Top Carbon Cutters - #4 Oliver Yates

Crikey, with the support of Climate Spectator, is presenting a series that attempts to pin down the top 10 people driving Australia’s efforts to create a low-carbon economy. You can read numbers 10 to 6 in the “carbon cutters” list here. Climate Spectator, in conjunction with Crikey, will be counting down from number 5 over the coming week, with CEFC boss Oliver Yates today coming in at #4. The profile of climate lawyer Martijn Wilder (#5 on the list) can be found here.

Banking chief Oliver Yates seems horrified to be asked if he is a “greenie”.

He asks Crikey what is meant by that. An environmentalist, I say; someone who wants to protect the environment.

There’s a pause. “I consider myself to be a father with three kids,” he answers carefully, and explains he feels a responsibility to avoid leaving a poor environment for the next generation.

It’s a fair question. Why would someone who has spent 20 years in the millionaires’ factory of Macquarie Bank leave all that to head up the government’s new, controversial green bank – which might be shut down before it gets going?

Yates is the CEO of the Clean Energy Finance Corporation, which has $10 billion of taxpayers’ money to invest in renewable energy and energy efficiency. The money hasn’t started to flow – that happens with an initial $2 billion from July – but already the Coalition has branded it a “giant slush fund” and pledged to shut it down.

There’s not so much as a dreadlock or a whiff of patchouli emanating from this suited banker, but one lesson becomes clear; if you strip away the emotional language used in the climate wars, there are people who would like better environmental outcomes in unexpected places.

Yates started at Macquarie in 1988 and worked in Australia, Europe and the US, for both Macquarie Bank and Macquarie Capital. He shifted to the company’s green banking section relatively recently and was global head of utilities and climate change (including investments in wind, solar, carbon credits) from 2008-10. He worked on REDD (the UN’s forest carbon scheme). Yates’ salary doesn’t appear in Macquarie’s annual reports; the firms’ top-tier executives earned $1.4 – 5.2 million, including bonuses, in 2010.

Yates left Macquarie in 2010 and worked for smaller firms – he’s been involved in Driftwood Capital and Linc Energy – unsuccessfully seeking NSW Liberal pre-selection for the Senate in 2009. He started at the CEFC in November, lives in Melbourne and commutes to CEFC headquarters in Sydney.

The CEFC was a surprise Labor announcement. Modelled on the UK’s green investment bank, it sits within Treasury and lends money to co-finance green projects. RBA stalwart Jillian Broadbent is the chair of the board (she’s seen as the safe pair of hands at the helm, with Yates as the day-to-day driver), and there’s an ex-Macquarie power clique, with Michael Carapiet and Anna Skarbek on the board.

The CEFC can invest in manufacturing and transmission, but is aimed more at proven technologies than start-ups, doesn’t give loan guarantees or grants (that’s ARENA’s job), and won’t invest in carbon capture and storage. Its line of credit doesn’t appear in the budget; the money is lent out and the government expects a rate of return equivalent to the bond rate (about 3.5 per cent). So Yates doesn’t just spend your money, he’s supposed to get it back.

Yates has a cool, brusque manner when interviewed over a coffee in Melbourne. He doesn’t bother with spin; he gives straight answers and behaves like someone used to being listened to. He doesn’t try to persuade or convince, but seems used to letting his balance sheets do the talking. Crikey shouts Yates a coffee, which is probably what you want from the person in charge of $10 billion of your money.

Climate industry analyst Rob Fowler welcomed the arrival of a mainstream banker like Yates; “I think it’s important people from the real world get more and more involved in this area.”

Other insiders were less complimentary; most Crikey spoke to reckon Yates has the Macquarie touch, ie a banker’s ego. One senior figure said you either like him or you don’t; Yates “came into this [climate field] late” and is “quite a maverick in a way”. This insider said Yates had plenty of money and could retire (he’s now 47), giving him the freedom to work where he wanted – including a place at risk of closure.

“Come hell or high water he’s going to do the best he can,” the insider said.

Another insider confirmed Yates was concerned that the CEFC would close. Yates publicly rejected the Opposition’s recent calls for the CEFC to not spend anything because the government should apparently be in “caretaker mode” after setting the election date.

“That Act means I will be investing when I have available money and I will invest during the election, during the caretaker period, after the election …,” he told journalists.

Yates appears to have pulled his head in – has he been bruised by this foray into a tense political debate? Still, if the Coalition wins, Yates may wind up in a different senior public role – or seek Liberal pre-selection down the track. His top-tier banking background would appeal to the Coalition.

As for the man himself, Yates got interested in the environment after observing the excessive consumerism (and power of vested interests) in the US. He thought the science was in on climate change and the next major growth area was the low-carbon economy. His approach is “creating a change through commerce”. Capital for renewable energy dried up post-GFC, so he left Macquarie.

Yates has interesting ideas on growth – that it might not always be good – and financed a 2011 documentary called Decadence: Decline of the Western World (“it’s very important for people to ask where we are at any point in time” is all he’ll say). He thinks environmental resources have limits, and GDP may not be the only valuable growth index. But he won’t do more than needle at the edge of capitalism, and says “you have to use capitalist levers to influence capitalist systems.”

For Yates, investing in carbon-based energy is high-risk, and he’s concerned about Australia’s “very heavy unhedged carbon risk … I see renewable becoming the standard form.” He cites a Bloomberg report that wind will be cheaper than (new build) coal power by 2020.

The way he sees it, uncertainty – partly about policy – cramps investment in capital-hungry renewable energy, and banks’ credit departments have limited experience (“no one likes to be the first person in a traditional bank to take a new risk”). The CEFC, which doesn’t have the balance sheet charges of a bank, steps in, offering long-term capital for renewables.

Critics question why the government is cherry-picking certain green projects to finance, especially given the existence of the Renewable Energy Target. They point to green-bank money going to waste overseas, and economists might prefer a purer policy than this jumble of carbon price, RET and green bank. The CEFC is seen by some as a rushed, Greens-appeasing carbon-price sweetener.

So that’s the puzzle of the millionaire banker who turned his back on a lucrative job to take up a controversial, experimental and possibly short-term job as a senior public servant.

“In essence I’m just a banker, that’s what I do. But if you can do good while you’re doing your job, then that’s just a bonus,” is Yates’ last word.