Government mulls more money for green investment fund

Craig NBR interview

About half the $100m allocated to NZ Green Investment Finance has been invested so far. Brent Edwards of the National Business Review talks to NZ Green Investment Finance CEO Craig Weise about our investments to date.

The government is considering increasing its investment in New Zealand Green Investment Finance, with the fund having committed about half of its initial startup capital of $100 million.

So far, the green investment fund has announced one loan and three investments worth $24.6 million but two more investments are due to be announced in the next couple of weeks. It is likely those two new investments, one of which will be in distributed energy, will be worth about $25m.

NZGIF chief executive Craig Weise said about half of the $100m was now committed.

Does that mean it has now asked the government for more money?

Weise is reticent to answer, instead talking about the fund’s ambition for growth.

“One of our big focuses this year is scale, right? How do we work with other investors to get more capital, or leverage up our capital to do more in the market?”

He repeated he could not comment about asking the government for more money.

“[But] you could imagine that any company would talk to its shareholders about its capital requirements.”

While Weise wouldn’t comment in any detail, Climate Change Minister James Shaw confirmed that increasing NZGIF’s capital was “under active consideration”.

Shaw said the initial $100m injection was simply to start the fund off so it was no surprise consideration was being given to increasing its capital.

Good enough?

In September last year, Shaw said he expected the fund would increase in size as it became more successful.

Last June, Weise said the fund would appreciate more money and its chair Cecilia Tarrant said then it would have to wait and see how well it went investing its money.

“If we are able to do a good enough job, we would hope, yes, we would see more capital in the future but right now we’ll concentrate on the capital we have,” Tarrant said.

NZGIF also has the advantage of being tax exempt, although if it becomes a successful business there is the flexibility to shift it to becoming a taxpaying entity.

Meanwhile, Weise said he was satisfied with the progress the fund was making. It was not just a matter of the investments it made but the signals it sent to the wider investment market and how it worked with other investors.

Last year the fund made a $5.8m investment in Carbn Group and just last week that company announced a deal with electric motor bike manufacturer Ubco to expand its subscription service for the electric bikes.

Weise said that was exactly the reason NZGIF invested in Carbn Group. It saw a gap in the market in terms of helping the transition to EV transport fleets.

“So that transaction, although when we initially did it, it wasn’t on the table on the day, is exactly the kind of thing we wanted to see come out of that Carbn Group investment.”

Typical investor

How does NZGIF balance control of its investments against its appetite for risk?

Weise said the Green Investment Fund was pretty typical of any investor. With the investment in Carbn Group it put parameters around that cash injection to help the company on its way. In that case, too, it was involved at a governance level just like any other investor.

Aside from the Carbn Group investment, NZGIF has so far announced three other investments:

  • A $15m loan to CentrePort to help it lower it overall carbon footprint by introducing electric vehicles, on-site renewable energy generation and energy efficient upgrades. It was expected to act as an example to other ports;
  • A $1.1m equity investment in former Rakon associate Thinxtra, along with other investors, to help it speed up its deployment of technology, which allows firms to connect high volumes of devices, using very little energy to run; and
  • A $2.7m equity investment in Energy Solution Providers, which provides remote monitoring technology saving customers 10-50% on their power bills.

He said each investment or loan was measured against its return but also against the wider goal of lowering carbon emissions.

Weise said the Climate Change Commission’s draft report, which recommended significant changes were needed to achieve the goal of net zero carbon by 2050, had confirmed two things that NZGIF saw in the market. First, there were a whole lot of things already in the market which the fund could invest in to cut emissions. Second, it required joint action across the economy from the government, business, investors and individuals and that no action was too insignificant.

He said he was confident that the fund’s investments were helping foster green investment from the private sector. It was also showing the way for businesses to invest internally and on how they could use existing technologies to cut emissions.

For him the Thinxtra and ESP investments stood out. Thinxtra’s technology was a low-cost way to monitor activity and could have a huge impact on emissions by reducing unnecessary use of transport. Similarly, ESP, by monitoring energy use remotely, could have the same sort of effect on power usage in factories and at other sites.

NZGIF had invested in them for growth, enabling other businesses to use their services and reduce their emissions, he said.

 View the full article and video on the NBR website.