Clean Energy Finance Corporation: Difference between revisions

Clean Energy Finance Corporation

Industry	Clean Energy Investment
Headquarters	Sydney, Australia , Australia
Number of locations	4 Offices
Key people	Ian Learmonth (CEO) Steven Skala AO (Chairperson)
Owner	Australian Government
Website	www.cefc.com.au

The Clean Energy Finance Corporation (CEFC) is an Australian Government-owned Green Bank that was established to facilitate increased flows of finance into the clean energy sector.

The CEFC is responsible for investing $10 billion in clean energy projects on behalf of the Australian Government. Its mission is to help lower Australia's carbon emissions by investing in renewable energy, energy efficiency and low emissions technologies across the economy, via a range of finance options. The CEFC also supports innovative start-up companies through the Clean Energy Innovation Fund and is investing in the development of Australia’s hydrogen potential through the Advancing Hydrogen Fund. Across its portfolio, the CEFC invests to deliver a positive return for taxpayers.

The CEFC is governed by an independent board which has a statutory responsibility for decision-making, performance of the Corporation's functions and managing the CEFC's investments, and a Chief Executive Officer who is responsible for the day-to-day administration of the Corporation. A system of delegations exist to aid in the performance of these functions. The Board reports to Parliament through its Responsible Ministers.

The object of the CEFC was extended to include a specific reference to its role in emissions abatement in 2022, with the introduction of the following language: “to facilitate the achievement of Australia’s greenhouse gas emissions reduction targets”. The change complements a continuation of the existing object of the CEFC, which is: “to facilitate the flows of finance into the clean energy sector.”CEFC Act .

Objective and functions

The CEFC is a corporate Commonwealth entity under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). The CEFC has access to funding of $10 billion comprising annual appropriations to the CEFC Special Account of $2 billion every 1 July from 2013 to 2017 inclusive, in accordance with section 46 of the CEFC Act. The CEFC draws on this finance on an as needs basis, with non-committed funds remaining in the Special Account until required. The object of the CEFC is specified in section 3 of the CEFC Act as being 'to facilitate financial flows into the clean energy sector'. The main function of the CEFC is the 'investment function' (as specified in section 9 and subsection 58(1) of the CEFC Act), to invest, directly and indirectly, in renewable and low carbon technologies. Section 9 also specifies a number of support functions such as:

• liaison with relevant individuals, businesses and agencies to facilitate the investment function
• to perform any other functions conferred by the CEFC Act or any other Commonwealth law
• to do anything incidental or conducive to the performance of the investment function or the other functions.

Investment strategy

The CEFC works with businesses, institutional investors and innovative entrepreneurs to accelerate investment in Australia’s transition to net zero emissions. In operating within the parameters of the CEFC Act and Investment Mandate directions, the CEFC must also anticipate and respond to the environment and market conditions in which it operates. This means retreating where the private sector is operating effectively, and stepping up its investment activities to fill market gaps where the private sector is absent.

The CEFC investment strategy is summarised as:

Backing the clean energy system of the future: Australia requires significant new investment to support a substantial uplift in renewable energy generation and storage. We’re investing in critical large-scale grid transmission projects, landmark battery storage, large-scale renewable energy developments and innovative bioenergy opportunities.

Investing across the economic landscape: Investing in low emissions solutions in property, infrastructure, industry, natural capital and resources can deliver benefits right across the economy, from lower energy consumption to alternative approaches to production, reducing demand on the energy network and abating carbon emissions.

Tapping into new investment models and opportunities: Developing new financial markets and products, building investor confidence and crafting tailored and innovative investment solutions for new and emerging industries to help Australia meet the challenges of decarbonisation and create a strong low emissions economy of the future.

Investment performance

In an update on performance highlights since it began investing to June 30, 2021, the CEFC noted:

CEFC	2020-21	Lifetime to 30 June 2021
Investment Commitments	$1.4b	$9.5b
Transactions	22	~220
Total transaction value	$5b	$32.8b
Private sector leverage	$2.68:$1.00	$2.40:$1.00
Capital deployed	$1.35b	$7.4b
Capital returned	$823m	$2.48b

CEFC Board operations

The CEFC Board Charter details the Board's role and responsibilities and its relationship with Management. The Audit and Risk Committee and the People and Culture Committee are the two standing Board Committees which assist the Board in its oversight role. The charters for the three Board Committee detail the leadership, composition and responsibilities of each Committee and how they exercise their authority.

The CEFC is a statutory authority established by the Australian Government under the Clean Energy Finance Corporation Act 2012 (CEFC Act). Under the Public Governance, Performance and Accountability Act (PGPA Act), the CEFC is known as a corporate Commonwealth entity. The CEFC Act:

• Creates the CEFC Special Account, a Special Account under the PGPA Act which is credited with $2 billion each 1 July, for five years from 1 July 2013, to enable the CEFC to invest in the clean energy sector
• Provides the CEFC Board with statutory responsibility for decision-making and managing the CEFC's investments. The Board operates and makes its investment decisions independently of government, based on rigorous commercial assessments
• Provides for the appointment of the CEFC Chief Executive Officer, who is responsible for the day-to-day administration of the CEFC, subject to (and in accordance with the policies determined by) the Board
• Requires investments by the CEFC to be "complying investments" as defined in Section 59 (2).

The CEFC publishes quarterly reports on its website regarding investment commitments.

Investment Mandate

An Investment Mandate direction is the means by which the Government of the day provides instruction as to how the Corporation may make investments, providing it:

• does not have a purpose of directing the Corporation to require the corporation to make or not make a particular investment and
• is not inconsistent with the CEFC Act, (including the object of the Act).

Under the CEFC Act, the CEFC Board must be consulted on the draft of a proposed new mandate, and any submission made by the Board must be tabled in the Parliament. [1]

Responsible Investment Leader

In September 2021, the CEFC was named a Responsible Investment Leader by the Responsible Investment Association Australasia (RIAA) in its annual study, the Responsible Investment Benchmark Report Australia 2021. We are proud to be recognised for our commitment to responsible investing and for our attributes as an investment manager and leader.

History

In August 2019, Australian Prime Minister Scott Morrison was reported in The Australian newspaper as saying that: “The fact Australia leads the world in per capita investment in clean energy, we have the world’s most successful green bank in the Clean Energy Finance Corporation and that we’re on track to have around a quarter of our electricity needs met by renewables by 2020, all underscores the work underway to reduce our global emissions.”

The CEFC was established under the Clean Energy Finance Corporation Act 2012, passed by the Parliament of Australia on 22 July 2012. It was established on 3 August 2012 and commenced making investment commitments from 1 July 2013.

In December 2018, an independent statutory review of the CEFC Act found that the CEFC had facilitated the flows of finance into the clean energy sector, with CEFC's investments successfully enabling projects that would not have otherwise proceeded, attracting substantial private co-investment to projects. The statutory review was conducted by Deloitte and tabled in Parliament on 14 December 2018. The CEFC submission to the Statutory Review of the Corporation is also publicly available.

On 5 August 2013 the federal Coalition Opposition led by Tony Abbott wrote to the CEFC asking it to stop making new loans and to cease assessing new projects. After the 2013 federal election, on 5 December 2013, then CEFC Chair Jillian Broadbent said on ABC Radio National that the government should "break an election promise" and keep the CEFC in operation, citing a 7% profit. Coalition Senator Arthur Sinodinos said that if it's making a profit, it should survive without the government and essentially confirmed the government would shut the corporation down. Legislation to abolish the CEFC and transfer the CEFC's existing assets and liabilities to the Commonwealth was put before Parliament but blocked by non-government senators in the Senate. In July 2015, Abbott announced he would ban the CEFC from investing in wind power and rooftop solar. On 13 July 2015, the CEFC said it was taking advice in relation to the draft Mandate.

In December 2015, Fairfax media reported that Prime Minister Malcolm Turnbull had lifted the ban on CEFC investment in wind power, in his first major break from the former regime's environmental policy. The Guardian reported on 24 December 2015 that the CEFC had been directed to focus on innovative and emerging technologies, reversing a mandate by the former prime minister Tony Abbott that would have specifically blocked funding for windfarms and small-scale solar projects.

Mr Ian Learmonth was appointed CEO in March 2017 In August 2017 Mr Steven Skala AO was appointed CEO Chair. Mr Skala described the CEFC's performance in its first six years reflected its ability to independently implement Australian Government directions, supported by its pillars of good governance, responsible client selection and considered risk management.

See also

• Australian Renewable Energy Agency (ARENA)
• Energy policy of Australia
• National electricity market
• Project finance
• Power purchase agreement