Monday What's on the Web: Deutsche Bank Climate Change Advisors

Each Monday I highlight other bloggers or web contributors who are making important or interesting contributions to climate, sustainability, transportation or market transformation. Check back each week for another installment.
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Deutsche Bank Climate Change Advisors is one of the leading climate change investors in the world.  From my perspective, however, the key role they play is as a word of reason from the business side of the ledger.  There are so many old-line businesses: industry, banking, manufacturing, etc., that are often pushing against taking strong action on climate change.  DBCCA is the opposite.

As a business in the investment industry, they need to be as knowledgeable and insightful and accurate as possible if they intend to succeed in the long run.  They have identified climate change as a "mega-trend."  From their site:

"Deutsche Asset Management identified climate change as one of the mega-trends that would drive the global asset management business for the next generation and beyond. We saw that the rapidly growing level of carbon in the atmosphere meant that the world had to take action now, and that this would require massive capital investment over several decades. That in turn would produce exciting new investment opportunities from which our clients could benefit."

In the last two years, DBCCA has put out about two dozen investment reports that provide key insights into how climate change interacts with investing and business in general.  These reports are well researched and thorough and make strong cases for action on climate as well as taking more in-depth looks at particular industries and trends.  Some recent examples include:

Natural Gas and Renewables: A Secure Low Carbon Future Energy Plan for the United States

Climate Change: Addressing the Major Skeptic Arguments
(I particularly like this one for its thorough look at debunking the skeptic arguments.  In my opinion, this paper is more influential than many due to its source from a major investment player rather than an advocacy group.)


Investing in Climate Change 2010 - A Strategic Asset Allocation Perspective

I receive an email when new research comes out from DBCCA.  I was not able to find a place on their web site where you can sign up.  If you are interested, though, try sending an email to Bruce Kahn, and he will put you on his list.

Rule of Thumb #4 - Ignore Advice

You've heard the advice about compact-fluorescent (CFL) bulbs: replace your frequently used lights with these, and you'll save money, energy and reduce global warming pollutants.

Well, I'm going to tell you to stop taking this advice. Instead, replace all your lights with CFLs.

In the old days when they cost $15, the original advice was fine. Now that you can purchase them for as little as $2 or $3 apiece, that advice no longer holds. It now makes more sense to replace them all.

“But they woe-on’t last as lo-onng,” you’ll hear people whine. Let’s do the numbers.

Assume that you have a 60-watt light that you switch on five times a day for two minutes each time (ten minutes total per day). You replace it with a 15-watt CFL that costs $3. Because of frequent switching, let’s assume its lifetime is hugely reduced by 75% to 2000 hours instead of 8000.

Your annual return on investment for that bulb is 5%-15% depending on your electricity rates and, dang, it will only last you for 33 years before you have to replace it. It might not be the 50% return you’ll get from some of your other fixtures, but it’s still a no-brainer. For a couple hundred dollars you can probably change out your whole house (a little more if you buy more expensive dimmables and 3-ways; visit www.efi.org for a good selection of bulbs). What are you waiting for? The climate to change?

Investments, Efficiency, VA Tech, and the DC Area

Last Tuesday's Washington Post featured a great article about the confluence of economic value and actions to reduce energy use and climate change. Virginia Tech and investor Hannan Armstrong along with other partners, including PEPCO Energy Services, are investing $500 million to improve the efficiency of at least 100 buildings in the DC area. The initiative is called the Energy Efficiency Partnership of Greater Washington.

It's important to note that Mr. Armstrong is not doing this because he is an environmentalist. He's doing it because he can make money at it. Opportunities to improve efficiency in buildings are enormous and profits can be made. The concept is pretty simple: invest money in energy performance improvements and then share the savings that come out of the utility bills. The building owner pays nothing up front and enjoys same or lower utility bills. The investor creates a stream of income from the utility savings that yields a good or excellent return on the initial capital investment. Both parties win . . .and so does our environment. The expectation is that the buildings they are investing in will reduce their energy use by 20% - 50%.

You can do this yourself, too, actually. In the short term, investing $200 in changing out the lighting in your house can yield up to $100 per year in investment returns--a fabulous return rate. If you have a home equity line of credit you can create your own positive cash flow--it's like printing money. By investing in efficiency improvements that have rates of return higher than the interest you pay on your loan, you can create a cash cow right in your house. Here's an example: $3000 wisely invested in improvements could save you $30-$40 month or more on your utility bills. A 15-year home equity loan payment is $27.81 at 7.5%. So every month you essentially print yourself a $5 or even a $20 bill (because you save more on your utility bill than you pay on your loan). As utility rates rise your savings go up, too, but your payment stays the same. Many improvements will also add to the value of your home, so if you move your house will sell for more--recouping your investment again.

I've always thought that investment resources like Money Magazine and Kiplinger's should recommend these investments to their readers. They can create better returns at lower risk than a lot of the other investment recommendations they make. The environmental benefits are just gravy.