damage to real estate and infrastructure
Potential impact
POTENTIAL EMPLOYMENT
POTENTIAL GVA
IMPACT (000’s)
IMPACT (£m)
SECTOR
1% negative impact
5% negative impact
10% negative
impact
1% negative impact
5% negative impact
10% negative
impact
-0.5
-2.5
-5
-12.5
-62.6
-125.3
0
-0.2
-0.4
-17.1
-85.4
-170.8
Logistics
-0.1
-0.6
-1.2
-35.4
-176.8
-353.5
Tourism
0
0
0
-7.1
-35.3
-70.7
-0.1
-0.4
-0.7
-25.7
-128.4
-256.8
Manufacturing
Construction
ICT
Opportunities
— Change can stimulate innovation and adaptation
— Sectors and organisations that embrace the challenge
and adapt are most likely to survive and prosper
Climate change adaptation sector
— Definition developed using LCEGS sector data
— Climate change and resilience
— Building technologies
— Relevant environmental consultancy services
— Low carbon and environmental goods and services sector
data
— Unique data set to developed to overcome lack of SIC code
definition
— Used by central Government to develop to define and map sector
— Envirolink pioneered methodology for mapping LCEGS sector
Size of GM climate change adaptation sector
GM Climate
Change
Adaptation
GM LCEGS
UK Climate
Change
Adaptation
UK LCEGS
Sales
£1.2bn
£5.1bn
£27.08bn
£122.2bn
Companies
670
1918
15,000
52,000
Employment
11,000
37,000
230,000
940,000
Relative size of the climate change adaptation
sector
Distribution of companies across definitions
— Big bullet
Construction
— Sub bullet
Finance, investment,
insurance
— Big bullet
— Sub bullet
Transport
Engineering
Services
— Big bullet
Services
Manufacture
— Sub bullet
Installation
— Big bullet
R&D
— Sub bullet
Supply
Distribution by company activity
Company distribution across GM
— Big bullet
— Sub bullet
— Big bullet
Wigan
Trafford
Tameside
Stockport
Salford
Rochdale
Oldham
Manchester
Bury
Bolton
— Sub bullet
Skills requirements
— Wide range of skills required, not necessarily adaptation specific
— Specialist and professional
— Manufacturing and engineering
— Business management (particularly for SMEs)
— Under-supply of young people entering high value engineering
and skilled trades
— Apprenticeships
— “Image problem” in relation to climate change sectors
— Encourage high level candidates to enter the sector
— School leavers and graduates
— Role of the universities
— Largest student population in Europe
— Range of relevant courses offered
Conclusions
— Priority sectors at risk if a failure to adapt
— BUT opportunities through innovation and adaptation
— Strength in construction retrofit, doors and windows should be
maximised through access to opportunities presented by GM’s large
scale commercial and domestic retrofit programme
— Develop specific sector strategies for particularly vulnerable sectors
— Draw on the universities reputation for excellence to turn Manchester’s
reputation for entrepreneurship to economic advantage
— Increase efforts to attract high-calibre candidates to the climate change
adaptation sector
Adapting the city
Investment and finance
For climate change adaptation
© 2012 Deloitte LLP. All rights reserved.
Investment and finance
Agenda
Investment & finance
requirement
Principles of “invest-ability”
Climate change finance
Finance for Greater Manchester
•
•
•
•
Manufacturing
Construction
Retrofit
Transport
• Certainty
o Assets
o Income
o Savings
o Measurement
• Risk
o
o
o
o
o
o
• Prevention vs mitigation
• Challenges for the future
Policy
Technology
Supply
Demand
Counterparty
Climate change
• Risk Mitigation
• Insurance
• Familiarity
© 2012 Deloitte LLP. All rights reserved.
Investment and finance requirement
Key sectors
Familiar sectors
•
Construction
•
Transport
Supply chain
•
R&D
•
Manufacture
•
Installation / Engineering
•
Services
© 2012 Deloitte LLP. All rights reserved.
Principles of “invest-ability”
Certainty, risk and familiarity
Investors and financiers seek to understand the level and nature of risk in order to decide:
- whether to provide finance;
Risk
- at what price; and
Risks to be mitigated include:
- on what terms.
• Policy
Costs
Certainty
Risk Mitigation
• Technology
Certainty will be sought over:
• Supply
• Assets
• Demand
• Income
Insurance
• Counterparty
• Savings (PAYS)
• Climate hazards
• “Green” impact
• Measurement
Familiarity
© 2012 Deloitte LLP. All rights reserved.
Climate change finance
Prevention vs mitigation
Capturing the value of climate change mitigation is more difficult than climate change
prevention as this tends to be thought of in terms of energy cost.
Possible financier perceptions
Well understood
Brown field remediation
Waste management
Solar PV
Solar Thermal
Energy Service contracts
Biomass
Renewable Heat
Insulation
Public good
Private value
Water management
Flood defences
Not well understood
© 2012 Deloitte LLP. All rights reserved.
Climate change finance
Challenges for the future
• How can the level of familiarity with climate change finance be broadened
among the wider financial community?
• Can the true value of works mitigating the effects of climate change
be captured financially?
• What role should the insurance sector play?
• Can community finance initiatives be used more widely?
• What should be the role of national and local government?
© 2012 Deloitte LLP. All rights reserved.
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each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and
its member firms.
Deloitte LLP is the United Kingdom member firm of DTTL.
This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will
depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of
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circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any
material in this publication.
© 2012 Deloitte LLP. All rights reserved.
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Adapting the city
GM Investment
Framework
GM Context
• Cities as engines of growth
• Combined Authority (CA) and LEP provide the platform
for growth and reform
• Place - based approach to aligned priorities, funding
and delivery
• Move away from a grant culture to a self sustaining
investment approach
• Secure the benefits from local investment
GM Investment Framework
• MIER provides the evidence base to understand what we
need to do
• Reduced access to public resources and difficult market
conditions (especially in terms of market finance failure)
• A new approach to investment is required to:
- make the most of our evidence base and opportunities;
and
- minimise the impact of the funding and market
challenges we face
Investment Framework Work Streams
Project
Pipeline
•
•
•
Develop single AGMA pipeline
Indicative prioritisation
Short term and medium to longer term pipeline
Investment
Strategy
•
•
•
Develop an approach to coordinating private and public sector funding
Enabling Funds
Investment Advisor
Capacity
•
Recruiting a central GM Core Team to strengthen AGMA’s delivery
capacity and capability
Developing skills and capacity in districts
•
Project Pipeline Development
• Around 80 projects now identified by Local Authorities
and the Manchester Family
• Includes economic development, housing, low carbon,
transport, broadband, business growth
• Many have multiple barriers to bringing them to market
• Local capacity and expertise varies to support pipeline
development
• Considerable pressure to commit Enabling Funds asap
Investment Strategy – Initial Priorities
Enabling
Funds
• Identify potential sources of enabling funds
• Match suitable enabling funds to projects
• Move quickly towards a single Feeder Fund to de-risk / enable projects
Private Sector
Funding
• Investment Advisor in place
• Develop panel of funders to work with AGMA
• Move towards a future AGMA Investment Fund
Governance
• Gateway process for projects
• Independent Advisory Panel to oversee investment approach
• Recommendations to CA and LEP
GM Enabling Funds
Those where we must commit resources quickly
(start on site - next financial year):
• Evergreen JESSICA Fund
• Regional Growth Fund – Rounds 1, 2 and (hopefully!) 3
• Growing Places Fund
• European Regional Development Fund (ERDF)
Resources into fund in due course…
• Tax revenues from EZ
• Recycled Funds returned to the pot
GM Investment Advisor
•
Investment Advisor recently appointed
•
Maximise impact of available public sector funding
•
Promote projects capable of attracting private sector funding (both equity
and debt)
•
Development of a panel of potential funders
•
Development of a specific Feeder Fund, to access private sector funding
•
Proposition that would enable AGMA to seek ‘blind’ investment from a range
of potential public and private sector investors
GM Structure/Governance
GMCA
GM LEP
INDEPENDENT ADVISORY PANEL
AGMA CEO INVESTMENT GROUP
GM CORE INVESTMENT TEAM
Adapting the city
GM Low Carbon Investment, Mark Atherton, Director
of Environment for Greater Manchester (AGMA)
• Investment Framework
• Green Deal Retrofit
• Low Carbon Investment Pipeline
• Low Carbon Hub
Green Deal Producer/Provider Model
To be agreed
Finance (Prudential
borrowing or reserves)
LA
Finance
vehicle
Green Deal
+ FIT
payments
CS & AW ECO
Delivery Partner(s)
Contract
Installers
Assessors
Fee
Referral
AW referral
Producer
After sales
Marketing
Energy
Companies
PV Meter/deemed
Install and manage
Benefits
Green Deal Payments
Low Carbon Project Portfolio
• Deal for Cities
• Commissioned SKM Enviros Verco
– Evaluate and put in place the steps necessary to identify
those projects with strongest investment potential and identify
the steps and mechanisms needed to get them investment ready
• Provisionally circa 70 low carbon projects
• Mix of retrofit, energy and other projects
Design Philosophy & Process Overview
Phase I
Procurement
Solution
Phase II
Contract
Market
activation
Refinement /
Delivery
Evaluation
Tools
Governance
Marketing
Screening
Mobilisation
Technical / Commercial
Review
Bankable
Projects
Prioritisation
Procurement
Legacy
DRAFT
DRAFT
Pathfinder
GM Low Carbon Hub
Discussion Points –So, what happens next?
•
•
•
The financial risks and opportunities of climate change for GM/cities
Looking forward to identifying specific opportunities for GM to fund
Resilience projects and support skills/products/services export prospects.
A view of the possible solution(s).
Where is the value in those solutions?
How can that value be capitalised?
How do we ensure climate-proofing of 'mainstream' investments (e.g. Evergreen,
Deal for Cities settlement etc) to de-risk returns in a changing climate?
What tools are available?
Adapting the city