Evaluating the social benefit of greenhouse gas reduction program

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In 2012, the Province of BC launched an incentive program under the Clean Energy Act. This program aimed to reduce greenhouse gas (GHG) emissions by incentivizing fuel switching from diesel to compressed natural gas (CNG) or liquefied natural gas (LNG) in a variety of industrial engines, including marine vessels, transit buses and generators. The program was so popular that the incentives offered were rapidly taken up, and a renewal of the incentive program was proposed in 2016. The Province required an independent assessment of the economic and social value of renewing the program and engaged Deetken to perform this evaluation.

In undertaking this work, Deetken had to consider a number of questions: What is the likelihood that companies will independently move from diesel engines to cleaner engines such as LNG without additional incentives? What is the Province's capacity to supply CNG/LNG for incremental incentivized demand? What are the impacts of expected changes in GHG emissions within the Province? Would the renewal of the incentive program be beneficial for utility ratepayers and the residents of the Province?

Our evaluation analyzed multiple demand scenarios with different combinations of incentives. Based on our findings, a strategic plan was developed for the new incentive program that would generate the greatest benefit for the general public. The Province approved this approach and implemented the new guidelines for the incentive program based on our recommendations.

Supporting Natural Gas Development

The world’s demand for lower carbon energy is increasing, particularly in Asia. North American producers are uniquely positioned to help meet these needs. The continent has a significant supply of natural gas, one of the cleanest burning fossil fuels. This is enough to meet the energy needs of Canadian and Asian markets for the next 150 years or more.

A great deal of analysis, planning and negotiation is required to help producers benefit from these enormous supplies, while also ensuring that the environment and the communities impacted by natural gas activities are protected.

Deetken has played a role in reaching these multiple objectives: we have served as support to the lead negotiator in 10 separate negotiations on issues ranging from project financing, taxation, carbon emissions, electricity supply and pricing, to First Nations settlements and Project Development Agreements.  Each of these projects have been valued in the billions of dollars.

We have leveraged our diverse skill set to liaise with bankers, governments, legal counsel, subject-matter experts, and other external consultants; provide mentoring and training around negotiating deal structure for select proponent meetings; and develop an approach that meets strategic goals and realizes business based outcomes for all stakeholders.

Our support is on-going. We hope it makes a modest contribution to bringing the benefits of natural gas to the global community while we continue to fulfil our environmental and social commitments.

Selecting double/triple bottom line investment opportunities through rigorous due diligence

Deetken Asset Management Inc. (DAMI), a joint venture between The Deetken Group and Cooperativa ABACO, manages the Deetken Impact Fund (DIF). To learn more about the DIF, click here. DAMI’s investment approach aims to identify opportunities that provide social impact, such as businesses that promote entrepreneurship or provide or enhance access to basic services (i.e. health care, affordable housing, clean energy and education for low and middle income populations). At the same time, we have a “returns first” focus; we will not sacrifice the financial returns of DIF to meet social or environmental objectives.

In order to select investees that meet these dual objectives, DAMI developed a rigorous evaluation or “due diligence” process. The process is designed to move from initial screening to investment approval over an eight week timeframe.  It relies on a series of steps starting with pre-visit desk analysis, an on-site visit and concluding with a decision regarding investment. It builds in a continuous feedback and decision-making loop for our Investment Committee.  What is unique about our approach is that we focus on building solid relationships with our potential investees throughout the due diligence process.

Due diligence in action in Ecuador and Peru

We recently undertook due diligence processes for two microfinance institutions based in Ecuador and Peru, respectively.  We started by collecting and analyzing available information and preparing a screening memo. Once the opportunities were deemed appropriate through this process, our next step was to undertake site visits. For the DAMI team, this is one of the most exciting parts of our job.

Our visits involved spending one day at a field site where we met with branch managers, loan officers, individuals responsible for client management systems and others. Together with a manager and a loan officer, we met with multiple clients to “get to know their stories”; that is, discuss their businesses, how they were using their loans and their general experience with the microfinance services they were using.  Client visits also helped us to confirm that the loan due diligence and disbursement processes and procedures practiced in the field were consistent with company policy.

We then spent time at each institution’s head office, interviewing the senior management team as well as operations level colleagues.  We used these interviews to get to the bottom of our “tough questions” – about governance, responsible lending, collections, loan quality and any performance concerns. This was also the best time to gauge the commitment of leadership to the company’s social mission, and to test how well it is integrated with day-to-day business practices.

By the end of the site visits in Peru and in Ecuador, we had built critical relationships and were in a strong position to make an appropriate investment recommendation.