The Green Investment Fund

Stuff ?reports: quote.

The launch of New Zealand Green Investment Finance, with a $100 million capital contribution from the Government, fulfills a confidence and supply agreement between Labour and the Greens. Prime Minister Jacinda Ardern and Climate Change Minister James Shaw say the company is central to a plan to make New Zealand carbon neutral. But it has a complex task ahead.

The new board of New Zealand Green Investment Finance, a new $100 million Government-funded venture, faces a complex task.

It effectively has two different goals, which do not sit comfortably together.

As well as boosting funds flowing into projects which cut the carbon footprint of the New Zealand economy, it also tasked with turning a profit. [sic]

This could create a conflict, not because green technology is inherently unprofitable, but because the company is meant to act as a means to?boost projects which the market is? failing to back. end quote.

In truth, many green technology projects fail to make money. There could be a number of reasons for this. Firstly, high research and development costs. Secondly, high selling prices make them unattractive to buyers, who can often find cheaper alternatives. Thirdly, maintenance costs are often high. Any one of these factors could make the projects difficult, but all three make it nigh impossible. quote.

Does it target highly ambitious projects, which have a high risk of failure but could have a huge impact on New Zealand’s emissions profiles?

Or does it find low hanging fruit, with far more modest gains in reducing carbon, but which have a strong chance of making a profit for the fund?

As well as having commercial implications, investing in ventures which fail could have political costs. But what is the point in executing projects which make little difference? end quote.

If the object of the exercise is to promote green technology, it is fair to say that there is a risk that such projects will not make money. That is a significant issue for funds like this. It could well end up as a hole for the government… or more accurately, the taxpayer, to throw money into . quote.

New chairwoman?Cecilia Tarrant?said the fund will take the approach of having a portfolio of investments, with different amounts of risks across its investments.

The task of the fund is broad. Although it appears the company will target efficient commercial buildings, farming practices, electric vehicles and manufacturing processes, Cabinet has given NZGIF a “broad and flexible mandate”.

Not only will it work to identify which projects should be backed, it can design how to best structure investments as a means of getting the private sector to join the ride.

The venture fund picks experienced investors and outsources the decision-making, leaving the private sector to pick the winners. end quote.

Herein lies the problem. The private sector will want to invest only in projects that are likely to make money. Green projects don’t always do that. quote.

“The fund will be picking technologies that can’t attract capital in an open market. It will pick them precisely because they fit the Government’s own particular political preferences,” Act Party leader David Seymour said. end quote.

Almost certainly true and there is a simple rule in business. If a project is likely to make money, it will be adequately funded. This fund is likely to put a lot of money into projects that will lose money. quote.

The Government, meanwhile, sees the fund having a major task.

“The fund is a central plank in the Government’s plan to transition to a clean, green, carbon-neutral New Zealand,” which also fulfilled a confidence and supply agreement promise with the Green Party.

As Shaw says, $100 million “sounds like a lot of money”. In isolation it represents a significant commitment of taxpayer money, which could be spent in many other ways.

But it represents 3 per cent of the provincial growth fund, and less than half a per cent of the New Zealand Superannuation Fund. end quote.

I love the way they throw around our money like it is nothing. The government is responsible to taxpayers to account for the way in which they spend our money. Once again, the attitude of ‘it’s not much really,’ is prevalent. quote.

Ardern has described climate change as New Zealand’s “nuclear free moment”, while Shaw claims that moving towards carbon neutrality represents the greatest economic opportunity in a generation.

If either of them really believe that, the scale of the fund seems like a token effort. end quote.

This is just the start, of course. Once the fund is established, it WILL become a hole to throw taxpayers money into, but you have to start somewhere. This is where we start.

We already throw a lot of public funds into environmental projects, much of which is not well spent. This will end up as a slush fund for pet environmental projects. That may not be the intention at the moment, but this is how it will end up.

Photoshopped image credit: Luke