Terence Corcoran: Poo, Power, Profits And The Cult Of Green Investment

  • Date: 06/02/14
  • Terence Corcoran, Financial Post

From Toronto’s zoo poo bonds the World Bank’s fossil fuel divestment plan to green bonds and Muscrat Falls, green investment is uneconomic.

The RENIXX index of the world's largest renewable energy companies hit a new low last month. Has the green energy fad run its course?

At the high-powered World Economic Forum meeting in Davos last week, the head of the World Bank, Jim Yong Kim, called on the world’s top investors and pension funds to “divest” their fossil fuel stocks and bonds and move cash into green technologies. Canada contributes more than $400-million a year to the World Bank and holds 2.43% voting power: Was that voting power cast in favour of  Mr. Kim’s “get out of oil and gas” campaign, in contradiction to the Canadian government’s hunger for fossil fuel expansion and investment?

Not that it matters. The World Bank’s anti-fossil fuel effort, and its specific endorsement of the burgeoning international movement to promote fossil fuel divestment, is part of a globe-spanning effort that encompasses a vast range of initiatives. Canada is a leader in the field, with many projects underway. These range from the growing issuance of Green Bonds to the building of giant multi-billion-dollar so-called green energy projects. No project is too big or too small, whether it’s the recent $5-billion bond issue to fund Newfoundland and Labrador’s Lower Churchill hydro megaproject, or the current attempt by Toronto’s ZooShare Biogas Co-operative to float a $5.2-million community bond issue to build a biogas plant to convert Toronto Zoo animal waste into electricity.

All these endeavours are at the forefront of the growing cult of green investment. And what they all have in common, aside from a focus on ridding the planet of fossil fuels to save the world from climate catastrophe, is that they are fundamentally uneconomic. In the cult of green investment, capitalism is turned upside down. From the World Bank’s international divestment movement to the Toronto Zoo poo bond scheme, these are all wealth-destroying ventures and would not exist without government subsidies, often on a massive scale.

The marketing slogan deployed by ZooShare Biogas, the community bond issue now in a road show around Toronto libraries and via whatever crowdfunding options exist, is “Poo. Power. Profits.” It’s an odd slogan for a bond issued by a strictly non-profit organization. The objective is to raise $5.2-million to build a 500 kiloWatt biogas plant on Toronto Zoo property, produce electricity via anaerobic digester, and then sell the electricity to Ontario Power Authority at a price of 17-cents a kilowatt-hour, at least double current market rates for electricity — part of the Ontario government’s subsidized power rates for green energy producers. Small investors are invited to put between $500 and $5,000 into the bonds, which offer a return of 7% per annum over the next seven years.

The ZooShare bonds are beyond the reach of regulators as a crowdfunding initiative, and exist as exempt securities under the Ontario Securities Commission provisions for community projects. ZooShare’s claim to community service is that it will reduce carbon emissions equal to removing 2,100 cars from the road. The offering statement, however, contains more flashing “risk” lights than a slot machine.

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