Launching the Investor Confidence Project Europe

One of the essential pieces of the jigsaw that we have to build to greatly accelerate investment into energy efficiency, particularly third party investment, is the standardization of project development and documentation. This is the area addressed by the Investor Confidence Project (www.eeperformance.org), an open-source initiative created by the Environmental Defense Fund in the USA which has created Protocols for developing projects in different categories of building and has considerable traction with banks, investors, the energy efficiency industry, and city and state programmes. As well as Protocols the Project has launched a Quality Assurance system called “Investor Ready Energy Efficiency SM” and an open data initiative. The Investor Confidence Project approach reduces due diligence time and cost, enables aggregation of projects and ultimately will facilitate a secondary market in energy efficiency finance such as the issuance of bonds. It also allow banks and financial institutions to build teams around standardized processes – no bank or investor can build a team around an ad hoc approach where every project is different which is the current state of affairs in energy efficiency.  In time it will allow the collection of standardized performance data which can be used by investors. All of these things are necessary to facilitate a thriving and much enlarged energy efficiency financing market as no financial product – or at least no financial product that is used at scale – can exist without commonly agreed standards. Think about the standardization behind mass-market financial products such as mortgages, car loans, credit cards etc, and the bonds being used to re-finance them which draw on the debt capital markets. Unless we can get to that stage with energy efficiency finance we can’t finance the huge amount of investment that we need to. The Building Performance Institute Europe estimates that between €500 billion and €1,000 billion needs to be invested in energy efficient renovation of Europe’s buildings by 2050. This level of finance can only come from the private sector.
 
The Investor Confidence Project Europe concept has had some great support, the EU and UNEP Energy Efficiency Finance Investors Group (EEFIG) in its report, “Energy Efficiency – the first fuel for the EU Economy,” specifically highlighted the Investor Confidence Project and said that “[Europe needs the] launch of an EU-wide initiative to develop a common set of procedures and standards for energy efficiency and buildings refurbishment underwriting for both debt and equity investments”. The International Energy Agency in its “Energy Efficiency Market Report 2014”, issued on 8th October said: “[Investor Confidence Project] will facilitate a global market for financings by institutional investors that look to rely on standardized products rather than project-specific structuring and due diligence.”
 
After many months of effort and work with the Environmental Defense Fund we have obtained funding and will be launching Investor Confidence Project Europe in Brussels on 5th November before the Renovate Europe event (http://www.renovate-europe.eu/reday2014/reday2014-draft-programme), and presenting at the BPIE Investor Day on 6th November (http://bpie.eu/investors_day.html). Building on the success of Investor Confidence Project in the US, the Investor Confidence Project Europe will bring together investors, banks, property owners and the energy efficiency industry to develop protocols to standardize the development and documentation of energy efficiency projects.  
 
It is important to understand what the Investor Confidence Project is not. It is not developing new technical standards – plenty of these exist, rather it is about using the available standards in a common way through the entire process of developing and documenting energy efficiency projects. It is not about limiting engineering creativity. It is not about standardizing contracts – there have been previous attempts at this in Europe particularly around Energy Performance Contracts. As I have said several times before we need innovation in contract form and the Investor Confidence Project approach can be used with any contract form, or any source of funds – including internal corporate funds (CFOs are investors too). Finally the Investor Confidence Project Europe is not about enforcing a US model – the process of developing a project everywhere goes through the same stages but uses different engineering standards. What will be common between the US and Europe is an approach, not specific standards or protocols. This is essential because the world of finance is international and many of the large institutional investors who want to invest in energy efficiency, but are currently constrained from doing so, operate on both sides of the Atlantic and indeed around the world.
 
We have built a powerful pan-European coalition of banks, development banks, investors, property owners, ESCOs, energy efficiency companies, government agencies, NGOs and others who are supporting the Investor Confidence Project Europe. We have a Steering Group (still a few spaces left if anyone wants to volunteer) and are recruiting a Technical Panel to contribute to and oversee the drafting of the protocols to ensure they can be readily used. We have a Project Director, Panama Bartholomy, (panama.bartholomy@eeperformance.org) who has a wealth of energy efficiency experience gained in Californian government but now lives in the Netherlands. We are looking forward to kicking off the project. We are looking to further engage with investors, banks, cities and regions looking to accelerate investment into energy efficiency.
 
To support this important initiative, please sign up as an Investor Confidence Project Ally at http://www.eeperformance.org/europe-allies.html, volunteer for the Steering Group, a national Steering Group or the Technical Panel.
 
Please direct any questions or suggestions to myself or Panama. We look forward to working with everyone involved and really helping to accelerate investment into energy efficiency.