Revenues soar for SCB as interest in climate risk intensifies

Revenues soar for SCB as interest in climate risk intensifies

As firms scramble to manage their climate exposures, low-carbon specialist broker SCB is well placed to assist, almost doubling revenues in a year and securing top spots in the 2022 Energy Risk Commodity Rankings

The past 18 months have been extremely challenging for energy market participants, requiring them to deal with the effects of the Covid-19 pandemic, extreme weather events, and the war in Ukraine triggering an energy crisis in Europe. However, even as firms battle with the immediate issues of volatility and physical logistics created by the European energy crisis, they are also firmly focused on longer-term climate risk.

For SCB Group, a specialist broker that has been in the low-carbon commodity markets for 15 years, this brings tremendous opportunities. Interest in carbon trading was given a boost by the 2021 UN Climate Change Conference (COP26) held in Glasgow in November 2021, while today’s high energy prices are further accelerating that trend. Against this backdrop, SCB Group nearly doubled its revenues and increased headcount by 25% in 2020 versus 2019.

SCB’s outstanding performance was reflected in the 2022 Energy Risk Commodity Rankings, where it was voted first in five different low-carbon commodities markets and emissions trading. It also scooped Best overall energy broker and Best overall commodities broker, reflecting the interest in environmental trading today.

Energy Risk discussed these issues and the firm’s growing success with chief executive Kevin McGeeney.

Energy Risk: How did SCB weather the Covid-19 pandemic?

Kevin McGeeney, SCB
Kevin McGeeney, SCB

Kevin McGeeney: I was in Japan in January 2020 and Hong Kong in February 2020, and even though I saw Covid-19 manifest in both places, I was still shocked when the world shut down in March.

We immediately invoked our business continuity plan and switched to remote working. Financially, 2020 ended up being extremely rough, yet still we made no layoffs and did not accept any government handouts.

It was also a very difficult time for our client base. From March 2020, SCB staff helped clients get out of exposures, some of which would have otherwise sunk them. A number of our biodiesel clients in northwest Europe had very limited tankage and were operating a just-in-time supply chain model. So, when road transport fuel consumption collapsed, they had biodiesel on ships that literally had nowhere to go. We were able to move that cargo to other clients with more storage and avoid a calamitous default.

Energy Risk: You were voted the number one broker in biofuels, carbon trading, vegetables oils and grains in the 2022 Commodity Rankings. What made you stand out from the competition?

Kevin McGeeney: We have been in the low-carbon commodity market for 15 years, which makes us a heritage business in this market. I would say, for 13 of those 15 years, it felt like we were running into the wind, but now it feels like we have the wind at our back.

As a sales business, we are used to making outbound calls, but the phone was ringing a tremendous amount as COP26 drew to a close. Our heritage position in low-carbon markets resonates with people. They know we are experts and a safe name to partner with on new opportunities, particularly in the carbon markets.

Our corporate values permeate everything we do. We are relentless in the pursuit of our goals, enterprising in how they’re achieved, experts in what we do, connected to our stakeholders and always act with integrity. I believe those values shone for our clients last year, and meant we picked up extra business.

Energy Risk: How has your business coped with recent levels of volatility?

Kevin McGeeney: I’ve been in financial markets for 30 years, but the level of volatility in the past two years has been unlike anything I’ve ever witnessed.

It has been a tremendous challenge. Having a long-term view allows us to remain calm in the most difficult circumstances. If you are looking for a very short-term deal or partnership, this type of volatility could crush you. Those seeking term deals and relationships may sail through with relative ease.

It helps that we are not an organisation driven by commission-based salaries. We compensate people on a long-term basis and don’t have a single employee on formula-based compensation. I think that helps institutionalise the long-term view.

The flipside of volatility is that our mission to promote a low-carbon future is made easier by higher energy prices. It makes it easier to persuade clients that they might want to look at alternatives. In the short term that can be painful but, in the long term, it’s great.

Energy Risk: Aside from commodities broking, SCB has become a prominent arranger in the carbon market. Can you tell us more about SCB’s carbon services?

Kevin McGeeney: We have two tracks of business activity. The first is assisting companies achieve net zero by substituting low-carbon alternative commodities for high-carbon commodities – reducing the amount of gasoline and increasing the ethanol in fuel is a classic example. The second track is helping companies achieve carbon neutrality through carbon credits to offset or abate their emissions.

That second track has seen strong growth over the past three years. Research from Trove Research shows that the adoption of voluntary carbon credits grew 30% per year until 2019, and could grow from 30% to 50% a year until 2030. There is so much interest and we can help clients with their goals because of the very wide range of carbon credits available and the complexity of the market.

COP26 was a milestone for the market. The UN decided to adopt a market-based solution, allowing governments to trade emissions. Many companies were previously asking ‘Do we have to internalise our carbon neutrality or can we use credits?’ As it became clear how COP26 was going to end, we saw a huge increase in activity as companies realised they could use carbon credits.

Energy Risk: Having arranged transactions in carbon offsetting, SCB is now directly financing carbon projects. Why the change, and how is this going to impact your business?

Kevin McGeeney: In 2018, we ran a company trip to Haiti to assist a community building a school and ran a similar trip to Senegal the following year. We then made an agreement with a non-governmental organisation that we would pay for and install solar panels at the schools and register this as a carbon offset project, so that we could issue credits and then sell them to corporations. That’s how we got into project development.

I think our clients like that there is real accountability with these projects and our commitment is very personal. We’ve been there digging the foundations, we’ve lived in those communities and learned about their lives.

Following the success of the schools project, we have developed partnerships with more experienced developers to take on larger projects. The first was the provision of 100,000 clean-burning cooking stoves to Rohingya Muslim refugees in Bangladesh. We love that you can help people, assist the green energy transition and still generate some revenue.

We feel these types of community projects are a close match to our values. We are committing $50 million to community projects over the next 12 months – which is a lot given the returns are still highly uncertain.

See the full Energy Risk Commodity Rankings 2022 results

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