"ItÆs all very well damning the Three Gorges and getting hydroelectric power (from the Yangtze River), but it has effects on the people living there. Likewise, with palm oil plantations in Indonesia that can make bio fuel, but for which you have to cut down a more valuable resource û the rainforests."

Former US President Bill Clinton made the comment in Hong Kong on Tuesday at the opening of the first Clinton Global Initiative meeting outside the US.

Clinton makes the point that being eco-friendly has to make sense in a multi-dimensional way in order to be realistic. He adds that if green initiatives did not make commercial and economic sense then business leaders would pay lip service towards them, but tangible action would seldom be forthcoming.

CLSA is a strategic partner of the Clinton Global Initiative. The firm's chairman, Rob Morrison, is also one of the founding members of the Copenhagen Climate Council, which is an organisation established to create a dialogue based on effective solutions to climate change. The recommendations of that council are delivered directly to the Danish government, which has agreed to take them forward to the United Nations.

CLSA has a hatful of long-only and long/short clean energy and water funds. In December 2008, it launched a long-only version of its clean resources Asia fund.

Morrison spoke to AsianInvestor about investing in clean energy, the science of climate change and how he deals with the challenges of running a modern intercontinental company in a way that doesnÆt muck up the planetÆs environment even more.

You personally are a member of the Copenhagen Climate Council. What does that do?
A successor treaty to Kyoto has to be negotiated, as that runs out in 2012. The key areas of that need to be worked out in 2009 and what the Copenhagen Climate Council does is to align science, business and policymakers into a group to bring pressure to bear on governments to make sure that negotiations are ultimately successful. There are a number of groups trying to do this.

WhatÆs the optimal ways of investing in clean energy and climate change themes, mindful that had you done so at the start of this year youÆd have lost 30% of your investment?
If youÆd been invested in the financial sector, youÆd have lost even more. It is a long-term trend in alternative energy, and thereÆs a lot of money still to be made. These are still relatively small-cap stocks and, no question, some of the funds have been hammered this year. Very few sectors have not been hammered this year.

I think solar energy is attractive and long-term is going to be a key part of the clean energy theme. Relatively, it is an expensive technology but costs are coming down in battery storage and photo-voltaic panels. There are 30 million homes now in China with solar water heating. In the US, there are less than a million homes using solar power.

How can you reconcile being both a climate change leader and chairman of a modern international company that uses business class aeroplane travel and untold tonnes of paper?
Driving energy efficiency and using resources better is good for the bottom line. ThereÆs no disconnect there. Do we still fly? Yes we do, but we run carbon neutral on air flights. We do use recycled paper and we are conscious about trees. We have obtained ISO14000 environmental certification. CLSA is the first financial services firm in Hong Kong to achieve this I believe.

What if someone reads the research reports and then puts them in the dustbin. Then they are out of the recycle. Why not send everything electronically?
For sure, that paper is out of the circle. Are we at the Nth degree yet? No weÆre not.

I can see a future in which broker reports are distributed electronically. What will help that is a reduction in microchip prices which ultimately permits our research and your magazine to come out, not on paper, but electronically. Not even on personal computers, as weÆll all be carrying portable machines that project what we want to read on a screen or on to a wall.

Maybe that will come with our next generation. I admit that I still like to read paper versions of newspapers, but there are an increasing number of people who donÆt want anything sent in hard copy.

CLSA has a shipping fund and the bunker fuel used by ships is a big polluter. You also give stock recommendations about buying coal stocks. On the other hand you have the Clean Resources Fund and Clean Water Funds. Is that a conflict?
Not really. The carbon debate is not so much about saying æyou canÆt flyÆ or æyou canÆt drive a carÆ. It is about looking for technological efficiencies, for example cleaner running ships. This is not about going back to the dark ages, or saying that you have to abandon fossil fuels overnight.

Ship fuel is dirty, but a greater real pollutant problem is coal-fired power stations. Coal is a real problem with climate change. If you priced it appropriately it wouldnÆt be a cheap fuel.

The answer is not to stop people from travelling, and itÆs easy for a sceptic to say that you arenÆt conscious of green issues just because you fly. The world still has to function. If you stopped that and stuck your head in the sand youÆd make your carbon targets, but everyone would starve in the process.

Changes can be made nevertheless. The US government shouldnÆt bailout Detroit without getting concessions on improving efficiencies. That would be a huge joke.

What is the best measure for reducing carbon emissions, government subsidies or taxing emissions?
There is no one convenient answer because countries are at different economic stages. A solution that might work for the US might not work for Equatorial Guinea. People keep looking for that one silver bullet, and there really isnÆt just one.

ThereÆs a fear in some of the developing countries that with trading schemes they may lose control and be hostage to carbon markets in the US and Europe, as they do not have such sophisticated capital markets. So they would prefer to see a taxation system.

China is the worldÆs biggest emitter of carbon, and it's also the biggest recipient of carbon-related cash income, via CERs. It can build plants that emit the ultra-noxious HFC23, then get paid handsomely to demolish them. This doesnÆt seem fair.
The system isnÆt perfect, but that doesnÆt make it wrong. There are anomalies, and thatÆs because it has developed piecemeal which has allowed for these kinds of arbitrages in the system.

The Council recommends a carbon target of 450 parts per million in the atmosphere and the scientific evidence says that at that level the world can still resolve the problem. Once past that level, and that could come as soon as 2020, it cannot be rectified and it's irrevocable. That line has to be drawn in the sand.

Scientists get grant money if their theories denigrate carbon. State money has been made available for anti-carbon research ever since Margaret Thatcher took on the British miners. Could the body of global warming theory predicated on this bias be bad science?
If you go back to when we were growing up in the sixties, you had plenty of scientists saying it was safe to smoke. YouÆll always have doubters and vested interests which say the evidence is wrong and come out with alternative evidence. A lot of funding for the anti-carbon lobby comes from oil companies.

The IPCC (Intergovernmental Panel on Climate Change) says that there is a 90% likelihood global warming is on an upward trend and linked to human activity. In the past, the IPCCÆs predictions have underestimated the negative effects of CO2 concentrations and climate change. Even their most pessimistic assessments have been wrong, and reality has proven worse. From a scientific point of view and the UN consensus, the case is very strong. The stakes are too high to take the chance that all the theory on global warming is wrong. The carbon we release now will still be in the atmosphere in a century.

I donÆt think any scientist with remaining credibility is making the case that increased solar activity accounts for global warming.

It all depends how big a gambler you are. Would a couple of percent doubt in your mind cause you to hold off taking steps for the next 20 years? In that case, roll the dice.

Does the fall in oil prices lead people to go back to fossil fuels? Is the marginal attractiveness of alternative energy reduced?
I donÆt think so. With oil having reached the levels it did, it makes people think it will reach that level again. There may be cyclical changes in its price, but it has shown it has the ability to break out and trade at those levels after the current recession. However, oil is less critical to the global warming issue than that of coal.

Despite all the UN activity, scientific involvement and carbon credit schemes, emissions have still gone up. IsnÆt the whole point of all this to reduce emissions?
ThatÆs why it is so important to get binding decisions made now. Kyoto was a step in the right direction, but with the US not signing it, it left a lot of room around the edges. You need something that includes the developing nations as well as the developed world.

If you look at ChinaÆs latest five-year plan, key parts of that plan are dealing with environmental degradation, perhaps not necessarily focused on climate change, but reducing pollution and cleaning up water. ThereÆs a long way to go, but this represents a big change.

You wouldnÆt need organisations like Copenhagen Climate Council if everything was going swimmingly, which obviously theyÆre not. The Council tries to bring groups together and eliminate the excuses. One government excuse not to sign up to targets is that costs are too high. But businesses can adapt and governments can spend money û as indeed they are doing right now in the financial crisis. If governments spent on climate change as they do with firms that should be left to go bust, the situation would be radically different.

In the current edition of AsianInvestor, we analyse the current state and 2008 performance of Asia's environmental and green investment sector.