In many areas of life and economic activity, the disruption caused by COVID-19 is accelerating shifts and patterns that were already well underway before the pandemic. One positive consequence of the near cessation of economic activity and transportation in the early stages of COVID-19 was the dramatic improvement in air quality experienced across the world. This offered a glimpse of the environmental improvements that may be within reach as businesses and communities re-evaluate priorities and re-shape to take advantage of the new opportunities that have presented themselves.
Our core corporate finance business at Centrus is centred around supporting essential service industries in the residential, accommodation, transportation and infrastructure sectors, and we recognise the importance of the role that we can play in furthering our clients’ sustainability and zero carbon objectives through the efficient financing of these initiatives.
Last year Centrus, with one of our housing association (HA) clients Peabody, initiated a project involving other leading HAs, investors and market participants to help establish a credible, meaningful and comparable set of Environmental, Social and Governance (“ESG”) criteria that housing associations can use to demonstrate their impact to the financial community and other stakeholders.
Following a series of workshops and with insight gathered from lenders and investors over many months, we presented in June this year a draft White Paper www.ESGsocialhousing.co.uk which proposed sector-standard ESG criteria and metrics for discussion and consultation. A final report and set of recommendations for this industry standard framework will be published on November 10th 2020, with widespread support and commitments to adopt the framework from a range of industry participants.
This successful initiative was followed up in September by Centrus forming a new partnership with a major UK pension fund, the global sustainability consultancy, Anthesis Group, and the renewable developer and solar installer Eden Sustainable, to offer solar and other renewable energy solutions to our U.K. network utility clients.
The rationale for this latest initiative is a recognition on our part that energy efficiency, sustainability and resilience will be key in moving towards ambitious net zero-carbon targets. Targeting some of the biggest users of energy in the country makes strategic and practical sense, particularly as many of these entities have the financial stability and covenant strength to support the 20 year plus power purchase agreements that underpin the required investment. In many cases they also have the land resources to allow on-site energy generation or “behind the meter” solutions that changes the economic proposition of the investment case. This is driven in Great Britain by the fact that according to OFGEM’s latest publications, network, environmental and social obligation costs currently make up over 40% over the average electricity bill. This means that currently those that can generate energy on their own sites and use private wires to supply their energy needs have a considerable advantage. There is always the risk that environmental and social levies will be recovered in some other way to reduce this advantage in the future, but whilst the status quo remains, there is a growing benefit to on-site generation compared to purchasing energy via the grid. Whilst the generation of energy for internal use and the delivery of this by private wire is nothing new, what has changed is that smaller scale and mixed generation projects have become viable and are now seen as both necessary and desirable as a means of delivering ambitious carbon reduction and sustainability targets.
For many of our larger energy consuming clients, embracing long-term sustainable energy solutions can deliver both financial efficiencies while also delivering on existing environmental commitments, and allow them to become more ambitious in the goals that they set on a sustainable future. Sectors which play an important role in servicing communities within the real economy are at the heart of our business and we are committed to promoting sustainable solutions and facilitating the financing required to deliver them.