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Law Times • JuLy 13/20, 2009 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On LEGAL SPECIALISTS & BOUTIQUES The new kind of lawyer Carbon finance specialists emerging F BY JULIUS MELNITZER For Law Times or some time now, securities lawyers have been trying to position themselves as the go-to lawyers on carbon trading. "When it comes to the actual trading, that makes sense," says Dianne Saxe, an environmental lawyer in Toronto. "But before you can sell something you have to understand it, create it, and have it recognized, and that's where the environmental lawyers fit in." Indeed, offsets are emerging as a powerful financing instru- ment, particularly to cover capi- tal investment. But offsets have no inherent value. They are no more than an artificial obligation to reduce emissions expressed in a legal document called an offset. As such, they represent a new kind of right. But evalu- ating and valuing that right is a complicated process sure to engender a new kind of lawyer: the carbon finance specialist. "You can't understand carbon finance without understanding both the developing domes- tic and international regula- tory framework," says Barbara Hendrickson of McMillan LLP. "You've also got to understand how credits are produced and traded, as well as the various cap and trade systems that emerge." Lawyers must also have a grasp of the existing standards for quantifying the value of an offset, whose quality is depen- dent on how rigorous the quan- tification of the underlying re- duction turns out to be. That's why Gray Taylor of To- ronto, rather than his firm's secu- rities lawyers, has been in charge of the emissions trading man- dates earned by Bennett Jones LLP. These include a $1-billion purchase of offsets from a Chi- nese company by financial in- stitutions like Goldman Sachs Group, Inc. and Barclays Bank. "It was almost like an under- writing transaction," says Tay- lor, leader of the firm's climate change and emissions trading group who started out as a cor- porate commercial lawyer and became an environmental trans- action lawyer before emerg- ing in his current incarnation. "After all, an emissions trading transaction ends with a closing book that looks like any other book. But there's a big differ- ence between running this kind of transaction and a normal securities transaction." It should be no surprise, then, that the large Alberta-based busi- ness law firms have a head start on carbon-based expertise. It is because these firms have impres- sive rosters of ongoing clients in the energy business (primarily oil and gas but also power), en- ergy companies are among the most problematic emitters in Canada, and Alberta had Can- ada's first legislated emissions trading market, that Bennett Jones, Burnet Duckworth & Palmer LLP, and Macleod Dix- on LLP find themselves among the vanguard here. In analyz- ing the carbon finance legal market, however, it's important to bear in mind the difference between the corporate com- mercial lawyer who becomes a carbon finance lawyer and the energy or environmental lawyer who moves into carbon finance. The corporate com- mercial group has always shift- ed with the times in the sense that the service it provided was unifying commercial legal and business principles and objec- tives in whatever industry it was that happened to present itself in the form of a mandate. The core expertise of these lawyers was in quarterbacking a deal. The specialists-turned-busi- ness-lawyers, on the other hand, tend to stick to doing the deals that emanated from the industries — or related industries, as in the case of energy lawyers — that were the subject of their specialties. When it comes to carbon fi- nance, it's a little too early to tell which of the quarterbacks at which of the business law firms will emerge as the significant players. But what is clear is that the vast majority of business law firms in this country are jockeying for position, and do- ing so aggressively. Among other things, they are seizing on strategic possibilities. Fasken Martineau Dumoulin LLP, for example, has partnered with the Montreal Climate Ex- change, a joint venture between the Montreal Exchange and the Chicago Climate Exchange and the first regulated environmen- tal market in Canada. Fasken, like other firms, is vy- ing not only for the big carbon finance deals that will eventually emerge, but also for brand repu- tations that will see them poised as the lawyers of choice for po- tential clients facing the host of emerging carbon finance issues. "Carbon offsets are a new as- set class in respect of which clients don't want to forego value or over- look liability," says Lisa DeMarco, who leads Macleod Dixon's Toron- to energy practice and is heavily in- volved in emissions trading issues. DeMarco comes from a back- ground that combines energy law with environmental law. "That worked out perfectly because at its core, carbon con- straint and carbon finance are primarily energy productiv- Untitled-2 1www.lawtimesnews.com & Murphy LLP, Elizabeth Harrison has extended her general corporate, M&A, and financing practice into the re- newables and emissions trading aspects of cleantech. "More and more clients want to be part of this move- ment and get in on the carbon market," she says. "They know that failure to consider the new economic parameters will get them in trouble." That's because the legal is- sues surrounding carbon fi- nance are myriad. "Whether you're talking 'Before you can sell something you have to understand it, create it, and have it recognized, and that's where the environmental lawyers fit in,' says Dianne Saxe. ity issues, not environmental law issues," she says. "The question for clients is how much bang they're going to get for their energy con- servation efforts and how few bucks they can spend to do it." And it works the other way too. At Farris Vaughan Wills about financial institutions, en- ergy companies, multination- als, or power developers, they all have varied needs relating to carbon finance," DeMarco says. "You have entities that are worried about securities cli- mate change disclosure compli- ance, you have emissions trad- ing market intermediaries and cleantech hedge funds, and you also have domestic and interna- tional governments who need outside counsel." The point is that carbon fi- nance engages a wide range of practice areas. "Apart from corporate commer- cial and environmental lawyers, you need IP, IT, real estate, carbon finance, energy, securities, tax, and banking lawyers," DeMarco says. Which is why cleantech and carbon finance practice groups tend to be broadly based. "Cleantech is an investment in- dustry label that's been used as an umbrella for a variety of different activities," says Cheryl Slusarchuk, a technology lawyer who leads McCarthy Tétrault LLP's climate action group in B.C. McCarthy created the group two years ago by combining the firm's technology lawyers (to handle funding and IP) with the environmental group (to deal with carbon trading) and the power industry group led by David Lever (renewables and big physical infrastructure projects). Cleantech's pervasiveness also explains why so many non-bill- able hours are going into clean- tech practice marketing. "Cleantech and carbon fi- nance take up all of my business development time," Hendrick- son says. "We're just waiting for a proper regulatory regime to evolve in Canada, which is when all that work should start to pay off." LT PAGE 9 Dimock Stratton welcomes Mee Ling Wong to the firm Mee Ling was called to the Ontario Bar in 2003 and is a registered patent agent and trademark agent. Her practice is focused on the preparation and prosecution of patent applications, especially in the fields of biotechnology and pharmaceuticals. Mee Ling received her j.d. from the University of Toronto in 2002. She earned her m.sc. from the University of Toronto in Pharmacology in 1999 where she was the recipient of the Charles H. Best Scholarship. Mee Ling received her b.sc. from McMaster University in Biochemistry in 1997. You can read Mee Ling's full profile at dimock.com. Dimock Stratton llp experience. results. 20 Queen W. 32nd fl, Toronto | 416.971.7202 | dimock.com 7/6/09 1:41:01 PM