GREEN BONDS: DEBT CAPITAL MARKETS AND … · green bonds: debt capital markets and the low carbon transition lenora suki head of sustainable finance product strategy ° ° ° ° °

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GREEN BONDS: DEBT CAPITAL MARKETS AND THE LOW CARBON TRANSITION LENORA SUKI

HEAD OF SUSTAINABLE FINANCE PRODUCT STRATEGY

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Electric Vehicles: development

and charging stations

The climate bond will fund….

Retrofitting 200 schools: energy

efficient buildings

Construction of energy efficient

buildings: social housing

New public green spaces:

roofs, walls, facades

Production of renewable

energy: solar panels

Alternative transport:

Cycling Plan

GREEN AND THEMATIC BONDS LEVERAGE CAPITAL FOR SUSTAINABLE AND EQUITABLE ECONOMIES

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PARIS IS NOT ALONE… SSA ISSUERS HAVE BUILT THE GREEN BONDS MARKET

230 unique SSAs and municipal issuers…

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CORPORATE ISSUANCE IS RAMPING UP

Corporate issuers in the green bonds market

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5

$3 tn target by COP21

$8 tn in assets to disclose footprints

$100 bn target by COP21

PDC oversees $230 bn in AUM

THE MOVEMENT FOR DECARBONIZATION AND DISCLOSURE ACROSS STAKEHOLDERS IS GROWING

$24 tn in AUM calling for an agreement

on climate change

154 companies with $4 tn in revenues pledge

environmental goals

$22 tn investor group engaging with over

1,300 companies

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27%

NY – 73%

DU - 11%

SUSTAINABLE AND RESPONSIBLE INVESTMENT IS

ACCELERATING BUT STILL LARGELY EQUITY

Sources: Principles for Responsible Investment, Bloomberg

Principles for Responsible Investment

Funds With Sustainable

Investment Strategies

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BLOOMBERG USER GROWTH ILLUSTRATES GROWING

INTEREST IN SUSTAINABLE INVESTMENT

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27%

NY – 73%

DU - 11%

Source: Bloomberg New Energy Finance (BNEF)

CLEAN ENERGY INVESTMENTS HAVE LEVELED AT ~$300 BN/YR SINCE 2011

* Estimated 2015 figure includes end of year projected R&D estimates and EST asset finance

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27%

NY – 73%

DU - 11%

Source: Bloomberg, Bloomberg New Energy Finance (BNEF)

BOND ISSUANCE FINANCES INCREASING SHARE OF CLEAN ENERGY INVESTMENTS, REFINANCING

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GREEN BONDS HAVE BEEN THE MOST IMPORTANT VEHICLE FOR THAT GROWTH

Source: Bloomberg, Bloomberg New Energy Finance (BNEF)

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NOT ALL PUBLIC DEBT SEGMENTS FINANCING CLEAN ENERGY ARE THE SAME

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STANDARDS ARE BUILDING EXPECTATIONS OF TRANSPARENCY AND SUSTAINABILITY PERFORMANCE

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27%

NY – 73%

DU - 11%

ACHIEVING GOALS OF COP 21 WILL REQUIRE SUSTAINABLE FINANCE, ESPECIALLY GREEN BONDS

• Capital providers are responding with sustainable finance innovation (e.g. green bonds, yieldcos, funds)

G7 decarbonization pledge already made

• Supranationals are leveraging green bonds for North-South resource distribution

Differentiated, distinct contributions key to success

• South-South Climate Cooperation Fund, Green Investment Banks can be green bond issuers

More climate finance funds and vehicles

• Green bonds market is headed toward more transparency and standards

Quantifiable, measurable, reportable, verifiable targets

>>>>>>>>>>>>>>

BLOOMBERG AND GREEN BONDS

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BLOOMBERG PROMOTES TRANSPARENCY AND ACTIONABLE INFORMATION

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BNEF<GO>

BNEF ANALYZES GREEN BONDS ISSUANCE, THEMES AND MARKET MAKERS

Source: Bloomberg

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27%

NY – 73%

DU - 11%

NEWS AND PREDEFINED PORTFOLIO SEARCHES GIVE UP-TO-THE-MINUTE ACCESS

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GRANTMAKING FOR STANDARDS AND SUSTAINABILITY BUILDS THE ECOSYSTEM

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TRANSPARENCY AND STANDARDS DRIVE ADOPTION OF BEST PRACTICE FOR CORPORATES AND INVESTORS

Innovation

Initial Activity

Best practices identified

Benchmarks established

Mainstream application

Financial Analysis /

Integration

“Derivative” Financial

Instruments

Developed Early stage

Standards-

Setting Phase

Measurement / Management

Ad

op

tio

n

Standards evolution

Information / Analytics

Today

Standardization /

normalization

begins

Quality,

comparable

data emerges

Sustainability risk

/opportunity for

Companies and

Investors

19

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BLOOMBERG HAS ADVANCED TRANSPARENCY AND MARKET CREATION ACROSS BOND MARKETS BEFORE

>>>>>>>>>>>>>>

MARKET FRONTIERS AND GROWTH

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THE CURRENT TREND IN CLEAN ENERGY INVESTMENT SEES A SHIFT TO LARGE SCALE RENEWABLES

Source: Bloomberg New Energy Finance

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CLEAN ENERGY CAPACITY IN EMERGING AND DEVELOPING MARKETS IS GROWING RAPIDLY

China Gross Annual Capacity

Additions and Retirements

New Clean Energy Capacity

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AGGREGATION AND NON-ENERGY CO-BENEFITS WILL DELIVER ANOTHER PUSH

Energy efficiency and distributed generation

• Residential, commercial, hospitality, health care, industrial, MUSH, municipal equipment

• Distributed assets with heterogeneous cash flows, contracts and structures

• Data challenges, baseline and measurement

• Need for a sophisticated aggregator and a pool of capital to finance

• Challenge of public + private benefit, social co-benefits => guarantees, PPPs, tax incentives

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ASPIRATIONAL PARTING THOUGHTS

Debt and Financial “Innovation”

Small investments won’t get us to the quantum of capital we need to achieve

climate goals. Tapping global debt capital markets is critical.

New Investment

A very small proportion of existing green bonds issuance is for new projects. “We

push issuers now on the new investment part of the green bonds.” – Stephan

Bonte, Standish Mellon Asset Management

Quality of Disclosure

Bloomberg and others are creating new transparency and evaluation screens.

Impact Investment

49% of investors say that impact investment will be one of the predominant

themes of their future investment plans.

The Future of Green Bonds

“In the future, all bonds should be green.” – Suzanne Buchta, Bank of America

Merrill Lynch