Hedge funds: Green trimmings
Impax Asset Management: Shorting the non-environmentalists
Climate Change Capital: Towards a carbon hedge fund
Clean Energy Asset Management: Focusing on renewable energy
 |
“Evidence points to the water credit market as being the major environmental market to be formed” |
John Regan knows a few things about environmental credits. Three-and-a-half years ago he founded Environmental Credit Corp, a carbon-credit supplier on the Chicago Climate Exchange. ECC installs covers over dairy and hog manure lagoons to trap methane, creating carbon credits that can be traded on the Exchange. He is now setting out to venture into the developing water markets with his latest project, BioFinancial Corp (BFC), a California and New York-based environmental credit project developer, credit aggregator and hedge fund group. BFC is launching a project development fund that will, in addition to trading carbon and other environmental credits, create and trade water credits.
“When I started looking at the carbon space five years ago, very few people knew what carbon credits were,” says Regan. “Today, the carbon credit market is the fastest-growing market in the world and Wall Street is pouring billions into it. Available evidence points to the water credit market as being the next major environmental market to be formed,” says Regan. “Global access to potable water is being depleted at an alarming rate. Mankind can survive many years living in a greenhouse gas environment but will perish in a matter of days without water. Both globally and regionally in the US we see a water crisis emerging.”
Regan sees a developing water “cap and trade” system similar to that in the carbon markets. Water polluters must reduce pollution internally or buy water pollution credits from another source. Already, 21 US states are initiating regional water quality trading programmes in response to Environmental Protection Agency initiatives as well as Clean Water Act measures for managing point and non-point sources of pollution.
“Water pollution is a serious problem and we need to find solutions. As witnessed in the carbon market, this sort of system will inspire innovation because there is money to be made from offsetting pollution,” says Regan.
The largest global water polluters are agriculture, municipal waste, urban sprawl and industry. With less than 1% of the planet’s freshwater supply available for human consumption, the cost of drinking water is expected to increase more than five times worldwide in the next 15 years because of shortages and quality security.
“We could see a 10-fold increase in the cost of water if the global water crisis continues to worsen. Simply put, drinking water is a basic human right, yet without vast capital resources for municipal infrastructure, innovations in pollution management and technologies to reduce the cost of desalinization, there simply won’t be enough to sustain civilization,” says Regan.
Although Regan has become an environmentalist, he is also a businessman and sees water as a huge opportunity. Of the $20 billion invested via the top 20 venture capitalists in 2006, only $71 million is estimated to have been invested in water. “The world needs the support of venture capital and the financial markets to help solve water pollution problems and develop a sustainable system for mankind to live in harmony with the planet,” Regan says.
