Financial return on investment in
energy efficiency and renewable energies:
a smart investment opportunity?
Michele Calcaterra
Roma - 12 Marzo ‘07
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E.Capital Partners and its full subsidiary ECPI
 ECP is an Independent Financial Advisor, management owned, active since 1997 in Europe.
 ECPI performs Innovative Portfolio Screening
 ECPI uses a Proprietary but Transparent Technology: the “ECPI Screening Methodology”
developed on client consensus/input, NGOs’ information flow, international treaties, academic
studies and our International Advisory Board (see appendix).
 We aim at capturing Corporate Intangible Value through 400+ screening tests
 The results of our screening activity are an enhanced Capital Preservation and Alpha Generation
 We produce Performance Benchmarks, advise Ethical Static/Dynamic CDOs, Hybrid Index
structures and Funds of Hedge Funds.
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ECPI Business Goals
 Intangible Value Scouting and Alpha generation:
ECPI Alpha Index aims at scouting value in financial markets.
 ECPI selects “Best in Class” companies by assessing their Intangible Value as an indicator
of expected higher Alpha Returns.
 Socially Responsible Investments and Capital Preservation:
By adding additional sector screens (Traditional SRI), ECPI methodology becomes an outstanding
Credit Enhancement tool – 3 year 70pct Default Rate reduction.
 ECPI is the European leader in SRI Advisory leveraging its Ethical Screening Methodology®
as the underlying engine of SRI benchmarks and structured products.
 ECPI performs MARS® – Manager’s Alpha Risk Scoring for Ethical Funds of Hedge Funds.
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European SRI market: a steadily growing trend. Background for Ren Energy
European SR Mutual Funds: 2001– 20051 Asset Under Management
 € 68,28 billion AUM in Mutual
80,000
Funds
60,000
50,000
Mio €
 Overall SRI Institutional market among
European Investors has grown up to
approximately € 1,033 trillion2
68,280
70,000
40,000
30,000
19,424
21,430
23,587
24,100
2003
2004
20,000
10,000
0
2001
2002
2005
European SR Mutual Funds: Number of Asset Management Product Lines (1984 – 2004)1
 Currently 432 SR Mutual Funds
500
450
 Strong trend since 1998, and growing.
384
400
432
350
300
260
250
200
136
150
100
50
10
13
26
1984
1986
1988
46
55
1990
1992
72
97
0
1994
1996
1998
2000
2002
2004
1Source:
E.Capital Partners Fundwatcher “Trends in European SRI”, September 2004
2Source: Eurosif – Report 2006 “European SRI Study 2006”
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ECPI Alpha Screening: Enhanced Positive Tests
Portfolio selection process
Global Investment Universe
 Positive criteria for the positive screening,
enhanced by EcoValue21 test
 Up to 450 sector sensitive environmental and
social tests, with a customizable bias:
Alpha Positive screening:
Selection of the businesses with high standards of
corporate social and environmental responsibility
In order to capture Corporate Intangible Value
 Product Process
 Environmental Impact
Forward-Looking Approach:
 Community Relations
In case of relevant news/facts we evaluate
reiteration, reaction, malice, guilt, industry custom
of such companies, with a predictive goal
 Diversity
 Human Resources
 Opportunistic Cross Border operations
 Balance Sheet Transparency
 Corporate Governance Initiatives
Recommended
High Alpha Candidates
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SRI universe shows high stability and very low default rates
Evaluation of the probability of “ethical downgrade” events within ECP ethical investment universe
 Ethical investment universe of 1,700 eligible companies, analyzed and selected according to negative and
positive criteria out of a total of more than 2,800 companies covered. Analysis over the 12-month period
from 1st June 2003 to 1st September 2006
 “Downgraded” companies are companies which used to be rated “ethical” but lost the ethical label and
were then excluded from the ethical investment universe
Corporate Defaults with Investment-Grade Ratings within One Year of Default (Moody’s)1
Number of companies
As % of total
40
100%
23
58%
7
Of which: 30%
16
Of which: 70%
17
42%
Number of investment grade defaults (Moody's)
Of which:
Number of companies covered by ECP
Of which rated ethical
Of which rated unethical
Number of companies not covered by ECP
 Ethical screening acts as an efficient positive filter: over 70% of defaults avoided
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Based on ECP’s coverage and ethical universe on default date. Full list presented in appendix
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… very accessible through Bloomberg menu ECPS <go>
Ethical indices monitored and published
Ethical Euro Corporate Bond
Ethical Global Government Bond Index
Ethical Euro Index (Equity)
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Renewable Energy: an inexhaustible source
 Large Net reserves (es: Solar Energy cannot be exhausted)
 Continuous Renew process (Biomass)
Bioenergy: Biodiesel, Biogas, Plant oil fuel. Can be obtained from
biomass, in particular wood straw maize, sugar beet, oil-seed rape,
biogas and plant oils. Its main advantages to be Co2-neutral.
Solar Power: Photovoltaic, Solar heating and Chemistry. Energy of the
sun (nuclear fusion), which takes the form of electromagnetic radiation.
Water Power: Tidal and wave power, Ocean temperature gradient and
Thermal energy. Energy of water currents, which can be converted into
mechanical energy using suitable machines
Wind power: Is the kinetic energy produced by masses of air moving in
the atmosphere.
Geothermal: Geothermal heat is the heat stored in the upper layer of
the earth’s crust. It describes both the energy produced by or stored in
the earth.
Fuel cells: A fuel cell is a voltaic cell that converts a continuous supply
of fuel and an oxidising agent into usable electrical energy.
Renewable energy sources have the potential to replace fossil and nuclear energy sources
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Renewables Industry: from risk to opportunity
Current Risks
— Energy Economics
— Energy Security
— Global Warming
From risk to opportunity
— Sustainability
Renewable
Energy Industry
&
Efficiency
Companies & Governments1
— Capex in the industry
— Policy on renewables
Investors
— Financing Providers
— Participate in the next economic Boom
149 countries have policies on renewables in place that will foster rapid growth at clean-energy firms, including big emerging markets such as
Brazil, China and India
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Latest warning: the Stern Review (Though criticized…)
 The benefits of strong and early action far outweigh the economic costs of not acting
 Because climate change is a global problem, the answer must be international
 Action on climate change will also create significant business opportunities, as new markets
are created in low-carbon energy technologies and other low-carbon goods and services
Stern Review is available at: www.hm-treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/stern_review_report.cfm.
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Why Investing in Renewable Energy: scenario
The increased marketability of renewable energy: the
use of new technology has led to steadily falling prices.
A fuel cell power plant has fallen in price by more than
90% in the last 10 years.2
Wind energy as a proportion of total
energy production:3
· Denmark: 20%
· Germany: 6%
· USA: already 1.5 million households
“At Today’s rates of
consumption,
oil desposits should last
another 30 years or so and
gas approximately 70 years.
Coal will last rather longer –
about 200 Years”1
1) 2) Heinz Deubelbeiss: Alternative Energiequellen stillen Energiedurst
(Alternative energy sources quench the thirst for energy), emagazine, 25.04.05
3) Jonathan Bernstein: Alternative Energy – Time to invest? ETFZone.com, 15.06.05
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Why Investing in Renewable Energy: growth forecast
Analysts confidently predict the clean-energy business will grow by 20-30% a year for a decade.
The Economist, November 16th, 2006
Solar Energy, Wind Energy
and Fuel Cells will probably
grow from about 16$ billion
in global revenues in 2004
to more than 100 $ billion
by 2014 according to a
report released by Clean
Edge (an energy research
and publishing firm)
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Sustainable Investment: a growing trend
 Total investment going into clean energy at $63 billion this year, up from $49 billion last year
and just $30 billion in 2004 (estimate by New Energy Finance)1
 In light of the longterm risks of investing in conventional energy systems, institutional
investors, such as the California Public Employees Retirement System (CalPERS), have begun
directing larg blocks of funds to the environmental sector, including to renewable energy,
much of it under the rubric of sustainable or socially responsible investing2
 In November 2005, Goldman Sachs committed to investing more than $1 billion in renewable
energy projects, including biofuels, solar power, and wind energy2
 Investment in the field by venture capitalists and private-equity firms has quadrupled in the
past two years, from some $500m in 2004 to almost $2 billion so far this year 1
1 The
Economist, November 16°, 2006
American Energy, The World Watch Institute, September 2006
2 From
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Global Share of Renewable Energy
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ECPI® Renewable Energy Global Tradeable
As of 22 January 2007
Features
Number of Constituents
20
Eligibility Monitoring
Daily
Component Weights
Equal
Minimum 6 months ADV
EUR 10 mln
Index Rebalancing Frequency
Annual (1th of October)
Currency of Calculation
EURO
Average Market Cap (EUR bio)
16.82
Largest Market Cap (EUR bio)
55.91
Smallest Market Cap (EUR bio)
4.16
Highest Index Value (since 2003)
1967.79
Lowest Value (since 2003)
911.64
 Sector Validation from ECPI
 Strong Financial results
 Very Good liquidity (Relative High
Market Cap)
 Good Rating from fundamental
analysis
Performance & Breakdown
Country
DENMARK
6.93%
ECPI® Reneable Energy Global
MSCI World
ITALY
9.76%
JAPAN
13.77%
SPAIN
15.03%
2100
25.00%
UNITED STATES
33.24%
15.29%
1900
20.00%
UNITED KINGDOM
NORWAY
Tot.
5.99%
Basic Materials
24.36%
1700
100%
1500
1300
4.92%
1100
Sec tor
3.63%
900
Energy
11.81%
700
Industrial
31.16%
Technology
13.99%
Utilities
29.44%
Consumer, Non-cyclical
Consumer, Cyclical
Tot.
5.04%
27.53%
30.00%
gen-03
17.67%
15.00%
10.00%
5.00%
3.76%
1.80%
0.00%
2003
gen-04
gen-05
gen-06
gen-07
Average
Since 2003
2004
2005
2006
YTD
Annualized Volatility
16.80%
100%
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ECPI® Renewable Energy Index
Investment Opportunities
 Structured Notes
 ETFs
 Index Trackers
By..International Investment Banks and Asset Managers
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Paolo Sardi – CEO & Partner
www.e-cpartners.com
m.calcaterra@e-cpartners.com
Bloomberg: ECPS <GO>
Reuters: ECAPITAL
Corso Italia, 13
20122 Milano
Tel: +39 02 80509813
Fax: +39 02 88181210
Disclaimer
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