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Environmental entrepreneur shares tales of business

Amanda Abney / Lantern reporter

A leader in environment-friendly innovation offered insight to students and others at Ohio State, as he discussed his journey from college to running an environmental empire.

During a Tuesday visit to campus, Richard Sandor, a forefather in environmental finance, spoke to a class, presented a lecture and a held a book signing.

Sandor is chairman and CEO of Environmental Financial Products LLC, a consulting firm that specializes in developing financial products that help the environment.

Sandor is working on a research project to develop a water market in Alberta, a province in western Canada.

“Alberta will run out of water before it runs out of oil,” Sandor said.

Richard Makiuchi, a second-year in finance, is heading up Net Impact, a sustainability program for students. He said he sees water as a very important field of research for the future.

“Water is a very big thing here in Ohio because of hydraulic fracturing (fracking),” Makiuchi said. “Because of climate change and drought, there will not be enough water to go around the world.”

Sandor earned the name “father of financial futures” as a result of work he did in the late 1960s and early 1970s. Sandor said he was the first to come up with the idea of electrical trading, fluctuating interest rates that could be traded and he crafted new legislation and regulation that would enable these ideas to become a reality.

At that point in time, futures were only taught in agricultural classes, so Sandor said he was the first to teach a class pertaining to futures in business school.

“The best way to learn something is to be forced to teach it,” Sandor said.

Sandor began building his resume at an early age.

“I started teaching by the age of 24 at Berkeley and I assumed the role of chief economist (at the Chicago Board of Trade), which is the largest exchange in the world, when I was 30,” Sandor said.

Sandor is the founder of the Chicago Climate Exchange (CCX) and The European Climate Exchange, which earned him the name “father of carbon trading.”

“It was a voluntary effort to gather companies in the private sector to agree to reduce emissions by 6 percent over 2003 to 2010, and if they couldn’t reduce them, they could buy someone else’s reductions that were in access of the 6 percent,” Sandor said.

Founding members include companies like American Electric Power, Ford Motor Co., DuPont and Motorola. The business grew to include 450 members, which included 70 percent of the Dow Jones, 11 percent of the Fortune Top 100 and 25 percent of the largest power companies in America.

Sandor used a fishing analogy to explain emission trading.

“You could get a right to fish 1,000 times and that limits the amount of fish taken out of the water, so it is a property right,” Sandor said.

Sandor explained if the fisherman doesn’t catch their quota of fish, they can sell those fishing rights to someone else, so there is a financial incentive.

Sandor said he sees this strategy as having many applications that could include education, energy and water.

“My mission is to try to find a way to use the markets to achieve social and environmental objectives,” Sandor said.

Sandor is about to release “Good Derivatives: A Story of Financial and Environmental Innovation,” a book that delves into good derivatives. Derivatives, in Sandor’s opinion, should be regulated with transparency traded on exchange with a clearinghouse.

“I wrote it because derivatives have gotten a bad name, and unfortunately there is not enough understanding out there about the ones that work,” Sandor said.

Attendees of the event said they agree that regulation is an important aspect in today’s markets.

“It is very relevant to the day and age that we are teetering in the balance between regulation and no regulation,” said Sanjay Dudaney, CEO of Halcyon Solutions Inc. “This is the kind of thing policy makers should be paying attention to.”

Sandor said he hopes the book will teach policy makers, students of finance, traders and people in India and Asia who do not have interest rate markets or environmental markets. Sandor believes the book will also teach the complex ideas of building a new institution and exchange.

“Hopefully this book will make a little bit of a difference,” Sandor said.

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