by ucgeg

11 slides

(ECO) Topics in Finance and the Environment.pptx

Published Apr 25, 2013 in Business & Management
Direct Link :

(ECO) Topics in Finance and the Environment.pptx... Read more

Topics to be covered in the journal and in the organization's research projects.

Read less


comments powered by Disqus

Presentation Slides & Transcript

Presentation Slides & Transcript

Topics in
Financial (ECO)nomics
David Wang
UCERC/(ECO) | 1 October 2012

Financial markets and the environment
Quite a dichotomy, right?
Bankers do their thing, environmentalists do theirs
Many overlaps, many interactions
Topics at this intersection:
Equity markets
Commodity markets
Project finance
Financial regulations
Sustainable development
Is “environmentally responsible” investing possible?

Equity markets
Exchanges that trade common stock
Prices fluctuate daily
Attract most investors
Activity built around trading and fundamental analysis
New investments = more profits = stock growth
Profit-driven activity
Environmental impact not a concern for typical investor
Environmentally-friendly investments are not qualified in the market
Usually cost more, look worse on financial statements

Example: Exxon-Mobil (XOM)
Google Finance, accessed 10/2/12
Price correlation
Limited supply
Sustained demand
Search for alternative sources of oil
Environment not a factor in trading price

Commodity markets
Financial markets that trade physical and virtual commodities
e.g. corn, gold, oil, pork
Derivatives: forwards, futures (options, swaps)
Hard commodities, soft commodities
Hard: Natural resources
Soft: Agricultural resources
Forwards/futures contracts
Trades at a specific period of time in the future
Used to hedge risk and profit off market movement

Project finance
Method of financing infrastructure/industrial projects
Repays project debt/equity via cash-flows
Assets, rights, interests are collateral for loans
Based upon contracts, SPEs, and banks
Large amount of energy projects funded via project finance
Large international investments
PF model decreases risk
Low-income countries’ sources of cheaper, renewable energy




Impact of financial regulations
Basel III
Requires higher capital shield
U.S. capital – USD 870Bn
ST liquidity – USD 800Bn
Liquidity measures
Need to increase low-yielding liquid assets
Divest illiquid, high-yielding ones
Impact on PF
Short-term: negative
Contractual structure of PF detrimental in B3 context
Less investments in sustainable energy

Eco-friendly finance: Possible?
Equity market value dependent on profits
Merging requires sustainable business actions to be profitable
ST vs. LT
Commodity markets: varies
Hard commodities: exploitation = value
Soft commodities: increased yields = value
Investing for a better environment
Difficult with more regulation
Environmentally-sensitive regulation

Thank you!