Fuelling Responsibility - Corporate Social Responsibility Concerns In Biofuel Financing

This article, by Vince Heaney, was published in the

June edition of International Trade Money magazine and quotes

Head of Eversheds' Clean Energy and Sustainability Team,

Michelle Thomas' views on corporate social responsibility

concerns in biomass project financing.

The list of biofuel's detractors is now as long as the

list of its former advocates. Before countries have had time to

implement current government proposals to increase biofuels

usage, pressure is growing to abandon the idea because of fears

over their impact on global food supply. Malcolm Wicks, the

UK's energy minister, recently said, "It would be

ridiculous if we fill up our cars with 5-10 per cent of

biofuels if the consequences are that somewhere else in the

world people are not being fed." Jean Ziegler, a United

Nations food expert, put it rather more forcefully, describing

biofuels as a "crime against humanity". With the

great white hope of alternative fuel technology fast becoming a

pariah, what has been the impact on the financing of biofuel

projects?

In some areas flows of funds into biofuels projects have

indeed slowed. Investment in US corn-based ethanol projects,

for example, has decreased over the last year - from

$1.7bn in the first quarter of 2007 to $311m in the same period

of 2008, according to New Energy Finance, a clean technology

consultancy. Imperium and Renewable energy Group, two biodiesel

companies, also pulled their IPOs from the US market in the

first quarter. These trends, however, owe as much to the

volatility of equity markets and the impact of the credit

crunch as to any increase in environmental concerns about

biofuels.

Similarly, when private equity firms, the Carlyle Group and

Riverstone Holdings acquired Ensus, a UK-based bioethanol

producer for about 250m in March 2007, there was some

speculation in the press that environmental concerns had

frustrated the company's intention to list on London's

AIM. However, according to a Carlyle spokesperson, the issue

was not environmental concerns, but one of market sentiment

specifically investors' uncertainty surrounding the

viability of the biofuel model following the underperformance

of several AIM-listed ventures.

Outside the US, meanwhile, investment in biofuels projects

has proved more resilient. Bolstered by projects in Brazil and

new areas such as Russia, Mozambique, Thailand and Hungary,

investment in biofuels in the first quarter of 2008 reached

$3.1bn, a decrease of only 15 per cent compared with the same

period a year ago.

Continued investment in biofuels projects, however, does not

obscure the growing importance of the environmental debate.

"Corporate social responsibility (CSR) concerns have been

an issue in biofuel project financing for at least 9-10 months

now. I have spoken to a number of institutions...