Three Key Points of the Carbon Principles

Carbon Principles pic

Carbon Principles
Image: morganstanley.com

As the vice chairman of investment banking at Wells Fargo Securities in New York, Eric Fornell helps clients maximize their return on investment. He largely works with clients in the energy and utility sectors and major Wall Street banks. Eric Fornell’s experience allowed him to contribute to the banks’ development of the Carbon Principles.

In 2008, three of America’s largest financial institutions worked together to establish the Carbon Principles. These guidelines provide a framework for determining which energy-sector projects are environmentally clean enough to finance and which ones may be too risky. In order to stay ahead of federal regulators and avoid risk, Citigroup, JP Morgan Chase, and Morgan Stanley agreed to three overarching commitments:

1. Encourage investments in renewable and cost-effective energy sources rather than fossil fuels. Clients should be encouraged to consider the value of reduced and avoided CO2 emissions in their investments.

2. Use the jointly established Enhanced Diligence Process to evaluate potential transactions. All three partnering institutions agree to use the same process for evaluating energy projects and for determining what terms can be offered to finance certain projects.

3. Foster environmental education within the financial world. Clients, regulators, and related professionals need to understand the new requirements for financing and how the Enhanced Diligence Process changes their responsibility to evaluate projects.

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What Are the Carbon Principles?

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Carbon Principles
Image: morganstanley.com

A graduate of Oxford University and Amherst College, where he was a Rhodes scholar, Eric Fornell currently serves as the vice chairman of investment banking and capital markets at Wells Fargo Securities in New York. Eric Fornell’s past experience includes work at JP Morgan Securities in the area of energy and utilities, where he helped negotiate the Carbon Principles.

The Carbon Principles, announced in February of 2008, were a set of policies focused on the electric energy industry. Originally an agreement between Citi, JPMorgan Chase, and Morgan Stanley, the principles were later signed on to by Wells Fargo, Bank of America, and Credit Suisse. Several environmental groups were also involved in the development of the policies.

The Carbon Principles called for enhanced diligence in the financing of electric power projects that affect climate change. This diligence focused particularly on the industry’s use of low-carbon energy, renewable energy, energy efficiency, and advanced energy technologies. The principles addressed the growing concern of multiple coal-fired power plants that were being constructed and the carbon risks that stemmed from them, and recognized the need for private industry to take steps to protect the environment.

NextEra Energy Partners and Green Energy

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NextEra Energy
Image: nexteraenergyresources.com

Eric Fornell, a financial executive with over 30 years of experience, works in New York for Wells Fargo as the vice chairman of investment banking and capital markets. Experienced in the energy sector, Eric Fornell has a history of championing the benefits of clean energy. He played an important advisory role in NextEra Energy Partners’ acquisition of NET Midstream.

NextEra Energy Partners is a clean energy company that is committed to producing energy in a clean and responsible way. It has been named one of the World’s Most Ethical Companies by Ethisphere for nine straight years. Based on its carbon emissions and green energy capacity, NextEra Energy is one of the top green utility companies in the United States and number four in the world.

NextEra Energy is headquartered in Juno Beach, Florida, and has annual revenues of over $17.5 billion. The company employs 14,300 people and has a presence in 27 states.

When NET Midstream was acquired by NextEra Energy in 2015, seven natural gas pipelines in Texas were added to the company’s resources. These pipelines have the capacity to carry 3 billion cubic feet of gas per day, with the potential for expansion. With existing nuclear, wind, and solar capabilities, this addition only strengthened the company’s commitment to provide energy to its customers in a responsible way.

NextEra Energy’s Strategic Acquisition of NET Midstream Texas Pipeline

NextEra Energy Partners pic

NextEra Energy Partners
Image: finance.yahoo.com

Eric Fornell is a longtime New York investment banking executive who serves as vice chairman at Wells Fargo Securities. He provides strategic advisory services in both the energy and utility industries. In August, 2015, Eric Fornell and Wells Fargo acted as advisors in a major acquisition by the solar and wind power generator NextEra Energy Partners LP (controlled by NextEra Energy Inc.).

The $2.1 billion transaction involved the purchase of closely held NET Midstream and added seven Texas natural gas pipelines to the firm’s portfolio. It significantly added power plant fuel sales capacities, with an end market in Mexico under a 20-year Pemex ship-or-pay contract.

The scope of assets acquired encompassed 3 billion cubic feet per day of Texas shale gas production and an Eagle Ford formation pipeline. For NextEra Energy Partners, it marks a broadening of business activities from renewable-energy power assets into pipelines. One strategic reason behind the transaction involves sustained Mexican natural gas demand increases, as well as a declining domestic Mexican natural gas supply.

The Carbon Principles

Carbon Principles pic

Carbon Principles
Image: morganstanley.com

In 2012, Eric Fornell became vice chairman of investment banking and capital markets at Wells Fargo Securities. During his time with JPMorgan Chase, Eric Fornell played a part in the negotiation of the Carbon Principles, a 2008 agreement between Citi, JP Morgan Chase, and Morgan Stanley, as well as two environmental non-governmental organizations.

The Carbon Principles were a set of climate change guidelines made for advisors and lenders to power companies in America. The principles were created over nine months to evaluate and address carbon risks that may arise in the financing of electric power projects. The three banks consulted several leading power companies, including American Electric Power and CMS Energy, to help create these principles. The Carbon Principles marks the first time that an effort like this one had been made between banks and environmental groups for the benefit of both the environment and the companies involved.

The Carbon Principles include doctrines regarding energy efficiency, renewable and low carbon distributed energy technologies, and conventional and advanced generation. Officials representing major companies in the power industry have made positive remarks about these principles, recognizing the importance of protecting the environment and limiting carbon emissions.

Carbon Principles – Understanding Carbon Risks in Power Investments

Carbon Principles pic

Carbon Principles
Image: morganstanley.com

Financial professional Eric Fornell has worked on a variety of projects throughout the United States and Canada as part of his banking career. Eric Fornell helped to negotiate the Carbon Principles, an agreement among Citi, JP Morgan Chase, and Morgan Stanley, and a handful of the world’s most influential power companies. Several environmental groups, including Environmental Defense and the Natural Resources Defense Council, were also involved in the process.

The Carbon Principles agreement marks the first time that power companies and financial institutions have come together to understand and respond to carbon-related risks in power investments. The Carbon Principles include energy efficiency, renewable and low carbon distributed energy technologies, and conventional and advanced generation.

This collaboration between carbon companies and banks was designed to positively impact the ways in which financial institutions finance coal-fired power plants. Additionally, the agreement is meant to encourage investing in safe, affordable, and widely available sources of energy in a manner that assists with job growth.

More information about the Carbon Principles is available here: www.morganstanley.com/press-releases/leading-wall-street-banks-establish-the-carbon-principles_6017

An Overview of the Carbon Principles

An experienced financial executive, Eric Fornell serves as vice chairman of investment banking and capital markets at Wells Fargo Securities, where he focuses much of his work on the energy and power sector. Eric Fornell’s past activities include serving on the Secretary of Energy’s National Petroleum Council and playing a key role in negotiating the Carbon Principles.

Established in 2007, the Carbon Principles are a set of guidelines designed to help banks assess the risks associated with providing financial support to new coal-fired power plants. Institutions that have adopted the principles and their accompanying Enhanced Diligence Process commit to taking a portfolio approach to energy investment, prioritizing renewables and energy efficiency, and addressing the future cost of CO₂ emissions in their financing.

The principles were developed through a partnership with several leading financial institutions, power companies, and environmental groups. The organizations involved in their creation included Citigroup, JPMorgan Chase, Morgan Stanley, American Electric Power, CMS Energy, and the National Resources Defense Council.