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Making money a renewable resource

How Peter Liu, a former oil industry engineer, stopped designing petrochemical plants and started the first green bank in U.S. David Bank.

Liu and Epstein began shopping the concept for what they were calling The Sustainable Bank. One of their first meetings was with Peter Blom, CEO of Triodos Bank, established in the Netherlands in 1980, now with operations in the U.K., Spain, Belgium and Germany. Triodos had considered entering the U.S. market, but worried its model wouldnt translate well. Europeans were willing to accept slightly lower interest rates to realize social returns, Blom says; Americans, at least until recently, werent. Likewise, Triodos was able to start in Europe with basic banking adding more services later. The U.S. market required a full menu from the start.

Blom was impressed by Lius research and analysis, and by his questions about Triodos operations. He asked a couple of extra questions that were not so easy to get from the Internet, Blom recalls. We thought, Why do it ourselves if there was such a good partner? New Resource Bank didnt accept all the money Triodos principals wanted to put in; the initial round of financing exceeded the plan approved by bank regulators by 60 percent. Now, Triodos has a 10 percent stake.

Such interest from investors underscores what may be New Resource Banks greatest challenge, by now, everybody is going green. Some 60 banks worldwide have adopted the Equator Principles, setting out social and environmental guidelines for project financing. Citigroup vowed to provide $50 billion to environmental projects over the next decade, while Bank of America announced a $20 billion initiative to support sustainable businesses and turned its new 55-story, $1.2 billion Manhattan office into the worlds most eco friendly skyscraper.

Last year, when former U.S. President Bill Clinton launched a global energy efficiency building retrofit program, he quickly signed up five of the worlds largest banks, ABN AMRO, Citigroup, Deutsche Bank, JPMorgan Chase and UBS, each committed to arranging $1 billion in financing for cities and building owners to reduce energy consumption in existing buildings. If the money comes through, that will double the worldwide retrofit market.

Such global-scale investments are necessary if the world is to reduce emissions 30Ã? gigatons by 2030, about half the projected output, if current trends continue, the radical step experts say is necessary to stabilize carbon dioxide levels and avoid catastrophic climate change. A few more solar rooftops and Prius drivers wont be nearly enough.

A cap on carbon output, along with a market for carbon trading, will drive a booming market for clean technology, generating billions of dollars for investments that, in theory, could meet much of that challenge. In practice, however, it will take more than money and technology to realize the potential of the green economy. Equally crucial is leadership to coordinate multiple players and diffuse new practises to homes and businesses. Thats where institutions like New Resource Bank come in.

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