Adapting the city Investment & Finance Overview Charlie Parker, Lead Chief Executive AGMA’s Environment Commission Absorb information Prepare for the future Seek opportunities Adapt the City Adapt our thinking Overview - finance and investment workshop Climate change adaptation: opportunities and threats to Greater Manchester, Helen Seagrave/Becca Heron (Envirolink & New Economy) (10 minutes) Overview of climate finance, Caroline McGill, Corporate Finance Director, Deloitte (20 minutes) Setting the GM scene (10 minutes) Greater Manchester Investment Sara Todd, Assistant Chief Executive Regeneration – Manchester City Council Low Carbon Investment Mark Atherton, Director of Environment for Greater Manchester (AGMA). Discussion led by Caroline McGill. Adapting the city Climate Change Adaptation: Opportunities and Threats to Greater Manchester Rebecca Heron, New Economy Helen Seagrave, Envirolink Purpose of research — Provide an overview of GM’s priority sectors and the impact of climate change on those sectors — Identify size and scope of GM’s climate change adaptation sector — Provide an understanding of potential opportunities regarding job creation in that sector Priority sectors — Priority sectors — — — — Financial & professional services Health Retail Manufacturing — Key sector concentrations (higher than national average) — Creative industries — ICT digital — Key sector productivity — Bio-technology (£140,500) — Environmental technology (£65,900) Risks — Increasing energy and fuel prices — Security of energy supply — Effects of climate change legislation — Carbon pricing, trading and emissions reductions targets — Falling demand for high carbon footprint goods and services — Damage to real estate and infrastructure Potential impact POTENTIAL EMPLOYMENT POTENTIAL GVA IMPACT (000’s) IMPACT (£m) SECTOR 1% negative impact 5% negative impact 10% negative impact 1% negative impact 5% negative impact 10% negative impact -0.5 -2.5 -5 -12.5 -62.6 -125.3 0 -0.2 -0.4 -17.1 -85.4 -170.8 Logistics -0.1 -0.6 -1.2 -35.4 -176.8 -353.5 Tourism 0 0 0 -7.1 -35.3 -70.7 -0.1 -0.4 -0.7 -25.7 -128.4 -256.8 Manufacturing Construction ICT Opportunities — Change can stimulate innovation and adaptation — Sectors and organisations that embrace the challenge and adapt are most likely to survive and prosper Climate change adaptation sector — Definition developed using LCEGS sector data — Climate change and resilience — Building technologies — Relevant environmental consultancy services — Low carbon and environmental goods and services sector data — Unique data set to developed to overcome lack of SIC code definition — Used by central Government to develop to define and map sector — Envirolink pioneered methodology for mapping LCEGS sector Size of GM climate change adaptation sector GM Climate Change Adaptation GM LCEGS UK Climate Change Adaptation UK LCEGS Sales £1.2bn £5.1bn £27.08bn £122.2bn Companies 670 1918 15,000 52,000 Employment 11,000 37,000 230,000 940,000 Relative size of the climate change adaptation sector Distribution of companies across definitions — Big bullet Construction — Sub bullet Finance, investment, insurance — Big bullet — Sub bullet Transport Engineering Services — Big bullet Services Manufacture — Sub bullet Installation — Big bullet R&D — Sub bullet Supply Distribution by company activity Company distribution across GM — Big bullet — Sub bullet — Big bullet Wigan Trafford Tameside Stockport Salford Rochdale Oldham Manchester Bury Bolton — Sub bullet Skills requirements — Wide range of skills required, not necessarily adaptation specific — Specialist and professional — Manufacturing and engineering — Business management (particularly for SMEs) — Under-supply of young people entering high value engineering and skilled trades — Apprenticeships — “Image problem” in relation to climate change sectors — Encourage high level candidates to enter the sector — School leavers and graduates — Role of the universities — Largest student population in Europe — Range of relevant courses offered Conclusions — Priority sectors at risk if a failure to adapt — BUT opportunities through innovation and adaptation — Strength in construction retrofit, doors and windows should be maximised through access to opportunities presented by GM’s large scale commercial and domestic retrofit programme — Develop specific sector strategies for particularly vulnerable sectors — Draw on the universities reputation for excellence to turn Manchester’s reputation for entrepreneurship to economic advantage — Increase efforts to attract high-calibre candidates to the climate change adaptation sector Adapting the city Investment and finance For climate change adaptation © 2012 Deloitte LLP. All rights reserved. Investment and finance Agenda Investment & finance requirement Principles of “invest-ability” Climate change finance Finance for Greater Manchester • • • • Manufacturing Construction Retrofit Transport • Certainty o Assets o Income o Savings o Measurement • Risk o o o o o o • Prevention vs mitigation • Challenges for the future Policy Technology Supply Demand Counterparty Climate change • Risk Mitigation • Insurance • Familiarity © 2012 Deloitte LLP. All rights reserved. Investment and finance requirement Key sectors Familiar sectors • Construction • Transport Supply chain • R&D • Manufacture • Installation / Engineering • Services © 2012 Deloitte LLP. All rights reserved. Principles of “invest-ability” Certainty, risk and familiarity Investors and financiers seek to understand the level and nature of risk in order to decide: - whether to provide finance; Risk - at what price; and Risks to be mitigated include: - on what terms. • Policy Costs Certainty Risk Mitigation • Technology Certainty will be sought over: • Supply • Assets • Demand • Income Insurance • Counterparty • Savings (PAYS) • Climate hazards • “Green” impact • Measurement Familiarity © 2012 Deloitte LLP. All rights reserved. Climate change finance Prevention vs mitigation Capturing the value of climate change mitigation is more difficult than climate change prevention as this tends to be thought of in terms of energy cost. Possible financier perceptions Well understood Brown field remediation Waste management Solar PV Solar Thermal Energy Service contracts Biomass Renewable Heat Insulation Public good Private value Water management Flood defences Not well understood © 2012 Deloitte LLP. All rights reserved. Climate change finance Challenges for the future • How can the level of familiarity with climate change finance be broadened among the wider financial community? • Can the true value of works mitigating the effects of climate change be captured financially? • What role should the insurance sector play? • Can community finance initiatives be used more widely? • What should be the role of national and local government? © 2012 Deloitte LLP. All rights reserved. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms. Deloitte LLP is the United Kingdom member firm of DTTL. This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication. © 2012 Deloitte LLP. All rights reserved. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198. Member of Deloitte Touche Tohmatsu Limited Adapting the city GM Investment Framework GM Context • Cities as engines of growth • Combined Authority (CA) and LEP provide the platform for growth and reform • Place - based approach to aligned priorities, funding and delivery • Move away from a grant culture to a self sustaining investment approach • Secure the benefits from local investment GM Investment Framework • MIER provides the evidence base to understand what we need to do • Reduced access to public resources and difficult market conditions (especially in terms of market finance failure) • A new approach to investment is required to: - make the most of our evidence base and opportunities; and - minimise the impact of the funding and market challenges we face Investment Framework Work Streams Project Pipeline • • • Develop single AGMA pipeline Indicative prioritisation Short term and medium to longer term pipeline Investment Strategy • • • Develop an approach to coordinating private and public sector funding Enabling Funds Investment Advisor Capacity • Recruiting a central GM Core Team to strengthen AGMA’s delivery capacity and capability Developing skills and capacity in districts • Project Pipeline Development • Around 80 projects now identified by Local Authorities and the Manchester Family • Includes economic development, housing, low carbon, transport, broadband, business growth • Many have multiple barriers to bringing them to market • Local capacity and expertise varies to support pipeline development • Considerable pressure to commit Enabling Funds asap Investment Strategy – Initial Priorities Enabling Funds • Identify potential sources of enabling funds • Match suitable enabling funds to projects • Move quickly towards a single Feeder Fund to de-risk / enable projects Private Sector Funding • Investment Advisor in place • Develop panel of funders to work with AGMA • Move towards a future AGMA Investment Fund Governance • Gateway process for projects • Independent Advisory Panel to oversee investment approach • Recommendations to CA and LEP GM Enabling Funds Those where we must commit resources quickly (start on site - next financial year): • Evergreen JESSICA Fund • Regional Growth Fund – Rounds 1, 2 and (hopefully!) 3 • Growing Places Fund • European Regional Development Fund (ERDF) Resources into fund in due course… • Tax revenues from EZ • Recycled Funds returned to the pot GM Investment Advisor • Investment Advisor recently appointed • Maximise impact of available public sector funding • Promote projects capable of attracting private sector funding (both equity and debt) • Development of a panel of potential funders • Development of a specific Feeder Fund, to access private sector funding • Proposition that would enable AGMA to seek ‘blind’ investment from a range of potential public and private sector investors GM Structure/Governance GMCA GM LEP INDEPENDENT ADVISORY PANEL AGMA CEO INVESTMENT GROUP GM CORE INVESTMENT TEAM Adapting the city GM Low Carbon Investment, Mark Atherton, Director of Environment for Greater Manchester (AGMA) • Investment Framework • Green Deal Retrofit • Low Carbon Investment Pipeline • Low Carbon Hub Green Deal Producer/Provider Model To be agreed Finance (Prudential borrowing or reserves) LA Finance vehicle Green Deal + FIT payments CS & AW ECO Delivery Partner(s) Contract Installers Assessors Fee Referral AW referral Producer After sales Marketing Energy Companies PV Meter/deemed Install and manage Benefits Green Deal Payments Low Carbon Project Portfolio • Deal for Cities • Commissioned SKM Enviros Verco – Evaluate and put in place the steps necessary to identify those projects with strongest investment potential and identify the steps and mechanisms needed to get them investment ready • Provisionally circa 70 low carbon projects • Mix of retrofit, energy and other projects Design Philosophy & Process Overview Phase I Procurement Solution Phase II Contract Market activation Refinement / Delivery Evaluation Tools Governance Marketing Screening Mobilisation Technical / Commercial Review Bankable Projects Prioritisation Procurement Legacy DRAFT DRAFT Pathfinder GM Low Carbon Hub Discussion Points –So, what happens next? • • • The financial risks and opportunities of climate change for GM/cities Looking forward to identifying specific opportunities for GM to fund Resilience projects and support skills/products/services export prospects. A view of the possible solution(s). Where is the value in those solutions? How can that value be capitalised? How do we ensure climate-proofing of 'mainstream' investments (e.g. Evergreen, Deal for Cities settlement etc) to de-risk returns in a changing climate? What tools are available? Adapting the city