Climate Change CapitalInvesting in Low Carbon PropertyGreen Alpha?

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Climate Change Capital

Climate Change Capital (CCC) is an investment manager and advisor specialising in the opportunities created by the transition towards the low carbon economy. Our activities aim to make the world’s environment cleaner while delivering attractive financial returns.

Headquartered in London with an office in Beijing, CCC focuses on the regions of the EU, North America and Asia.

ADVISORY

M&A Corp./Project

Finance Strategy & policy Carbon

FinancePrivateEquity

RealEstate

EnergyInfrastructure

INVESTMENT MANAGEMENTDevelops, structures and supports a range of funds investing in assets, companies and instruments for the low carbon economy

RESEARCHResearch in-house policy

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Annual global flow of energy - 88% conversion loss

Source: J.M. Alwood and J.M. Cullen, University of Cambridge

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Climate Change Property Fund UK Urban non car dependant city centres – no flood risk

2nd Investment: Edinburgh

3rd Investment: London

1st Investment: Birmingham

4th Investment: Manchester

Location, Economics, Sustainability

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UK carbon emissions – The built environment

Residential28%

Commercial19%

Agricultural1%

Industry20%

Transportation32%

Buildings47%

Source: BRE, GVA Grimley

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Regulatory change

“20-20-20” goals set down by the European Union 20% of consumed energy to be renewable 20% increase in energy efficiency 20% reduction in emissions

Energy Performance of Buildings Directive adopted in 2002 Certification of buildings based on its relative energy performance (EPCs) Required in UK for all large buildings occupied by public authority or relevant

institution by October 2008 (DECs) UK Buildings regulations Zero Carbon by 2019

Climate Change Bill introduced by UK Government in November 2008 Reduction in emissions levels by 26-32% by 2020 and 60% by 2050 5 year carbon budgets UK Carbon Reduction Commitment (CRC) = Carbon cap/trade on Property

portfolios that consumed > 6,000 kw/h per annum in 2008

Trend in Regulation and Legislation Increasingly onerous and weighted toward fiscal penalty rather than incentive

By 2020 (compared to 1990)

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Carbon Reduction Commitment Energy Efficiency Scheme (CRC)

CRC is a ‘cap and trade’ scheme ~ financial incentives/penalties for large occupiers + investors to improve energy efficiency

Organisations with total electricity consumption over 6,000MW hrs/yr (typically £500,000 pa)

A league table of performance will be published each year CRC brings carbon penalties to existing buildings in the UK

Canary Wharf – lights at night Canary Wharf – thermal image

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Economization of Electricity: 55 %- Innovative climatisation concept- New Façade- Intelligent lighting control system- Innovative elavator technique

Economization of Heat Energy: 67 %- Change heating system from gas to district heating- Installation of heat recovering systems- New Facade- Solar plant on the roof

Economization of Water: 43 %- Rain water use- Techniques for water conservation- Use of grey water for toilet flush

Need for ventilation energy: 60%- Change of climatisation concept- Heat/cooling transfer via water system- Natural ventilation

CO2- Emissions: 55%- Installation of energy saving systems- Use of district heating- Use of “green” power

Heat Island Effect: 50 %- Green roofs- Photovoltaik plant on the roof- Solar plant on the roof

Recycling Material: 30%- Reuse raised floor- Recycling window glazing- Recycling Facade

Potenziale in bestehenden Objekten

Green Buildings Referenzen (Auszug)

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The plan is projected to:

Cost $13.2 million (on top of a planned $500 refurbishment) with payback in 3 years - through energy & operational savings

Reduce energy use by up to 38% Achieve annual savings of $4.4 million Reduce carbon emissions by 105,000 metric tons over the next 15 years Be complete within two years Serve as a global model for owners of existing buildings

Empire State Building – Integrated sustainability refurbishment programme

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5 St Philip’s Place, Birmingham, UK

Electricity costs reduced by 45% (60% Gross)

Carbon emissions reduced by 43% (63% Gross)

Green Lease – Landlord and tenant share data (Energy/Water/Waste/Carbon)

Prime offices let to UK Government for 10 years

£750,000 (< 5 year payback) spent on Energy Efficiency Improvements by Landlord + Tenant

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Sustainable asset management – The journey

5 St Philip’s Place Offices: Annual CO2 emissions, DEC Grades and benchmarks from Energy Consumption Guide 19 for a “Type 3” air-conditioned office

Kg/m² Treated Floor Area at Defra 2008 CO2 factors of 0.185 for gas and 0.537 for electricity

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Why “Green” buildings will outperform

If… Investment Implications Underlying Effects on ‘Green’ Assets

Tenants prefer to occupy ‘green’ buildings

Green assets let more quickly Rental growth higher and lower depreciation

Shorter cash flow risk

Green buildings = lower operating costs

More tenant money is available for rent

Rental growth higher and lower depreciation

Government regulation and legislation

‘Greener’ assets de-risked as more attractive to and retain tenants better

Lower risk premium than ‘brown’ buildings

Investors have fiduciary duty to invest in ‘green’ buildings

‘Green’ properties = more liquid ‘Green’ properties are more liquid + should attract a lower risk premium = higher value = “Green Alpha”

Original Source: IIGCC

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Low carbon property investment – the new mainstream

“Prime investment” now encompasses sustainability

Investment downside risk protection + value upside

Low growth, banking crisis > Cash flow fundamentals

Rents + 6-8% ,Capital Values + 16% (Maastricht/Berkeley)

more UK + pan European research in hand

Low carbon property is mispriced

No need to trade return for “Green”

> Green Alpha

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Contact Climate Change Capital

CCC Head Office

Climate Change Capital3 More London RiversideLondonSE1 2AQUnited Kingdom

Tel: +44 (0)20 7939 5000Fax: +44 (0)20 7939 5030

www.climatechangecapital.com

Tim Mockett

Tim Mockett is co-founder of CCPF (Climate Change

Property Fund), the first low carbon property fund

investing in mainstream UK commercial assets. Having

raised c. £70m equity, the fund is now 100% invested in

core assets in London, Edinburgh, Birmingham and

Manchester with a GAV of approximately £150m.

Prior to CCC, Tim was Property Director of Stow

Securities plc where he was responsible for the

implementation of Stow's UK and European investment

strategy. In his seven years at Stow, Tim created an

investment/development portfolio consisting of assets

with a gross value of £200m, including mixed use, office

and retail properties principally within Greater London.

Tim has over 25 years of experience in commercial

property investment and development advising and

representing a range of investors, and has invested in

and traded over £1bn of commercial property during this

period, generating a typical portfolio IRR of over 15% pa.