THE GALLON ENVIRONMENT LETTER

Canadian Institute for Business and the Environment

Fisherville, Ontario, Canada

Tel. 416 410-0432, Fax: 416 362-5231

Subscriptions: subscriptions@gallonletter.ca

Vol. 18, No. 8, December 8, 2014

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ABOUT THIS ISSUE

There's been a lot of talk recently about Green Bonds but it has been somewhat unclear, at least to GallonLetter‛s editor, what it is that makes a bond, or other financial instrument, green. So for this last issue of 2014 we have delved into the topic and have come up - well, read on to find out what it is that we have come up with!

We also discuss some of the features of the recent packaging expo, PACK EXPO, held in Chicago, including the nearby homes and buildings designed by Frank Lloyd Wright, an early US eco-visionary architect. We also use the recent two metre dump of snow on Buffalo, New York, to explain why more snow does not mean less climate change. In fact, the more snow may be caused by climate change.

As we go to press, the nations of the world are gathered in Lima, Peru, under the auspices of the UN Framework Convention on Climate Change. Expectations for major decisions are essentially zero, with next year's meeting in Paris having been designated as the key decision point for a new international agreement on climate change but hopes even for that waypoint are not very high at this point. In our next issue of Gallon Environment Letter, early in January, we will review the Lima meeting, its announcements and its outcomes.

We wish all our readers the very best holiday season and here's hoping for more sustainable development for all the people of the world in the New Year.

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FEATURE: GREEN BONDS

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GREEN BONDS: CONTRIBUTION TO A GREEN ECONOMY

At a time of financial downturn, green bonds are a way of expanding financing sources to help meet environmental goals but they should not be regarded as a panacea, states a 2012 paper by the Paris-based organization CDC Climat (1). Green bonds are defined as bonds that result in environmental benefit or reduced environmental vulnerability. Climate bonds are green bonds which are investments in adapting to or mitigating climate change.

Among some of the observations are:

Institutional investors (e.g. banks, pension funds, insurers) are active in the bond market because of the risk-return ratio, transaction volume size (large preferred) and bond standardization which reduces processing cost. GallonLetter notes that some observers regard this predominance of institutional investors as a weakness in the green bond market.
Unlike conventional bonds, green bonds generally require monitoring or reporting on whether the funded initiatives have achieved their environmental objectives. As standards for green bonds develop, the type of assurances about the environmental benefits, not only potential but achieved, add to the cost of issuing the bond.
Green bonds expand the ability of the issuer to access Socially Responsible Investors who have incorporated non-financial criteria, social, environmental and governance ESG, a market that has been seen growth.
Many of the projects funded by green bonds have features suitable for bonds with upfront costs followed by steady returns over the long term e.g. from renewable energy or energy efficiency projects.
Investors in different countries vary in their interest in responsible investment funds. Pension funds in the UK and The Netherlands are more likely to be interested in investment in environmental initiatives in order to label the investment as responsible. Some institutional investors have signed on to various initiatives such as the UN Global Compact and sustainable finance commitments which increases their interest in green bonds.
Multilateral institutions and governments can provide guarantees, reducing the risk and often providing fixed rates of return. The report suggests that depending on regulations in different countries, some private green bonds "are hampered by a less favourable reputation in the markets" e.g. bonds are called green but are not directed to environmental projects. Various solutions have been developed including pooling multiple but related projects e.g. wind energy in Germany and France, with public guarantees of such projects through export credit agencies (see also separate article on Export Development Canada). Standards for green bonds such as the Climate Bond Standard, audited by independent verifiers, can ensure that the investment meets ESG criteria, protecting the reputation of the investors.
Governments including local governments can use the issuance of green bonds to raise awareness of their commitment to environmental initiatives.
Issuers with both conventional and green bonds may not be offering any different investment than before because projects called green such as infrastructure e.g. wastewater treatment, were always part of the conventional bond issue. Additionality means that the green financing is in addition to rather than merely replacing already existing or likely to exist financing. Even without additionality, it is possible that a green bond requires best environmental practices and then does improve the environmental benefits as well as increasing awareness of best practices.

Staging of Green Bonds into Further Action

"Green bonds provide a promising solution to early-stage funding issues, and therefore complement existing climate tools as emissions trading systems or carbon offsetting. Thus, the first ones – the green bonds - help to finance the projects made profitable by the second ones – the climate tools." concludes the report, "Bonds are part of the preferred mechanisms envisaged for the operational implementation of the Green Climate Fund at the international level. The purpose of this fund is to manage a significant portion of the new additional funding from developed countries for developing countries’ climate policies."

Note (1) Self description: "CDC Climat is a limited company that is wholly-owned by Caisse des Dépôts. The Caisse des Dépôts et Consignations is a French financial organization created in 1816, and part of the government institutions under the control of the Parliament. CDC Climat provides independent expertise on economic issues relating to climate policies in four areas: the carbon and energy markets, emission-reduction initiative mechanisms in the farming and forestry sectors, local climate policies, and investment and assistance with decision-making. CDC Climat Research is ranked as the leading think tank in France and 7th in Europe for climate issues."

Morel, Romain, Research Fellow and Cécile Bordier, Club ViTeCC. Climate Brief N°14 – Financing the transition to a green economy: their word is their (green) bond? Paris, France: CDC Climate. May 2012. http://www.cdcclimat.com/IMG/pdf/12-05_climate_brief_14_-_financing_the_transition_to_a_green_economy-_their_word_is_their_green_bond.pdf

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CERES: GREEN BOND PRINCIPLES

Endorsed by a number of big banks and other investment groups, Green Bond Principles is

a set of voluntary guidelines for issuing green bonds. GBP provides for availability of information and standard disclosures for evaluating the environmental impact of the investment. However, the guidelines don't claim to provide authority on some key issues. For example, investors have to decide for themselves whether the funded projects are eligible green projects based on the information provided by the bond issuer.

The guidelines cover four dimensions:

1) Use of Proceeds: The issuer should declare what the eligible categories are e.g. a potential but not limited list includes:

Renewable energy
Energy efficiency (including efficient buildings)
Sustainable waste management
Sustainable land use (including sustainable forestry and agriculture)
Biodiversity conservation
Clean transportation
Clean water and/or drinking water.

These categories should have clear environmental benefits which should be described and if possible, assessed and/or quantified.

2) Process for Project Evaluation and Selection: The issuer should have a process to determine the overall environmental profile including both direct and indirect impacts, including social and governance issues and whether the investment fits the eligible projects.

3) Management of Proceeds: The proceeds should be tracked and publicly disclosed. Independent third party auditing to verify the tracking of the fund flows is offered as one of the options for auditing/verification but is not required.

4) Reporting: Annual or semi-annual reporting should provide details on projects and investment in that projects and intents about investments for unallocated proceeds. Issuers should use impact reporting standards that have been developed over the last few years to report on indicators such as reduced greenhouse gas emissions, number of people with increased access to clean drinking water, and so on.

Assurance that the Green Bond offering meets the GBP can include hiring a consultant whose recommendations may or may not be made public, third party independent verification or certification. GallonLetter thinks that an independent auditor could have difficulty providing assurance because of the generic nature of the guidance provided by the principles at this stage.

Ceres, formerly the Coalition for Environmentally Responsible Economies, has long been involved in investment in sustainability and directs the Investor Network on Climate Risk and Business for Innovative Climate and Energy Policy.

Paid subscribers see links to original documents and references here.
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GREEN BOND INDEX LAUNCHED

Barclays MSCI Green Bond Index, launched in November 2014, will provide assessment on four dimensions in addition to fixed income index criteria said to be of interest to green investors. These are "use of proceeds, project evaluation, management of proceeds, and reporting."

Sean Kidney, CEO of the Climate Bonds Initiative, is quoted as saying, “The green bond market has grown enormously in recent years. The availability of market standard indices is important in establishing clear, broadly accepted guidelines for the new issuers rapidly entering the market. The stature of Barclays and MSCI will help to bring attention to green bonds.” The green bond market is expected to be US$30-$40 billion this year rising to $100 billion next year. The index is said to improve the transparency and to standardize evaluation as a tool for both bond issuers and institutional investors in what was once a niche market and is now seen as an important new market.

Paid subscribers see links to original documents and references here.
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"CLEAN CAPITALISM": CLEAN50 RECOGNIZES 2015 CONTRIBUTORS

Delta Management, an executive recruitment company which searches for candidates for jobs requiring clean tech, corporate social responsibility and sustainability professionals, founded the Canada Clean50 Award program which recognizes "green collar" people, both clients and candidates, at a Summit held in September 2014.

In terms of this issue's feature on investing, one of the categories is Angels: Investors & Eco System Support. One of the honourees is Celine Bak, Founder and CEO, Analytica Advisors. The firm provides research on the Canadian cleantech industry, global markets and working with investors and others including government, set a goal to achieve a $60 billion clean technology industry by 2020. She is founder of the Canadian Clean Technology Coalition and Global Sector Practice Leader for Clean Technology at DFAIT (Foreign Affairs, Trade and Development Canada).

Other honourees in the Angel category were:

Rui Resendes, Executive Director, GreenCentre Canada. In two years, the GreenCentre is said to have invested just over $5.6 million in 76 technologies and new ventures across Canada and leveraged $22 million more.
Don Roberts, Vice-Chair, CIBC Wholesale Banking. He is said to be the only vice chair of a major financial institution with a primary mandate for renewable energy and clean tech. Last year, CIBC was first in Canada and fifth in North America for providing debt financing.

Project Honourees

Among the 15 projects recognized, again in line with GallonLetter's theme, was SolarShare, a provincial cooperative which invests in commercial scale solar projects and sells bonds when the facilities are already built.

The Ontario government buys the electricity generated under a 20 year contract. In order to buy the bond, investors must be residents of Ontario, pay a lifetime membership fee of $40 and buy a minimum of $1000 worth e.g. the latest offering is a 5-year bond maturing October 2019 and paying an annual interest rate of 5%. For 2014, $8 million in solar bonds have been offered and $6 million sold. Although the bonds are described as RRSP eligible, there are special instructions for that kind of purchase.

Some of the other projects recognized include:

HP designed for the environment to make print cartridges recyclable and with plastics recycler Lavergne Group, is using the recycled material to make new cartridges.
TELUS Corp's 80% less energy use at its Quebec Data Centre won the People’s Choice “Top Project” Award
The Weston Environmental Leaders of Tomorrow, a curriculum program for grade six offered to students in Ontario by the Toronto and Region Conservation Authority provides environmental education and experience such as overnight trip at outdoor centres. GallonLetter is particularly interested in this as one of our associates is involved with a local nature-oriented group which encouraged and worked to prepare the facility/grounds so that the Grand River Conservation Authority reopened a local nature centre for children and school group experiences.

Nominations for the 2016 Clean50 to be announced September 2016 are open until July 1, 2015

Note: GallonLetter's writing about investments is for providing examples of what is going on and should not be taken as an endorsement; readers should check for themselves on all matters.

Paid subscribers see links to original documents and references here.
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PROVINCE OF ONTARIO GREEN BONDS

Ontario became the first government in Canada to issue green bonds with an issue of $500 million for which there were orders totalling $2.4 billion by Canadian and international institutional investors. The framework for the green bonds are said to be consistent with the Green Bond Principles. Funding from the first green bond will be used to fund the Eglinton Crosstown Light Rail Transit which is described as the largest transit expansion project in Toronto history, scheduled to be completed in 2020. The bonds are part of the province's economic plan which has funding for $130 billion in infrastructure over ten years. The Auditor General of Ontario will audit use of funding for these projects.

Project selection is done by the province by the Ontario Financing Authority (OFA) with advice from the Province’s Green Bond Advisory Panel (GBAP) which has staff from the

Ministry of Environment and Climate Change and other ministries and agencies depending on the project e.g. Metrolinx for public transit with guidance from the Green Bond framework. Specifically excluded are fossil fuel and nuclear projects. Projects include:

Clean Transportation e.g. public transit projects
Energy efficiency and conservation e.g. public sector building efficiency improvements
Clean Energy and Technology e.g. smart grid infrastructure and energy storage
Forestry, Agriculture and Land Management e.g. sustainable forest management
Climate Adaptation and Resilience e.g. flood protection and storm water management

Finance Minister Charles Sousa said, "Ontario's green bond program will help us invest in transit and other sustainable infrastructure projects across the province, which will help create new opportunities for all Ontarians." While many of us living in sparsely populated areas understand the difficulties of transit here, a long term plan that includes some level of transit to connect more remote regions to the city transit services or local job centres ought, in our opinion, to be on the table for discussion for green infrastructure.

Ontario. Ministry of Finance. News release. Strong Demand for Ontario's First Green Bond. Toronto, Ontario: October 9, 2014. http://news.ontario.ca/mof/en/2014/10/strong-demand-for-ontarios-first-green-bond.html and the province's web page for green bonds which includes the framework: http://www.ofina.on.ca/greenbonds/greenbonds.htm

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WORLD BANK GREEN BONDS

Green Bonds pioneered by The World Bank and the International Finance Corporation in 2008 were intended to raise awareness of the opportunities in climate friendly investment. Since 2008, the World Bank has issued $7 billion in green bonds in 17 currencies and the IFC $3.7 billion. While small potatoes in the $80 trillion bond market, the popularity of green bonds, according to a brief from the World Bank in October "took off in 2013, and it has been growing as investments in environmentally friendly growth gain popularity. Green bonds are fixed income, liquid financial instruments that are easy to understand, and the funds they raise are dedicated exclusively to climate-mitigation and adaption projects, and other environmentally beneficial activities. This provides investors an attractive investment proposition as well as an opportunity to support environmentally sound projects." Private finance is seen as essential to confront climate change at a time when government budgets are pinched. The Green Bonds issues by the World Bank Treasury and IFC are used to fund "renewable energy, energy efficiency, sustainable transportation and other low-carbon projects, as well as financing for forest and watershed management, and infrastructure to prevent climate-related flood damage and build climate resilience." Green bonds also provide an alternatives where investors seek to divest from fossil-fuel investments.

Expansion of Green Bonds

By October 2013, the green bond market was estimated to be over $32 billion. Other development banks, states, cities and corporations are working with the World Bank and IFC on the use of green bonds. In April 2014, the World Bank entered into an agreement with the Dubai Supreme Council of Energy (DSCE) to design a Dubai green investment program.

State of Massachusetts, Ile de France, and Export Development Canada have issued green bonds and the French utility GDF Suez issued the largest green bond yet, a 2.5 billion euro ($3.4 billion) bond for renewal energy projects in May 2014. Low-carbon growth is the focus of an investment in November 2013 by Zurich Insurance for a green bond portfolio of USD 1 billion managed by BlackRock.

Green Bond Principles

Led by a group of banks and developed with Ceres, the Green Bond Principles were published in January 2014 to set some standards and provide more transparency about what the money collected through green bonds is used for, for example, the sectors funded include "renewable energy, energy efficiency, sustainable waste management, sustainable land use, biodiversity conservation, clean transportation, and clean water." About 55 large banks, investors, investment management and others have expressed support for principles including America Merrill Lynch, Citibank, Credit Agricole, JP Morgan Chase, Goldman Sachs, HSBC and SEB.

Multiple Benefits of Green Bonds

Both society and the environment benefit from green bonds. Examples from the World Bank and IFC green bonds include:

A geothermal project in Indonesia increases access to affordable, clean energy and reduces 1.1 million tons of greenhouse gas emissions annually.
Improved energy efficiency in factories in China reduces costs and 4 million tons of greenhouse gas emissions a year.
A large scale solar power facility in Mexico provides energy for 164,000, provides jobs and avoids air pollution and greenhouse gas emissions from diesel generators.
An Indian company is recycling e-waste from computers and other electronics providing employment while reducing toxic disposal to the environment and avoiding risks to human health.

Paid subscribers see links to original documents and references here.
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EDC: GREEN BONDS

Export Development Canada, an agency of the federal government, launched its first green bond on January 23, 2014, a USD 300 million, 3 year global offering to support financing of environmental-related business including remediation of air, water or soil and climate change mitigation. (see GallonLetter Vol. 18 No. 6 Canada EDC Releases CSR Report)

An independent review of EDC's Green Bond Framework for assessing eligibility for Green Bond investment, though not of individual projects, by CICERO, a research centre at the University of Oslo made the following observations among others:

EDC is modelling its framework on IFC, World Bank and OECD. The EDC framework also addresses host country requirements.
Detailed assessments of the projects in which green funds are invested present challenges due to differing methods and interpretation, data availability, and subjectivity no matter how many experts contribute to the assessment.
Transparency not only about assessment and selection processes but about the specific projects judged to be eligible and details about the investments actually made is essential.
Criteria also target what is not eligible e.g. Green Bonds cannot be used to invest in coal power although commercializing carbon capture and storage could change that.
Even if a specific project reduces greenhouse gas emissions, there may be a rebound effect e.g. the energy efficiency may reduce the cost of the power resulting in more energy production hereby increasing the GHGs.
Based on the sectors which are eligible for Green Bonds, some sector projects may have many challenges in measuring and verifying effects and some may have little effect on GHG emission. For example, water management may have little impact on GHG emissions but have other positive effects and be positive for water supply security. Renewable energy development has environmental impacts and is likely to be in addition to fossil fuels use rather than replacing them potentially leading to more GHG emissions. Sustainable Forests Management likely leads to reduced emissions of carbon dioxide but may not be permanent so the time line is key.

The conclusion of the second opinion which focuses on the GHG emission reduction potential of the Green Bond Framework is that the EDC has established a reasonable system although there are too many methods and frameworks for assessing projects which result in inconsistencies. The sectors most likely to reduce GHG emissions are "waste management, recycling & recovery, renewable energy, alternative energy transportation and public ground transport, and industrial process improvements."

Export Development Canada EDC. Green Bonds. https://www.edc.ca/EN/Investor-Relations/Pages/green-bonds.aspx

Asbjørn Torvanger, Ph.D. Senior Research Fellow, CICERO(1). Second opinion on Export Development Canada (EDC)’s framework for Green bonds. 15 January 2013. https://www.edc.ca/EN/Investor-Relations/Documents/second-opinion.pdf

Note(1) CICERO is the Center for International Climate and Environmental Research, an independent research centre associated with the University of Oslo in Norway.

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CALIFORNIA: PROP 1 WATER BONDS

Slightly more than 67% of California voters voted yes on Proposition 1 on the November 4, 2014 ballot: Prop1 approves a $7.12 billion bond for California's water system, including

state water supply infrastructure projects, such as surface and groundwater storage; ecosystem and watershed protection and restoration; drinking water protection; water supply management; water recycling and advanced water treatment technology; and flood control.
transfers $425 million of bonds not used from prior water bond acts.
allocates money from the General Fund to pay off the bonds. Bond repayment is estimated to cost $360 million per year for forty years.
requires matching funds from non-state sources for some projects

Arguments in support

Among the authors in favour side of Prop 1 in the state's official voter's guide was Governor Jerry Brown. The argument included:

Both environment and economy are addressed by the bond to supply reliable water sources for agriculture and businesses affected by multi-year drought and an aging water infrastructure.
The investment is fiscally responsible because it deals with critical projects.
Existing water supply is protected by clean up of contaminated groundwater, water recycling, efficiency improvements and provision of clean drinking water where contamination is an issue.
New storage will increase the amount of water available during dry years.
Lakes, rivers, and stream will be protected from pollution and lead to restoration of fish and wildlife.

The Yes side is supported by both Republicans and Democrats, conservation groups such as the Nature Conservancy, Ducks Unlimited and the Natural Resources Defense Council NDRC, farm groups such as California Farm Bureau Federation, and other groups. NRDC says that investment in environmental restoration projects will protect salmon and other fisheries and that though critics say the bond will fund dams, new dams are not earmarked.

Arguments against

Various groups issued statement of opposition some of which focussed on the idea that the bond will do nothing for long term water self-sufficiency because funds will be directed to the same old poor water planning that caused the water shortage in the first place with serious environmental impacts. For example. The California Sportfishing Protection Alliances makes a number of points most of which relate to the idea that environmental protection is "eviscerated" while "extravagant subsidies" are given to special interest groups. Arguments against include:

The bonds undermine the principle of beneficiary pays. Many projects such as dams and other damaging projects have remained unfunded because the water users would have had to pay. Now the taxpayer will pay and speculators will make millions in profit selling back water already owned by the public back to the public.
Instead of requiring those who contaminated the water or caused other environmental impacts to the water, taxpayers will be footing the bill. The state should require the polluters to pay for the damage they have done.
Dam projects on rivers will have large allocations with damage to fish stock.

The Centre for Biological Diversity focussed on protection of species mentioned arguments in opposition such as:

Imperiled Chinook salmon, smelt and steelhead will be further stressed with more demand in the Sacramento-San Joaquin Bay Delta. Instead of building more dams for "powerful Big Agribusinesses", there should be more investment in water conservation, efficiency and recycling.
About $572.2 million is allocated by the bond for buying water from upstream sources which becomes abandoned water to be used from the Delta at a cost to ecosystems and species.
$2.7 billion is allocated for water storage. More dams and reservoirs will damage ecosystems without adding very much in drought times; all is paid for at taxpayers expense.
Due to the unpredictable climate facing California, the bond won't result in long-term water solutions.

Paid subscribers see links to original documents and references here.
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SANDOR: MARKET-BASED TRADING SYSTEMS FOR REDUCING POLLUTANTS

Green bonds are just one of the market-based approaches to dealing with climate and environmental issues. Emissions trading is another. Richard Sandor, founder of the Chicago Climate Exchange, did a lot of work to develop the emissions trading process.

With a doctoral thesis on the economics of innovation (University of Minnesota, 1967), Richard Sandor moved from professorship in business to being economist at the Chicago Board of Trade, over time becoming a financial inventor of innovations including electronic exchange and financial products such as futures contracts. He suggests that certain financial innovations create supply and demand for products which previously didn't exist adding to economic benefits as well in specific applications to environmental needs. His 2012 book, Good Derivatives, is a biography, a history of the changes in the commodities trading systems over the last four decades and a training manual on how the financial products are structured which could be more than you ever wanted to know. It provides an insight into the risks and challenges faced by his involvement in creating the Chicago Climate Exchange. He was elected to the CBOT Board of Directors in 1990; when the Clean Air Act Amendment of 1990 was passed, he proposed a market solution to acid rain because "My research suggested that a futures market in SO2 allowances was potentially as big as wheat futures. It has the potential to benefit America." The US Environment Protection Agency eventually awarded the right to conduct the annual auction of SO2 to CBOT. The first auction was held in 1993 with most of the bidding done by U.S. utilities which thought that buying permits was cheaper than the cost of abatement. SO2 permit prices ranged from $122 to $450 a ton of SO3 while the cost of abatement ranged between $400 to $800 a ton. Greenpeace protesters marched to protest the trading of pollution but Sandor wrote that the environmental group ignored that trading was the best way to solve pollution problems at the lowest possible cost to society. By bidding on the permits, civil society including environmental groups can also participate in retiring the permits thereby reducing the amount of emissions allowed.

Sandor lauds the early leadership role by the U.S. in climate change. During the Kyoto Protocol negotiations, the U.S. was promoting emissions trading while the EU was sceptical - later this turned around. His book provides details on engineering the market architecture for a carbon market which eventually led to his setting up the Chicago Climate Exchange CCX as a US company which traded CO2 allowances from 2003 to 2010. While companies voluntarily joined and traded with a peak price reaching $7.40 per ton in mid-2008, the lack of US federal legislation on climate change caused a decline to $0.05 by 2010. CCX tried to lobby for federal recognition of early action by companies but supportive legislation which could have benefitted CCX died partly due to, in his view, the dysfunction in Congress, the favouring of command-and-control after the 2008 economic crisis added disillusionment about market forces and courtroom challenges to the US EPA about its right to regulate greenhouse gases. Another problem Sandor identified was the lack of institutional memory in Congress: he says the average age of many of the staffers is under 30 years or so and they were too young to have seen the effectiveness of some of the market systems to address pollution e.g. acid rain and the smaller scale but effective phasing out of lead in gasoline in 1982 where companies had a cap of 1.1 grams of lead per gallon but could buy and sell lead rights and even bank lead rights for use in later years saving an estimated $250 million annually in abatement costs.

In the EU, the European Climate Exchange ECX located in Amsterdam was launched by CCX in 2005. It was made viable by enabling legislation of the European Union Emissions Trading System. Mostly due to the value of ECX, CCX was sold to International Commercial Exchange ICE for $604 million. Sandor speculates that China is likely to establish a cap-and-trade system before the US does.

GallonLetter received a signed copy of Sandor's book as an attendee at a School of the Environment, University of Toronto event held last December with Sandor as a keynote speaker. Susan McGeachie, Adjunct Professor at the School was moderator. Members of the panel were Paul Dickinson (Chair Carbon Disclosure Project), Toby Heaps (CEO of Corporate Knights), Erik Haites (Editor, International Climate Finance and Special Advisor to the United Nations on market mechanisms and climate finance) and Ed Waitzer (Partner, Stikeman, Elliot LLP and Director of the Sustainable Accounting Standards Board SASB).

Sandor, Richard L. Good Derivatives: A story of financial and environmental innovation. Hoboken, New Jersey: John Wiley & Sons, Inc., 2012. See web page http://www.richardlsandor.com/ and http://books.google.ca/books?isbn=1118216393

See also his new book set for release December 1, 2014. Sandor, Richard, Murali Kanakasabai, Rafael Marques and Nathan Clark of Environmental Financial Products. Sustainable Investing and Environmental Markets: Opportunities in a New Asset Class. World Scientific Publishing. 2014. Foreword by Amory Lovins who says industrial capitalism often doesn't value natural capital (nature) which may turn out to more valuable than the conventional financial and physical capital (money and goods) and Chapter 1 (A Brief Survey of Environmental Asset Classes) are available at http://www.worldscientific.com/worldscibooks/10.1142/9203

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MISMATCH BETWEEN PACKAGING MAKERS AND MUNICIPAL RECYCLING

One of the exhibitors, ecologic (TM), "packaging the earth can live with" at the Chicago PACK EXPO held November 2-5 is described as "America's first molded fiber bottle." This packaging first introduced in 2008 has an outer fibre shell and inside is a plastic bag with a plastic valve or dispenser, the same principle as the already common wine bag in a box. An organic dairy, Straus Family Creamery (Marshall, California) was the first to try the packaging for their milk although their milk is mostly sold in returnable glass bottles. In 2011, Seventh Generation introduced a liquid laundry detergent bottle made of 70% recycled cardboard and 30% old newspaper fibres produced by Ecologic. The packaging was available at natural retailers but now the fibre bottle, called the eco.bottle container, is becoming available at retailers such as Loblaw, Canadian Tire, Metro and London Drugs in Canada as well.

So Is it Recyclable by the Consumer?

According to the manufacturer, the shell is recyclable and compostable according to ASTM

D 6868. The brochure says, "Split side to separate and recycle or compost" and then the plastic bags are supposed to be recycled with plastic bags. However, throughout Canada, most municipalities provide specific guidelines which often specify packaging not by material such as moulded fibre but by what the packaging is used for. So just in regard to one material for this bottle, the moulded fibre shell, the Haldimand County Recycling Guide for the Paper Fibres Box which applies to us here in Fisherville says Accepted are "cardboard egg cartons and take-out beverage trays."

The guide implies that the fibre detergent bottle part is not acceptable so we called the County help number where we were told that the disassembled bottle probably would be accepted but we should contact the waste management company that actually handles the recycling. In that telephone conversation we were asked what the recycling code was to which we responded that it was moulded paper not plastic so there was no code. Then we were told it wasn't an issue and would probably be accepted but "If the drivers don't like it, they will put a sticker on the recycling box to reject it or toss out the item before collecting the box." We have studied the recycling guides of both small and large cities and waste management commissions in Canada and see the same problem repeated. Packaging which could be recycled isn't because the guides are confusing and/or restrictive. Even if the consumers are willing to go the extra step of disassembling the eco-bottle, they too might find that their recycling box is rejected.

Paid subscribers see links to original documents and references here.
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FRANK LLOYD WRIGHT: AMERICAN STYLE

During PACK EXPO in Chicago at the beginning of November, the central hotels were very expensive and mostly full, so GallonLetter's editor took Chicago rapid transit, an electrical rail system with a long history with very frequent and clean service, to Oak Park, which is now a commercial and residential area but when young architect Frank Lloyd Wright first started out and built his first home for his own family with $5000 lent to him by the head of his firm, Louis Sullivan, he used to ride his horse on the prairie surrounding his home. When his boss started seeing homes in Oak Park with the telltale look of the Wright design which hadn't been contracted through his firm, he didn't hold with bootlegging and the two parted ways with long lasting animosity.

Chicago and Oak Park are full of Wright-designed buildings which we hope to visit some day but PACK EXPO was so huge that there was too little time but we did see that first family home to which Wright added a studio in 1897. The Frank Lloyd Wright Trust, which preserves and conducts tours of Wright buildings, says that about a third of Wright's life work was produced from that Oak Park location between 1898 and 1909. Wright did not have a formal education but his mother dreamed of him becoming an architect even when he was only a child and provided him with education working with shapes and learning from nature. In his studio, he gathered formally trained architects including Marion Mahony, the first licensed woman architect in the US, draftsmen, artists such as sculptors and painters and other skilled and talented people who helped turn his early ideas of a Prairie style into practice. These people were often inspired by the writings of naturalist writers like Thoreau and wanted to design new types of buildings for the American landscape rather than the traditional European style and setting.

Some call Wright an eco-visionary before green became an environmental term because of his philosophy about “organic architecture” with many features such as consideration of the natural setting of the site in the design of the buildings. Part of that philosophy related to use of local materials. A tan brick from which he made a curved wall outside his home was of brick locally made in Chicago, a brick most people at the time relegated to other less-front-and-centre purposes than their architect designed home.

But of all materials, Wright saw wood as one of the most intimate of materials and especially admired how the Japanese applied it to buildings. Instead of cutting down a tree entirely which was in the way, he built his family house so the tree trunk and wood branches were inside. GallonLetter's editor has often thought that when politicians make laws, someone will find a way around them and the development of Oak Park is one example. Now a suburb of Chicago, it was called Oak Park because of the oak trees which grew on a ridge/spit which once formed the shore of a glacial lake called Lake Chicago. The Chicago Fire of 1871 killed several hundred people, destroyed most of downtown Chicago, and left a third of the population homeless. Loss of property was estimated to be about a billion in today's dollars. For the Great Rebuilding, Chicago passed laws requiring fire proof building materials which were not only more expensive than wood. but some people didn't like them. Although even in Chicago many ignored the rules, people also moved out of Chicago such as to Oak Park which became a village where Wright and others built a lot of houses from wood.

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LET IT SNOW

Just look outside at the snow and you'll know that there is no such thing as global warming was the theme of a letter to the editor in our local city paper. This idea that as long as we have snow in winter, we don't have to worry about global warming is a too often-repeated message by climate sceptics. The snow dump in Buffalo, New York beginning November 17, 2014 was an epic event in the city's snowy history, according to the US National Weather Service. This could be reassuring to those who think their conclusion reached by a glance out the window can trump decades of scientifically collected climate data. Snow accumulated over 2 metres in some areas in Buffalo although this was highly variable with some areas only a few kilometres away receiving only a few inches. For those promoting the idea that any snow equals "Don't Worry, Be Happy" about climate change, the science may be less assuring. In a warmer world, global mean precipitation increases, but with a lot of variations with some regions receiving more and others less. In some colder areas, that could mean more snow falling there rather than less.

New York Climate Change Report

In the 2014 update on responding to climate change in New York, the state government report includes a discussion on lake effect snow which can result in heavy snow events in a single storm affecting places downwind of the Great Lakes and to a lesser extent, the Finger Lakes. Buffalo gets snowfall from Lake Erie. The report says, "Annual ice cover has decreased 71 percent on the Great Lakes since 1973; models suggest this decrease will lead to increased lake-effect snow in the next couple of decades through greater moisture availability (Burnett et al. 2003). By mid-century, lake-effect snow will generally decrease as temperatures below freezing become less frequent (Kunkel et al. 2002). The high ice extent of the 2013-2014 winter highlights the fact that natural variability is expected to continue, even as long-term trends gradually shift the statistics in favor of low-ice winters."

The Burnett study from Colgate University reported in Science Daily November 2004 compared snowfall in Great Lakes and non-Great Lakes areas concluding that for the foreseeable future years at least, warming will produce more snow downwind of the Great Lakes rather than less. Researchers studied snowfall data for areas in the Great Lakes and outside that region and concluded that the amount of snowfall had increased significantly in the Great Lakes region since the 1930s but not in non-Great Lake regions. Global warming increases the water temperature of the Great Lakes creating a bigger gap between air and water temperature which can lead to snowfall if the air is cold enough. The authors suggest that more research on the issue of how relatively small changes on the global/regional scale could have a bigger than expected impact on local areas is justified because municipalities could face large costs for snow removal, risk flooding and for effects on important activities such as recreation.

IPCC: North America

Chapter 26 of the 5th assessment report (2014) of the Intergovernmental Panel on Climate Change IPCC focuses on North America (Mexico, US and Canada): "North America’s climate has changed and some societally relevant changes have been attributed to anthropogenic causes (very high confidence). ... Recent climate changes and individual extreme events demonstrate both impacts of climate related stresses and vulnerabilities of exposed systems (very high confidence). ... Observed climate trends in North America include an increased occurrence of severe hot weather events over much of the USA, decreases in frost days, and increases in heavy precipitation over much of North America (high confidence).” Some of the risks assessed depend on what the world will do to reduce emissions; a global warming of 4 deg C is likely to cause most of the south of North America to have decreased annual precipitation while more precipitation is expected in the northern half of the continent.

Examples of possible outlooks which include snow are:

earlier peak flow of snowmelt runoff. Snowmelt occurs over a shorter season starting earlier than in the past. Increased flooding due to climate change is projected for some areas.
declines in amount of water stored in some areas which receive snow: spring snowpack, streams and Western US and Canada.
HRmore frequent low-snow years.

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MOTO RESTAURANT: DEFINITELY NOT HOME COOKING

While in Chicago, GallonLetter's editor went to moto, a restaurant offering avant-garde cuisine, a multiple course meal at more than we tend to pay but the reason we went was that in view of our last feature on edible packaging, the restaurant had an edible menu. It turned out that they "had evolved” since the edible menu was offered so we couldn't eat anything normally inedible but the rest of the experience was unique, with service at the level of choreography and food courses with intriguing names such as Which came first?, Fallen Log, and Shades of Red. The dessert Toasted Marshmallow came with its own tabletop campfire. Some of the food was local e.g. each of the tables had containers with sprouts which were cut for one of the courses called Grow Room but local isn't the key feature as moto's web page lists other priorities: "Dining at moto is like actively engaging in a multi-sensory dining experience unlike any other around the world. The moto kitchen serves as a state of the art canvas for Chef Farina and his gifted team to combine high-tech equipment and intricate techniques with exotic, sustainable and seasonally conscious ingredients from around the world. While our vision in gastronomy may at some times appear to be a note taken out of a far out science-fiction novel, the magnificent flavors and extreme attention to detail for each moto dish are indeed very real." At the end, the two of us were the only ones to be offered and given a tour of the kitchen and equipment

Texture was an important feature and a number of dishes contained various crispy vegetables and mushrooms, crunchy but not tasting as if they were loaded with fat. When we got back home, we tried a couple of versions of our own crispifying food using an oven already on for cooking the meal. We don't have the special equipment, range of food or the skill of the chefs at moto but it was fun. Enoki mushrooms mixed with a little bit of oil turned out only partially crispy but made a nice topping on the oven-roasted dinner. Daikon radish chips tended to burn mostly faster than they turned crispy but our kale chips were a great success.

Kale Chips Recipe

Oven 350 deg

Take half a bunch of kale (organic, local or both) and wash thoroughly.

Remove leaves from stalks by cutting or tearing. (1)

Cut or tear up leaves into pieces onto a strainer or salad spinner. Spin or pat dry. Pieces of a more uniform size help to ensure they get done at the same time but it doesn't seem to matter that much. The leaves should be as dry as possible.

Toss the kale pieces with a bit of oil. 1 tsp of oil for a cookie tray of kale should be enough. To avoid using another bowl, we tossed the kale pieces directly on the cookie tray which helps to add some oil to the tray. Toss as thoroughly as possible so the little bit of oil covers as much surface area of the leaves as possible. Too much oil , however, can make for soggy chips.

Layer the leaves on the tray as thinly as possible.

Sprinkle a bit of salt if you use salt.

Bake for 15 minutes, stirring once or twice or if there is room just turn the tray around. Just check to make sure they are not burning but they should be crisp before removal from the oven

After removing from the oven, leave for a few minutes to crisp up some more. Eat warm or cold but if storing e.g. in a glass jar with a lid, let cool first.

Kale is a good winter local food as it is tough enough to survive a few snowfalls and we will continue to steam it just as we usually do but it was fun to be inspired by the innovative chefs at moto to try a little experimentation.

(1) Kale stalks get too chewy when baked without liquid so we cut them up and added to a container in the freezer for later cooking for soup stock, called by some “Trash Soup.”

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READING GALLONDAILY

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