Scion of Goldsmith family argues business gets sustainability and is leading a “green revolution” in the UK
UK Prime Minister David Cameron promised to lead a green government, but critics say his party has refused to follow (Pic: Number 10)
It’s currently fashionable to believe that bankers and conservatives share a common antipathy towards the environment and green issues.
The meme can draw on some fairly rich examples, but conveniently ignores a growing awareness within business and an existing centre-right lobby that regards conservation as essential for a strong economy and society.
For Ben Goldsmith, sitting in the Mayfair offices of his sustainable investment firm WHEB Partners, which manages two private equity funds worth €150m, the wise investor thinks green, although he admits it’s not always the most obvious choice.
“I think the nub of the problem is that people don’t fully recognise that absolutely everything we do is dependent on natural processes – every single thing the economy does is dependent on the environment and somehow that goes unrecognised,” he says.
“I think the answer lies in putting a proper economic value on services provided by nature and on natural assets, healthy ecosystems, such that when a development decision needs to be taken that affects one of those natural assets we get a full cost-benefit analysis.”
Speaking to RTCC as part of our Climate Leaders series, Goldsmith says business is now leading a “green revolution” which is likely to change the investment landscape.
Ben Goldsmith co-founded WHEB Partners in 2002
The brother of Tory MP Zack and nephew of Green Party co-founder Teddy insists he is not an eco-warrior, and there appears little chance of him donning a tie-dye t-shirt and joining the anti-fracking protests in Balcombe.
But the the former environmental advisor to Prime Minister David Cameron says business can change attitudes towards issues such as climate change.
Where once people were ridiculed, now investment is flooding in, not just from eccentric philanthropists, but also corporations.
“Just look at the scale of the capital that has already been deployed into renewable energy infrastructure. It’s immense,” he says, citing California and Germany as leading what he believes is a growing trend of low-carbon investment.
Market potential
Recent data suggests he may be on to something.
Bloomberg New Energy Finance says global investment in clean energy was US$53.1 billion in the second quarter of 2013, up 22% from the first quarter thanks to an upturn in the financing of wind and solar projects and a 170% surge in equity funding for specialist companies on public markets.
The US led the way with an investment hike of 155% compared to 2013’s first quarter, reaching US$9.5 billion, also China (up 63% at US$13.8 billion) and South Africa (up from almost nothing in Q1 to US$2.8 billion in Q2).
EU figures were disappointing – investment falling 44% compared to Q1, reaching just US$9.5 billion, the lowest quarter total for more than six years, but Goldsmith says on the whole, this is a sector on the move.
“It takes trailblazers – it takes businesses to start doing something new and to do it well and deliver the returns they said they’d deliver to build up credibility around what are effectively new asset classes,” he says.
When WHEB raised the first dedicated energy and resource efficiency fund in the UK in 2005 many raised their eyebrows. Now those same cynics are quietly asking to come on board.
“It’s increasingly becoming of interest and the more investment funds like ours that specialise in that [can show] these assets do deliver the yields that we say they’ll deliver and do so at the risk levels that we say are associated with these kinds of assets, the more investors will start to invest in this area.”
Fracking
Above this shining optimism float dark clouds. The UK government has pulled back sharply from its promise to be the ‘greenest ever’, with some right wing elements calling for the 2008 Climate Change Act to be repealed.
The debate over shale gas exploration threatens to poison the issue further as the ‘fracking’ issue splits on familiar political lines.
Supporters see domestic natural gas supplies as a source of cheap energy. Opponents say it will mean fossil fuels dominating the energy mix for years to come, and could see the UK break its carbon targets.
Goldsmith dubs drilling for shale gas in the UK as “a red herring” but says he supports its use as a transition fuel away from coal.
“Fracking is a one off phenomenon in the US. I don’t believe in the fracking in Europe, I think Europe’s too densely populated,” he says.
“You can’t even put a wind turbine up in most constituencies – the Tory grassroots freak out if there’s a wind turbine – imagine a fracking rig.
“In the US it will have an impact – it’ll reduce energy prices, it’ll delay the time until renewable energy is genuinely compatible.”
Motivation
Some would suggest Goldsmith should choose the green or fracking camp and stick in it, but the man himself seems unconvinced.
Describing himself as “brutally conservative”, Goldsmith says the UK is still a country where you can be green and right wing, unlike, for instance, the States: “I couldn’t vote Republican in the USA – I would vote Democrat,” he says.
His green instincts developed from an early age as a result of his brother Zack, a keen environmentalist and now a Conservative MP. Goldsmith says he spent his childhood years as a “devoted wildlife watcher and nature lover”.
And while his father Sir James Goldsmith set up the Eurosceptic Referendum Party, his uncle Teddy was one of the founding fathers of the UK Green Party, which Ben gave £20,000 to in 2004.
“He was an amazing man and was talking about this before anyone gave a shit – he was talking about this stuff when it seemed almost a little crazy and really weathered the storm of criticism and then just as the debate opened up and people had come to accept the ideas that had been thought of as radical was pretty rational and became mainstream and then he died.”
Carbon bubble
While Goldsmith no longer funds the Green Party, he shares many of its concerns over Arctic exploration by fossil fuel companies.
It’s a fear based on a economic and environmental foundation. From an investment perspective many believe a carbon bubble based on oil and gas reserves the earth cannot afford to burn is being created.
Some warn this could create stranded assets worth US$6 trillion in a decade, and precipitate a repeat of the 2008 financial crisis.
“I’m terrified by the prospect of exploration for oil and gas in the Arctic,” says Goldsmith. “There would be an ecological catastrophe – really difficult to clean up the mess.
“And it’s quite likely that accidents will take place – you saw the test rig that Shell tried to launch a few months ago. So I’m really really scared about the prospect of drilling for oil and gas up there.”
He adds, perhaps over optimistically, that governments are starting to “wake up” to climate change and ocean acidification, citing Australia’s carbon tax, China’s pilot emission trading scheme and California’s cap and trade market.
“Barriers have been put in the way of releasing more carbon and yet markets should do more of this,” he says.
Multiple benefits
Many countries and markets remain resolutely hostile to carbon taxes or trading schemes, with critics citing the cost of ‘going green’ on industry and jobs.
It’s a familiar and persuasive argument heard in the halls of Westminster, on Capitol Hill and in government offices around the world.
Goldsmith sees the issue differently: “What’s that quote? “What if climate change is just a hoax and we’re building a better world for nothing?” I think the people need to be persuaded about how good a world we can build if we invest in clean energy,” he says.
“I think some things we want to be doing irrespective of climate change – do we really want to have a massively expensive and trouble provoking military presence in the Middle East just to ensure supplies of oil?
“Do we want to be pumping trillions of dollars every year fuelling our economic deficit into the hands of some of the most totalitarian regimes in the world because we’re addicted to the stuff that they sell us?”
Better regulations, cheaper renewable energy systems and a potential UN emissions treaty in 2015 may go some way to alleviating those concerns, but Goldsmith says through sensible investment, business can also take a progressive lead.
“I think businesses are way ahead of the curve – I think that we really are undergoing a green industrial revolution,” he says.
“I think that Prince Charles said that accountants can save the world. I think putting a proper economic value on natural assets and making people pay in some way for the services they provide as well for the damage that they do to natural assets – I think that’s a big part of the answer.”