Clean Energy Finance Corporation

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. As a specialist investor the CEFC at the centre of efforts to help deliver on Australia’s ambitions for a thriving, low emissions future. The CEFC reached two important milestones in 2022, marking 10 years of investment activity and exceeding $10 billion in investment commitments. With a strong investment track record, the CEFC is committed to accelerating Australia's transition to net zero emissions by 2050. In addressing some of the nation's toughest emissions challenges, the role of the CEFC is to fill market gaps and collaborate with investors, innovators and industry leaders to spur substantial new investment where it will have the greatest impact. The CEFC invests on behalf of the Australian Government, with a strong commitment to deliver a positive return for taxpayers across its portfolio

In September 2022, the CEFC acknowledged passage of the Climate Change Bill 2022 and the Climate Change (Consequential Amendments) Bill 2022. The Climate Change legislation sets national targets of cutting emissions by at least 43 per cent by 2030 (compared with 2005) and reaching net zero emissions by 2050. It embeds these targets in the objectives of a range of Australian Government agencies, including the CEFC.

In August 2020, legislation to create a Grid Reliability Fund (GRF) was introduced into the Australian Parliament. If passed, the GRF would add $1 billion to the CEFC investment capacity, to encourage investment to support the reliability of the electricity grid and improve affordability for energy users. The legislation lapsed at the May 2022 Federal Election.

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 CEFC achieves its objectives through the prudent application of capital, in adherence with its risk management framework, its Investment Mandate and the investment policies issued by the CEFC Board.

Objective and functions

The CEFC invests in accordance with its legislation, the ''Clean Energy Finance Corporation Act 2012'' (CEFC Act) and the prevailing Investment Mandate.

The CEFC Act was amended in September 2022. The object of the CEFC was extended with the introduction of the following language: “to facilitate the achievement of Australia’s greenhouse gas emissions reduction targets”. The change complemented a continuation of the existing object of the CEFC, “to facilitate the flows of finance into the clean energy sector.”

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 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. Through its investment origination activities the CEFC seeks to address emissions challenges across the wider Australian economy.
CEFC investment activities are broadly focused, including:
* ''Backing the clean energy system of the future:'' Australia requires significant new investment to support a substantial uplift in renewable energy generation and storage. The CEFC is 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

The CEFC marked its first decade of investment in August 2022, confirming lifetime investment commitments of $10.76 billion. Together with institutional investors, business, industry and cleantech innovators, the CEFC catalysed $37.15 billion in investment in Australia’s low emissions economy in its first 10 years. Expected lifetime emissions from CEFC investment commitments were more than 200 million tonnes of CO2-e at 30 June 2022, buoyed by landmark investments in the hard-to-abate manufacturing sector, which together are expected to eliminate some 900,000 tonnes of CO2-e annually. At 30 June 2022, the CEFC had access to $4.57 billion in ongoing investment capital, in addition to returns from existing investments, having drawn a net $5.43 billion from its original $10 billion funding allocation. The CEFC was named a Responsible Investment Leader by the Responsible Investment Association Australasia (RIAA) in its Responsible Investment Benchmark Reports in 2021 and 2022. In May 2022, the CEFC was named Global Sustainable Investor and Asia Pacific Institutional Investor of the year in the Agri Investor Awards. The awards recognise CEFC leadership in driving investment towards sustainability-focused, low carbon agriculture.

Investment highlights: 2021-22

In the 12 months to 30 June 2022, the CEFC made new and follow-on investment commitments of $1.45 billion. In attracting an additional $2.30 for each dollar of CEFC finance committed, total transaction value for the year reached some $4.79 billion. Highlights included:

* Investment of $455 million in essential grid and transmission infrastructure projects, including the Powerlink Queensland project and the EnergyConnect development in New South Wales, Victoria and South Australia
* Continued growth in CEFC support for large-scale renewables and energy storage, with an additional $51 million in commitments across three transactions, including innovative bifacial solar panels and half-cut cells, as well as an early-stage development in NSW
* A combined $110 million in landmark investments in two major Australian manufacturers, Manildra and Orica, delivering significant operational and emissions benefits and demonstrating opportunities to address so-called ‘hard-to-abate’ sectors
* Continued leadership of Australia’s green bond market, with $164.8m committed across four transactions, giving an increasingly diverse range of issuers access to the growing pool of institutional capital committed to net zero emissions
* Innovative investments of $17.5 million to cut emissions in the resources sector, including a hydrogen hub and ultra-heavy duty hydrogen trucks and finance for the production of modular and scalable electric battery systems to replace diesel use in mining
* A record $45.4 million in new and follow-on investments through the Clean Energy Innovation Fund, including backing for MicroTau, which has developed a shark skin-inspired film coating to reduce transport emissions and Samsara Eco, which is using modified enzymes to deliver infinite plastics recycling.

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. In April 2022, Chair Steven Skala AO was reappointed for a further five-year term, commencing on 7 August 2022. Mr David Jones AM and Mr Matt Howell were also appointed to the Board for five-year terms, to fill vacancies left by the departure of Ms Laura Reed and Mr Philip Coffey.

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

The Clean Energy Finance Corporation Investment Mandate Direction 2020, directs the CEFC to make available up to $300 million to support the growth of a clean, innovation, safe and competitive Australian hydrogen industry via the newly created Advancing Hydrogen Fund. Under the Investment Mandate Direction 2019, the Australian Recycling Investment Fund was created. The Mandate was updated in 2020 and directs the CEFC to make available up to $100 million to support recycling or recycled content projects using clean energy technologies, with a particular focus on waste plastics, paper, glass and tyres.

Clean Energy Innovation Fund

The Clean Energy Innovation Fund is the largest dedicated cleantech investor in Australia, created to invest $200 million in early-stage clean technology companies. The CEFC spearheaded the creation of its first specialist fund manager in 2021–22 to substantially lift the amount of investment capital available for cleantech startups, building on the work of the Innovation Fund. The CEFC is a foundation shareholder in Virescent Ventures, a new fund manager focused on investing in ambitious cleantech founders, technologies and businesses that can help achieve net zero emissions. Virescent Ventures is targeting a $200 million capital raising, with the CEFC expected to be a cornerstone investor alongside superannuation funds, strategic investors and large family offices. It will seek investments that address the largest, hardest to abate sources of emissions, investing from pre-seed to late-stage growth capital, including in deep tech and business model innovations, software and hardware. These companies require patient capital from the earliest stages of their development, through to additional growth capital rounds and beyond.

History

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. 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.”

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

References

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Climate change organisations based in Australia
Energy organizations
2012 establishments in Australia
Energy in Australia