How to Convince Wall Street to Invest in Energy Efficiency
From The Guardian
By Justin Gerdes
In the depths of the Great Recession three years ago, California‘s chief fiscal officer John Chiang gathered his deputies and posed a question: “Is there any way we can put capital on the ground in California to put people back to work in ways that would make sense for the long term?”
After some debate, they settled on what they called “the holy grail” – energy efficiency. Retrofit projects would employ many of the 100,000 construction workers looking for work and put money into the pockets of the state’s cash-strapped residents. But the policymakers soon hit a snag: they realized that to scale up a statewide program, they would need money – lots of it.
“As soon as we started working on this, international investors – Deutsche Bank, Goldman Sachs, Barclays, folks at that level – came in and said: ‘We have, sitting on the sidelines right now, approximately $3tn in assets that we don’t have anywhere to invest.’ We would love to put some of that on the ground in California,’” said Alan Gordon, California’s deputy controller for environmental policy, recounting the story at Greentech Media’s Avant EE conference in San Francisco.
One obstacle was the banks themselves. “All of these smaller projects – even if you’re talking about Donald Trump doing a $5m retrofit – you need 20 of those before you’ll even get Goldman Sachs or Barclays or any of those folks involved,” Gordon said. Banks untroubled by investing billions in mortgage-backed securities were wary of investing millions in energy retrofits. After all, each deal requires bankers’ time, so – from that perspective – smaller deals come with diminishing returns. And the energy efficiency industry wasn’t prepared to supply enough projects to be bundled into a bigger, bankable deal.
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