To be able to make good decisions in the future, we must know how green all the measures are.
Managing Director of Doctorate of Nysnø Klimainvesteringer AS
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To calculate the future Financial return on investment is one of the first things you learn in your finance studies. But how can we calculate the future? climatically Return of investment? There is a precarious need here to establish a common toolbox for the world’s cash flows that really helps steer us in the right direction.
We have a unique opportunity to succeed in the green change if state and private capital are combined in the best possible way. The importance of the financial industry is also recognized at the Glasgow climate summit, a follow-up to the 2015 meeting at which the Paris Agreement was drafted. At this year’s climate summit, one of the four main goals is to mobilize the financial industry to combat global greenhouse gas emissions.
Carbon accounting system
But, the time is too short for us to be confident of investing in the measures that simply I’m listening well. We must start innovative work and establish our own carbon accounting system.
At Nysnø, we have good financial models to calculate potential future economic returns, but there is a great need for better standardized calculation models for greenhouse gas reduction.
Today is like this that it is relatively easy to calculate the future climate effects of more mature technology, such as onshore wind farms or solar parks. However, for new technology in the early stages of development, it is much more difficult.
The need is clear
Let’s take an example: In 2018, Nysnø Klimainvesteringer contributed growth capital to the Otovo solar cell company. Its operation is based on new technologies.
The company has now grown outside of Norway and into Sweden, France, Spain, Italy, Poland and Germany. The goal is to have solar panels and batteries installed in every house in Europe offering the easiest and most economical way to ‘go solar’ upon.
How do we calculate the climatic performance on this? And even more difficult: what is the climate return in 2030? So what amounts of reduced CO2 can investors expect the Otovo technology to contribute by 2030?
To answer this, we must make calculations of how much CO2 is emitted from Otovo’s own operations and from the production and shipping of solar panels. Then it is necessary to calculate how much polluting current each solar panel replaces.
In many countries they come electricity from polluting sources such as gas and coal. When you know how much is replaced by clean solar energy, you can also calculate how much it is equivalent to the number of tons of CO2. Finally, one must estimate how many solar cell installations it is expected to have contributed to by, say, 2030.
In autumn sin third quarter report The company has reported that its facilities so far this year will have a net negative CO2 effect of -141,000 tons. If we add up all the Otovo installations installed so far, the reduction effect will be approx. – 500,000 tons of CO2. This corresponds to a year of emissions of approx. 300,000 cars.
The climate summit in Glasgow 2021
What would the world look like? without Otovo technology? Solar panels would still be installed, but with Otovo on track, solar cells install faster and on more roofs than without Otovo. The question then is what additional effect the introduction of the unique technology has on Otovo.
If Otovo succeeds in achieving its ambitions in 2030, the total emission reduction will be up to -18 million tons of CO2 by 2030. The figures are significant, but it makes little sense without being able to answer all the above assumptions and questions.
Otovo is just one of many examples of projects that can make a big difference in the global climate, and on which Norwegian and international companies will benefit by acquiring knowledge. So we desperately need to implement standard methods to calculate future climate effects.
The best should not become the enemy of the good
No matter how thoroughly you try to experimentally calculate and predict future climate effects, the 2030s will be a bit off, and the 2040s and 2050s even more so.
But if investors use the same method and reports on the framework used for the calculation, the relative differences between investments will provide valuable information. It can then function as a decision-making tool to make good climate decisions when capital needs to be invested.
The way forward is to ensure a standardized methodology that is available to everyone. Here it must be widely mobilized because the more people use the same framework, the more valuable the carbon calculation system will be to investors.
The EU is introducing a broad regulations to define what are sustainable economic activities. This taxonomies it is an important step on the way to being able to conduct qualified investment appraisals.
However, we need a method to calculate future greenhouse gas reductions from investments made today. We are now in the process of finding solutions to such future carbon calculations. We are now collaborating with academia, other investors, and the business community to find standardized analysis tools to avoid future carbon emissions.
Along with, among others, Cleantech Scandinavia, who has published this introduction at the problem and at the University of Stavanger Business School (UiS), now in Nysnø we are refining our methods for calculating climate effects. We are part of the steering group in the international arena the FRAME project which precisely aims to contribute to a framework for future avoided greenhouse gas emissions.
In this way, we hope to take a few more steps to make better decisions. Now we also invite more people to join this team because together we will make good climate choices for the future.
In Glasgow, global decision makers met this month, and there are high expectations that good climate decisions and decisions will be made. When it comes to ensuring that the finance industry is mobilized to combat global greenhouse gas emissions, it is important that investors get both the financial returns and the greatest possible climate effect. My conclusion is that to make good decisions for the future, we simply have to start warning about the climate effect of investment decisions.
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