Tiina Kähö´s visiting lecture at Lappeenranta University of Technology, Markets and Technology -course 18th of February 2015.

1. Towards carbon neutral
economy
Tiina Kähö, Senior Lead
LUT, Cleaner Technologies and Markets
18th February 2015

2. Sitra Tiina Kähö 18.2.2015
Our duty is to promote Finland's:
• stable and balanced development;
• quantitative and qualitative economic growth;
• international competitiveness and co-operation.
Act on Sitra, the Finnish Innovation Fund (717/1990)
2
Heading for the future
Sitra is a fund
operating directly
under the Finnish
Parliament. We
finance our
operations from the
returns on our
endowment capital
and venture capital
investments.
As an independent
societal actor, we
offer training and
bring together
experts who seek
solutions to systemic
challenges, which may
even be applicable on
an international basis.
We anticipate
change and its impact
on the Finnish people.
We try out new
operating models and
accelerate business
activities aimed at
generating sustainable
well-being.
We influence
societal structures and
promote changes
that increase well-
being.
An
independent
societal game
changer

3. 3Sitra Tiina Kähö 18.2.2015
Sitra as a Change Agent
Venture capital and societal trainingFunding R&D Societal change agent
?
Global service
society
Closed
industrial
society
1990
2000
2014
1970
1980

4. 4
Resource-wise and carbon-neutral society
Sitra creates the conditions for a resource-wise,
carbon-neutral society and for business operations
chasing this goal.
Preparing for the impact
of climate change and its
proactive prevention call
for systemic and phased
long-term action.
Concern about the
scarcity of natural
resources and the need to
improve our resource
efficiency is beginning to
guide consumption habits
and production activities.
However, increasing our
resource efficiency will
not be enough – we also
need to find alternative
materials, services and
solutions, and learn to let
go of old practices.
We are moving towards a carbon-neutral society based on the principles of
one planet living. Our focus is on the opportunities presented by this change.

5. We promote business activities that solve ecological, social
and well-being challenges
We help Finnish companies to expand
abroad and further their growth and
competitive strength.
We speed up testing and introduction
of new business and funding models.
We actively participate in developing
the business of the companies in
which we invest in and support their
success.
We invest in growth companies that
promote sustainable well-being.
5Sitra Tiina Kähö 18.2.2015

6. Inter-
dependency
is increasingCommunities
are
empowered
Europe's
structures
are
crumbling
Skills are
challenging
information
Human
lifespans are
increasing
Technology is
being
integrated
into everyday
life
Job stability
is
disappearing
Power
relationships
are shifting
Inequality is
growing
The roles of
cities are
growing The effects of
climate
change are
broadening
Ecological
footprints are
outgrowing
our “shoes”
Well-being is
becoming
more
important
Megatrends | Sitra 2014/2015

7. 7
Growth is weak across the world economy
OECD countries
 Still recovering from
financial crisis – loss of
fiscal flexibility
 Slower productivity growth
 Infrastructure renewal
challenge
 Income inequality
China
 Looking to restructure its
economy and reduce
energy intensity
 Excess financial
leverage
 Significant pollution
problems
Low-income countries
 Too dependent on
commodity
exports/cycle
 Capital constraints
 Remaining deep
poverty, including lack
of access to energy,
water, health, food
Middle East
 Excess dependency
on hydrocarbon
exports
 Insufficient private
sector employment
Middle Income countries
 Need escape from “middle
income trap”
 Two speed economies with
large productivity gaps
India
 Significant
infrastructure gap
 Regulatory
complexity
 New chance to
catch up
Source: New Climate Economy, 2015
Sitra Tiina Kähö 18.2.2015

8. 8Sitra • Tiina Kähö • 18.2.2015 •
Climate Change poses both Threats and Opportunities
to the Global Economy
Sources: World Bank, OECD, IEA World Energy Investment Outlook 2014,
Ministry of Employment and the Economy
OECD: 0.7%-2.5% Global GDP Loss by 2060 – Effects
of Climate Change
World Bank: GDP Growth $1.8-2.6 trillion a Year by
2030 – Climate Change Mitigation
IEA: $48 trillion in Energy Investments over the Period
to 2035$
Ministry of Employment and Economy: Global
Cleantech Market €1600bn€

9. 9
Climate performance off track: next 15 years critical
Source: IPCC Sitra Tiina Kähö 18.2.2015

10. 10
Next steps
The Global Commission recommends 10 transformative actions
Source: NCE. For details please see the NCE Global Action Plan (2014)
1 Integrate climate risk into strategic decisions
Secure a strong international climate agreement
End subsidies for the high-carbon economy
Price carbon to send a clear market signal
Scale-up low-carbon innovation
Reduce the cost of capital for low-carbon investment
Move toward connected and compact cities
End deforestation
Restore degraded lands
Phase out unabated coal fast
2
3
4
5
6
7
8
9
10
Sitra Tiina Kähö 18.2.2015

11. 11
Key drivers of growth and climate performance
RESOURCE
EFFICIENCY
INNOVATION
INFRASTRUCTURE
INVESTMENT
HIGH QUALITY, RESILIENT, INCLUSIVE = BETTER GROWTH
ENERGY
LAND
USE
CITIES
WIDER
ECONOMY
Source: New Climate Economy, 2014 Sitra Tiina Kähö 18.2.2015

12. 12Sitra • Etunimi Sukunimi • 00.00.2014 •
Carbon risk and divestments are stepping up on the
investors’ agenda
HS 18.2.2015
Sitra Tiina Kähö 18.2.2015

13. 13
Carbon risk and divestments are stepping up on the
investors’ agenda
Sitra Tiina Kähö 18.2.2015

14. 14Sitra • Tiina Kähö • 18.2.2015 •
• Carbon Tracker: To reduce the chance of exceeding 2°C warming to 20%, the
global carbon budget for 2000-2050 is 886 GtCO2, of which already 36%
was burned by 2011.
• In order to stay within the carbon budget, up to 80% of current reserves
should never be dug up and burned
Sources: Carbon Tracker Initiative: Unburnable Carbon, The Economist
All currently known fossil fuel
reserves cannot be burned if
we are to limit global warming
to 2 degrees
Carbon Risk: A Carbon Bubble in the Financial Markets?

15. • The share prices of oil, gas and coal companies depend in part on their
reserves, but what if some of those reserves can never be dug up and burned?
15
Sources: Carbon Tracker Initiative: Unburnable Carbon, The Economist,
McKinsey&Carbon Trust
Carbon Risk: A Carbon Bubble in the Financial Markets?
• Carbon Tracker: All currently known fossil fuel reserves cannot be burned if we
are to limit global warming to 2 degrees. In order to stay within the World’s
carbon budget, up to 80% of current reserves should never be dug up
and burned
• If energy consumption continues unfettered, unburnable carbon will be reached
in just 16 years (according to the latest IEA projections of energy-related fossil
fuel CO2 emissions)
Regulation
Financing
Public Opinion
Other external
factors
?
Sitra Tiina Kähö 18.2.2015

16. 16Sitra • Tiina Kähö • 18.2.2015 •
Carbon Risk: A Carbon Bubble in Energy Sector?
• The fossil fuel reserves held by the top 100 listed coal, oil and gas companies
represent potential emissions of 745 GtCO2
• Given only 20% of the total reserves can be used to stay below 2°C, then only
149 GtCO2 can be used unabated
Sources: Carbon Tracker Initiative: Unburnable Carbon, The Economist

17. 17Sitra • Tiina Kähö • 18.2.2015 •
Sources: Nordea
Towards a Low-Carbon World?
…boost transition towards clean energy while investments in
high-emissions projects lose their appeal.
Carbon Price
and Taxes
…in wind, solar and energy efficiency erode the competitiveness
of fossil fuels.
Technological
Development
…and increased attention to climate issues affects the operating
environment of fossil fuel companies.
Consumer
and Investor
Behavior
All this puts pressure on fossil fuels but also creates
opportunities for new business

18. Jouni18
“If a petrochemical
firm can do this,
anybody can ”
CEO Ray Anderson,
2009
Interface carpets; pioneer in low-carbon transformation and resource efficiency
Source: Jouni Keronen, 2014 Sitra Tiina Kähö 18.2.2015

19. 19
Source: Tesla motors website, scdigest.com, autonews.com
Triggering competitive
response
Transforming the auto industry
 Tesla market cap: $26bn
~25,000 cars sold in 2013
 GM market cap: $54bn
~9.7 million cars sold in 2013
Promoting new
materials
Pioneering batteries
and energy storage
Tesla motors is challenging the status quo in many industries,
and creating huge wealth in the process
Sitra Tiina Kähö 18.2.2015

20. 20
Google is becoming one of the biggest “clean tech” companies
on the planet
Source: Google, Greentech Media Sitra Tiina Kähö 18.2.2015

21. 21
Finland’s performance in different global cleantech and
environmental policy rankings varies from poor to great
Index
The Global
Cleantech
Innovation Index
2014
The Global Green
Economy Index
2014
Environmental
Performance Index
The Climate
Change
Performance Index
2015
EY Renewable
energy country
attractiveness
index (9/2014)
Index
provider
Cleantech Group,
WWF, Tillväxtverket
Dual Citizen LLC Yale University
Germanwatch &
Climate Action
Network Europe
EY
Index
description
Assessment of
countries’ potential
and conditions for
developing
cleantech
innovations.
Assessment of
countries'
performance in Green
Economy.
Country assessment
based on 20 national
environmental
indicators.
Assessment of
countries’ climate
policy and success in
tackling climate
issues.
Assessment of the
attractiveness of
countries’ renewable
energy investment
and deployment
opportunities.
Finland’s
ranking
2./40 8./60 18./178
32./61
(Grade: Poor)
37./40
Top3 –
countries
1. Israel
2. Finland
3. USA
1. Sweden
2. Norway
3. Costa Rica
1. Switzerland
2. Luxembourg
3. Australia
1. Denmark (4.)
2. Sweden (5.)
3. UK (6.)*
1. China
2. USA
3. Germany
Countries
ranked next
to Finland
Sweden (4.),
Denmark (5.),
UK (6.),
Canada (7.),
Switzerland (8.),
Germany (9.)
Switzerland (6.),
Austria (7.),
Iceland (9.),
Spain (10.),
Ireland (11.),
New Zealand (12.)
New Zealand (16.)
Portugal (17.)
Ireland (19.)
Estonia (20.)
Slovakia (21.)
Italy (22.)
Ukraine (30.),
India (31.),
Latvia (33.),
Croatia(34.),
Greece (35.),
Austria (36.)
Philippines (34.),
Saudi Arabia (35.),
Kenya (36.),
Russia (38.),
Indonesia (39.),
Ukraine (40.)
*None of the countries achieved positions one to three.
Sitra Tiina Kähö 18.2.2015

22. 22Sitra • Tiina Kähö • 18.2.2015 •
Finnish Companies have managed to turn Climate
Change into Business Opportunities
Energy Efficiency and
Related Solutions
Energy Efficient Use of
Resources

23. The role of
public risk
capital
• Traditionally most economists argue that the government should focus on the
framework conditions in supporting innovation, and let innovation and
business flourish in the free market
• However, promising or societally important innovations may not appear
tempting to private capital due to substantial risks, capital intensity or the
time horizon from innovation to cash flows – a sort of market failure often seen
with for example radical new medicines or energy sources
• This is where long-term public risk capital can step in, assuming the risks
and uncertainty associated with innovation that would otherwise not find financing
from the private sector

24. 25
Slush
• Slush is a non-profit event organized by a community of entrepreneurs,
investors, students and music festival organizers, supported by
seasoned entrepreneurs and venture capitalists
• In the past three years, Slush has grown from a local, 300-person event
to become one of the leading tech and startup events in the world
• In 2014, Slush brings together 10.000 attendees and more than 2500
companies for the two-day event, which takes place on November 18-
19th in Helsinki
Copyright: Slush

25. 26
NegaWatt
Energy
Efficiency
Fund
• NegaWatt Energy Efficiency Funds utilizes an innovative investment model in financing
investments in the built environment, all with the aim of increasing efficient energy use.
• Business rationale: Investment financed by the fund and savings from these energy
efficiency investments are shared between the investor (fund) and the asset owner for a
period of time. After this the benefits flow to the asset owner.
• Funds financially profitable technological measures which achieve material
improvements in the energy efficiency of across buildings, infrastructure and industry.
• Financing for example geothermal heat systems, extensive lighting modernizations, heat
recovery, solar power and many other energy efficiency solutions.
• A prime example of Sitra’s investment target: potential to contribute to improving the
national economy’s competitiveness and reducing both dependency on imported energy
and carbon dioxide emissions.

26. 27
Cleantech
Invest
• Investment fund investing in companies that do profitable business in generating
clean energy and providing solutions for efficient natural resource use
• Energy production
• Energy storage, quality, transfer and efficiency
• New materials and recycling
• Clean water and air
• Operates between cleantech growth companies and large industrial corporations as
a pathfinder, combining the innovative powers of entrepreneurship with industrial
scalability
• Sitra an early investor, IPO in 2014. Stock listing enables also retail investors to
invest in a portfolio of cleantech ventures through the stock market.

27. 28
AW-Energy
• AW-Energy Ltd is a Finnish company developing the WaveRoller concept to utilize
ocean wave energy
• WaveRoller has passed the proof of concept stage through extensive marine
testing in Peniche, Portugal as well as in Orkney, Scotland.
• The evidence from the marine testing indicates that WaveRoller has the potential
for becoming a significant driver in making wave energy a mainstream energy
source.
• Sitra amongst the first investors; a strong strategic fit to Sitra’s vision
• A good example about the role of public risk capital: capital intensive, long-term
development project with many uncertainties but immense potential

28. Sitra accelerating industrial transformation
towards a carbon-neutral society
• 5-10 leading corporations commit to developing solutions to challenges
posed by climate change
• Large corporations lead the industrial transformation
• Building home markets and ecosystems
• 1-3 national pilot projects
• Policy recommendations
Sitra • Tiina Kähö • 18.2.2015 •
Carbon-neutral
industry
Targeted results
Transformation
has accelerated
the energy transition
of the whole society, and
large companies
lead the way
Increased
competitiveness
secures the success of the
businesses in the future
Pilot projects and areas
add information
and build the home market
Recommendations
support a functioning
business environment

29. 30
Sitra prepares Finnish industry for a carbon neutrality
journey
Awareness
•Background
studies
Understanding
•Discussions on
selected issues
with group of
companies
Acceptance
•Development
projects with
selected
companies
Commitment
•Building blocks for
everyone to use
• Carbon neutrality transformation building blocks are generic
• Sitra facilitates cross company co-operation
• Sitra promotes reference areas and pilot projects
• Sitra wants to reach the Finnish industry and help them in the
transformation
Sitra Tiina Kähö 18.2.2015

30. 31
Building blocks for carbon neutrality transformation
Strategy
Leadership & Culture
Carbon Efficiency
New
Cleantech
Business
Carbon neutrality
Resource wisdom
Business
Society
Sitra • Tiina Kähö • 18.2.2015 •

31. 32
In addition, carbon neutrality should be understood in a
wider context
Strategy
Leadership & Culture
Carbon Efficiency
New
Cleantech
Business
Carbon neutrality
Resource wisdom
Business
Society
Ecosystems
Value chain and carbon hand print
Corporate
citizenship
Sitra • Tiina Kähö • 18.2.2015 •

32. Industry
cases
Generic
topics
33
Building blocks in Carbon neutral industry focus area
Strategy
Study: How carbon
neutrality is
changing the global
business?
Industry workshop
Carbon neutrality
risks
Tools and methods
for climate and
carbon risk analysis
Industry workshop
Building blocks for Carbon neutral industry transformation
Carbon neutrality opportunities
Industry workshop
New cleantech
business and
financing models
review
Industry workshop
Cleantech innovations
review
Next best ecosystem Next best value chain
Next best carbon
hand print
Next best leadership
practises
Next best innovation
practises
Next best business
models
Next best carbon
neutrality LCA
Sitra • Tiina Kähö • 18.2.2015 •

33. Climate Leadership Council
Main projects
• Low carbon roadmap/building block development
for companies
• Supporting the clean tech developments in the
capital area of Finland
• Supporting World Bank Carbon Price initiative
• Development and piloting climate and carbon risk
analysis methods
• CLC utilises the results of Sitra Carbon-neutral
Industry Focus Area: and develops collaboration
with relevant national and international partners
J Keronen, Climate Leadership Council
Sitra • Tiina Kähö • 18.2.2015 •

34. J Keronen, Climate Leadership Council
Sitra • Tiina Kähö • 18.2.2015 •

35. 36Sitra • Tiina Kähö • 18.2.2015 •
”Business and goverment must work together to design
effective policy to support the transition to green economy ”
Lähde: KPMG, Sustainable Insight, 2012.

36. 37Sitra • Tiina Kähö • 18.2.2015 •

37. tiina.kaho@sitra.fi
Facebook.com/SitraFund
@SitraFund
@tiinakaho
Thank you!
Building a successful Finland for tomorrow