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Green
Technology Interview:
Bill Lockyer
Bill Lockyer has a long public service legacy; from
1999-2006, he was California Attorney General. Prior to his election to
that office, he served for 25 years in the California Legislature,
culminating his Capitol career with a stint as Senate President pro
Tempore.
In his current position as the state’s Treasurer, Lockyer works on the
cutting edge of the state’s efforts to align economic growth and
environmental stewardship. In a recent interview with Green Technology,
he offered insight into the unique role that the Treasurer plays in
implementing the state’s climate change policies.
Why does climate change deserve to be a focus of state policy?
The consequences of climate disruption are so widespread and significant
that every level of government should be involved in addressing them. For
California specifically, the consequences that we anticipate include
severe disruption of our water supply, a doubling of heat-related deaths,
dramatic increases in asthma and other respiratory illnesses,
infrastructure damage along the coastline - which is 1100 miles in our
state – and billions of dollars in property damage.
The risks are significant and we need to begin to address them more
aggressively. The lead-time on infrastructure investments is so long, that
you really have to prepare a decade in advance. Beyond the time lags on
infrastructure, as a general matter it takes a long time to implement
regulatory changes and obtain business and government compliance.
Why would climate change be the responsibility of the Treasurer?
The Treasurer is the state’s banker and has a responsibility to promote a
good business climate and expand job opportunities. The green technology
sector shows potential to expand jobs, grow the economy, and produce more
revenues.
In addition, the Treasurer serves on the two pension boards for our state
[the California Public Employees Retirement System (CalPERS) and the
California State Teachers Retirement System (CalSTRS)]. They are the two
largest in our nation, with in excess of $400 billion under management.
Their investment practices can impact our efforts to have a clean, green
and sustainable planet.
More narrowly, there is the idea of greening all of the state buildings.
As a fiscal officer for the state, I’ve been involved in that
implementation strategy.
What is the “green bond” that you have proposed?
The state of California is the largest building owner and user in the
state, with in excess of 206 million square feet of property. Buildings
use about 70 percent of the electricity produced in our society and about
half the natural gas used - so if we can make buildings more efficient, it
will have a genuine impact on energy use, green house gas emission levels,
and taxpayer cost of purchasing energy.
I’ve been advocating adoption of a multi-billion dollar bond, at least $2
billion of which would be used to retrofit and retro-commission current
buildings. We estimate that we can save taxpayers lots of money – hundreds
of millions of dollars a year – if we have more fuel-efficient buildings.
Of course, when we build new ones, we will try
to build them to high green standards. The Green Bond proposal would also
include Power Purchase Agreements financed by Electricity Prepay Bonds to
reduce the financing costs of purchasing renewable energy supplies. This
is before the Legislature as SB 1754 (Kehoe).
The California Alternative Energy and Advanced
Transportation Financing Authority would
oversee this program. These bonds would fund construction of new
renewable and energy generating facilities at the lowest possible cost to
provide a portion of the state government’s electricity needs.
Doing so using non-greenhouse gas producing technologies would further
reduce demand on the power grid and fossil fuels, and reduce contributions
to global warming.
When the government establishes goals for emissions, if the public sector
does not do its share, then it shifts all that burden to the private
sector. That’s an additional reason for the state government to show
leadership.
What have the pension funds done to address climate change?
CalSTRS and CalPERS invest billions of dollars in real estate. One of
their policies is to have at least a 20 percent reduction in energy use in
their core real estate portfolio. They’re about half way there already;
that was a five-year goal and we’re in the middle of that cycle.
They also make significant investments in the green space. So far, the two
pension funds have invested about $800 million in equities with hedge
funds and others that have a specifically environmental purpose.
One of the things that we’ve found is that very often when PERS or STRS
adopts a new initiative in these areas that many others will follow. They
know that there’s substantial staff commitment to permit thorough due
diligence in these pension funds, so it’s often comforting to others to
see that PERS or STRS has broken ground in these areas.
The first $200 million that was invested in a pioneering effort acted as a
catalyst to an additional $1.8 billion that came in from other sources.
There is an amplification that occurs when they provide leadership – and
the amount that they invest in the green space is going to expand in
future years.
This influence is a desirable consequence of their investments, but it’s
not really the goal. Their goal is to invest on behalf of the
beneficiaries of the funds - firemen, policemen, state employees and so
forth - in a way that will provide them with secure retirements and health
benefits. That’s their primary goal. There’s a current belief that they
can make good returns on their investments in the green sector and so far,
the returns have been very good.
Can green investments actually be a way out of tight economic times?
My general view is that sustainability equals profitability. If you want
to make profitable long-term investments you have to be aware of the risk
factors associated with global climate disruption. Ask anyone that was an
investor in New Orleans – they know how nature, or inadequate
infrastructure, can have an impact on investment returns. That could
happen much more broadly with global warming.
I see a new form of green capitalism emerging
that is an area to do well and do good. We will accomplish just that by
saving tax payers money and by retrofitting existing buildings to save
energy. We especially need to do that when belt tightening is necessary.
Long-term economic growth is absolutely necessary to sustain the
investments that we want in education and other things. So looking for the
future engine of job growth and job creation and capital creation is
important, both as a state and as the pension funds make investments.
What of those in the private sector who continue to see green
strategies as “luxuries”?
They are going to find that they are not external luxuries, but that they
are intrinsic to running a successful business. One of the things that I
have been active in is trying to persuade businesses to take a sober look
at their long-term prospects in a changing global environment and to
calculate impacts on business and ways to adapt to that.
You recently became one of 49 signatories to an action plan developed
by the Investor Network on Climate Risk. What are your hopes for this
agreement?
A lot of public and private sector leaders have signed the plan. Ceres has
provided excellent leadership in this area, along with the UN and others.
Basically, what we’re trying to do is enhance investment in the green
sector and related efforts to change and implement national policy. It
breaks down into two or three fundamental strategies. One is taking a look
at our own investments – our pension funds and so on – to see that we
expand investments in this area.
The commitment made by the group is to see that there is an additional $10
billion invested in the next two years. That’s pretty ambitious, but
doable. I know that CalPERS and CalSTRS are ratcheting up their green
investments and I think that other pension funds - public and private
funds - are doing so as well. The last I heard there were almost 300
different green funds of one sort or another on the planet – mutual funds
and other such things.
We want to manage our real estate portfolios to reduce energy use and
diminish emissions. We want to engage businesses and others in taking a
disciplined, intelligent look at their own risks because of climate
disruption. We want to push the SEC to contemporize their current
definition of material risk to have the filings that are currently
required of businesses to include an assessment of climate change risk.
The SEC has been inactive in that area and we think we need to continue to
push them.
Beyond this, we hope that there will be national efforts, with post-Kyoto
protocols and other efforts, to play a more active role in the
international community to address climate risk.
You've taken steps to ensure that future housing is both affordable and
sustainable. Can you talk about this work?
We provide about three-quarters of a billion dollars a year in housing
tax credits for low-cost and affordable housing and billions of dollars
every year for housing financing in a variety of different ways - bonds
and so on, private activity bonds and other methods of encouraging housing
expansion, particularly for low and moderate income families. There’s
considerable competition to get these allocations, and we’ve written into
the regulations some extra credits that an applicant would be able to get
if there are sustainable technologies, like solar panels or other forms of
cheaper and lower-emitting technologies built into the plans for the
housing. There are ways that we try to encourage developers to have
sustainable energy technologies.
Are there other ways that your office is involved in green activities?
The Treasurer makes deposits in community banks around the state. There is
one totally green bank in California so far, the New Resource Bank in San
Francisco. The state has deposited $10 million in that bank; that allows
them to expand their business activities in loaning and so on. We’ll do
more of that when there are other opportunities.
We have to think about the planet as our home and to be much more
conscious of our stewardship responsibilities, to see that our grandkids
live in a healthy place.
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