The unintended consequences of COP-15

The global climate talks scheduled to begin Dec. 9 in Copenhagen have brought the international spotlight onto Denmark, a small country with a hefty DKK 62 billion ($12.6 billion) in cleantech exports in 2008.

But the impact of legislation that could result from the meeting is already being felt throughout the investment community, said Lars Rohde, CEO of Danish pension fund ATP. 

"Almost every company and every structure of the society will be influenced by these developments," Rohde told the Cleantech Group. "As a pension fund we have to take this into account because we are long term investors."

ATP, which is among the five largest pension funds in Europe, began investing in cleantech because of the inevitable impact on financial returns, not the "feel-good" aspect of green investing, Rohde said.

"It's not rocket science. Climate change is foreseeable," he said. "We can foresee to a very great extent what is going to happen. We’re able to plan and get involved in a structured way going forward."

With €60 billion under management, ATP was established in 1964 and counts almost the entire Danish population among its investors. The firm invests internationally but holds at least 10 percent of domestic companies Vestas, Novo Nordisk and Maersk.

As clear-cut as climate change is for ATP, the firm's strategy for future investments depends heavily on the outcome of the COP-15 talks in Copenhagen, Rohde said (see Cleantech Group report: COP15 doesn’t matter).

"It’s our fiduciary responsibility to provide the highest return for whatever investment. If we haven’t got a legal binding agreement it will be more difficult," Rohde said. "We will make smaller investments, more risky investments, but also with higher expected returns."

However, a global framework would reduce the risk for private investors to make long-term investments in emerging markets, Rohde said.

"You'll see more investments in Asia and Africa and South America. I think we’ll have more investments in infrastructure and real estate in those areas, more investments in timberland," he said. "If there’s no agreement the investments will be no more focused on the developed world [than they are today]."

Rohde said 80 percent to 90 percent of future investment in this sector could come from private sources—if coherent, binding legislation reduces risk for long-term investors.

"The more specific the regulation, the less costly it is for private investors to cover some of these investments," he said.

Denmark was hard-hit by the energy crisis of the 1970s because 95 percent of its energy came from oil from Saudi Arabia. The government pushed for the discovery of new energy sources, provided incentives for energy efficiency, and levied high taxes on energy that remained even after the crisis was over, said Finn Mortensen, executive director of Climate Consortium Denmark, a public-private partnership set up to promote Danish industry during the COP-15 talks.

The government regulations resulted in the country's GDP increasing 80 percent while energy use remained essentially flat, Mortensen said. In addition, generous feed-in tariffs led to the growth of wind energy, which now makes up 20 percent of the country's electricity supply.

"The Danish wind industry was born on the back of the first oil crisis," Mortensen said.

Cleantech is now the fastest-growing sector of Danish exports for the past three years, and exports are expected to quadruple in the next four to five years, he said. The sector employs about 35,000 people in the nation of 5.5 million residents.

The COP-15 talks have "definitely" boosted the international awareness of Danish cleantech companies, Mortensen said, noting the actual impact on sales is difficult to measure. In addition, Denmark's "national brand" as been boosted by the COP-15 talks (see A Copenhagen call to action). A successful outcome could further help the country's cleantech industry, Mortensen said.

"Everyone hopes there's an ambitious agreement. It may be tough, but it has to be realistic," Mortensen said. "There has been so much pressure put on governments around the world they simply cannot fail to deliver some kind of solution in Copenhagen."

Cleantech developments making news in the past 24 hours

• Nexamp closes Series A round, brings on new CEO
• Water innovation beyond desal: the new opportunities?
• Areva to launch solar business with Ausra takeover

View the last week of cleantech developments here | Subscribe to full feed