Greenpeace East Asia Sustainable Finance Inititive

Greenpeace East AsiaSustainable Finance Inititive

Overview, Framework and Case Studies

Philip B. WeiSenior Sustainable Finance AdvisorGreenpeace East [email protected]

April 2, 2011 in Beijing

Agenda

3 GAR Finance Campaign Case

1 Sustainable Finance Introduction

Page 2

2 Policy Consultation Case

4 The Forthcoming Climate Finance Program

Agenda

1 Sustainable Finance Introduction

Page 3

3 GAR Finance Campaign Case

2 Policy Consultation Case

4 The Forthcoming Climate Finance Program

Renewable Energy Carbon Market Development Clean Tech, Waste Management Ecological Agriculture and Forestry etc.

Climate Change Risks Energy Risks Reputational Risks Legal and Social Risks etc.

CSR, SRI , Climate Finance Standards and Principals (e.g. Carbon Disclosure, Equator Principals)

Green Finance Policies etc.

Strategic & RegulatoryConsultation

Green Solutions Promotion

Environmental Risk Disclosure

Page 4

The Framework of the Sustainable Finance Inititive

Page 5

Return

Risk

AnalyticalModel and Data Based

Visionary

Long Term vs. Short Term

Promote New Opportunities

Change Risk Perception

The Foundamentals of the Finance Sector and How we work accordingly

Solid Research with Financial Partners

Provide Scenarios & Outlooks

May JunApr

S&P 500 Index

Apr.20:Rig sinks in Gulf of Mexico, oil spill risk looms

Jun 18:credit rating agency cut BP’s rating

Moody’s: Aa2 —A2

S&P: AAˉ —A

Fitch: AA—BBB

Jun 1/9:U.S. government has launched a criminal probe

May 31:BP removed from Dow Jones sustainability index

May 24:The U.S. government piled pressure on BP Plc to

clean up a "massive environmental mess" in the

gulf of Mexico

59.48 USD

26.75 USD

Source: Reuters

On the Risk Side: Environmental Disaster = Economic Disaster? Stock Price of BP (NYSE) After the Oil Spill

Page 6

HENG SENG Index

Jul 19 Jul 13

Jul 12:Zijin's copper mine sewage contaminates river.

The Same in China?Stock Price of Zijin Mining Group (HKSE) After Pollution Affair

5.58 HKD

4.47 HKD

Source: Reuters

?

How should We Send the Risk Information to the Financial Sector?

Page 8

NGO Voice Environmental & SocialRisk Analysis (ESRA) Financial Sector Interest

• Biodiversity Issues• Climate Change Issues• Deforestation Issue• Food & Agriculture Issues• Toxic Issues• Pollution Issues • Health Issues• Community Issues• Globalization Issues• Labor Issues• Social Issues• Human Rights Issues• Poverty Issues• Development Issues• Etc.

• Environmental Risks• Political Risks• Biodiversity Risks• Climate Change Risks• Social Risks• Etc.

ESRA Institutions• MSCI ESG Research• TruCost• Systainalytics• Muddy Waters

Research• EIRIS• ERM• CERES• Etc.

• Economic Trend• Policy Trend• Market Trend• Industrial Trend• Company Profitability• Management Quality• Innovation, IP• Product Development• Supply Chain• Business Expansion• Mergers & Acquisitions• Market Entrance• Price per Share• Return on Investment• Etc.

Page 9

Source: Dow Jones Sustainability World Index Factsheet, July 2010

Overall Index Performance

-> Mixed Performence

In the Economic Upturn

-> Outperform

In the Economic Downturn

-> Underperform

On the Return Side: Sustainable = Profitable?Performance of Dow Jones Sustainability World Index (DJSI World)

Source: Google Finance, as of 28 February 2011

In China, the SSE Social Responsibility Index (000048) is not able to significantly outperform the Shanghai Composite Index either

Page 10

Social Responsibility Index

Shanghai Composite Index

Dec 2010 Jan 2010 Feb 2010

Page 11

Despite the stimulus, clean energy stocks are less favorable for investors, underperforming the S&P by over 20%, the oil sector by over 40% WilderHill New Energy(NEX) Global Innovation Index 2010

Source: Bloomberg New Energy Finance 2010

Agenda

1 Sustainable Finance Introduction

Page 12

3 GAR Finance Campaign Case

2 Policy Consultation Case

4 The Forthcoming Climate Finance Program

Page 13

Global Sustainable Stock Exchange Development lead by Emerging Market Exchanges (S. Africa, Singapore, Malaysia, China, etc.)

Page 13

Page 14

The Role and Influence of the Stock Exchanges

Page 14Source: BM&FBOVESPA

Page 15

Paticipated 2 Consultations on Environmental Information Disclosure Chinese MEP 2010-09 Singapore Exchange 2010-10

Page 15

Page 16

Our Demands on Sustainability Reporting

Page 16

1. Mandatory Reporting Regulation by Stock Exchanges

2. Integrated Sustainability Reporting with Financial Reporting

3. High Sustainability Impact Sector Classification

4. Sector Specific Reporting Criteria and Guideline

5. Supply Chain Sustainability Disclosure and Management

6. Financial and Regulatory Penalties for False and Misleading Disclosures

Agenda

1 Sustainable Finance Introduction

Page 17

3 GAR Finance Campaign Case

2 Policy Consultation Case

4 The Forthcoming Climate Finance Program

The Worst of the Worsts: Sinar Mas Group – A WIDJAJA Family Controlled Empire

Page 18

GAR and APP – the Key Corporate

Campaign Targets

Page 19

Sinar Mas Finance AnalysisEquity Finance of GAR and the potential IPO of GEP are the Tipping Points

Source: Profundo 2008

Vol ume Proport- i on Vol ume Propor-

ti on Vol ume Proport- i on

Gol den Agri -resources Ltd. Si ngapore (GARPF. PK) USD 4, 482

mi l l i on 65% N/ A N/ A USD 5, 633mi l l i on 8%

PT Si nar MasAgro Resourcesand Technol ogyTbk

J akarta (SMAR. J K) Rp 3, 528bi l l i on 44% N/ A N/ A Rp 1, 388

bi l l i on 17%

Gol den EastPaper ( J i angsu)Co. , Ltd

Potent i al I PO i nShanghai / Hong Kong N/ A N/ A N/ A N/ A CNY 4, 813

mi l l i on N/ A

PT I ndah Ki atpul p&paper Tbk J akarta ( I NKP. J K) USD 2, 186

mi l l i on 36% USD 2, 062 mi l l i on 34% USD 1, 045mi l l i on 17%

PT. Pabri kKertas Tj i wiKi mi a, Tbk.

J akarta (TKI M. J K) USD 624 mi l l i on 27% USD 953 mi l l i on 41% USD 409 mi l l i on 18%

Bond LoanDebt Fi nanci ng (2008)

Palm

Oil

Equi ty Fi nanci ng (2008)

Pulp

& P

aper

Bi zSector Subsi di ary

Stock MarketStock

Foundamental Financial Reserchfrom Databases such as Thomson-Reuters, Bloomberg, etc.

Page 20

Resarch Areas Item # Research Items Priority Due DateFM-1 Share Price Medium bi-weeklyFM-2 Share Issuance High bi-weeklyFM-3 Bond Price Medium bi-weeklyFM-4 Bond Issuance High bi-weeklyFM-5 Mergers & Acquisitions High bi-weekly

FM-6 Key Business Operation eg. Market Entrance, Capacity Expansion High bi-weekly

ER-1 Equity Research Reports (GAR, PT SMART) Medium bi-monthly

ER-2 Equity Analyst List (GAR, PT SMART) High 30-Jul-10

ER-3 Stock Market Indicies List (GAR, PT SMART) High 30-Jul-10

ER-4 Shareholder List (GAR, PT SMART) Medium 30-Jul-10

ER-5 Share Underwriter (Investment Banks) List (GAR, PT SMART) High 31-Aug-10

ER-6 Financial Advisor (Consulting, Law, Accounting Firms) List Low 31-Aug-10

DR-1 Credit Rating Reports (GAR, PT SMART, Golden East Paper) Medium quartlyDR-2 Credit Rating Analyst List (GAR, PT SMART, Golden East Paper) Medium 30-Jul-10

DR-3 Loan Lender (GAR, PT SMART, Golden East Paper) High 31-Jul-10DR-4 Bondholder List (GAR, PT SMART, Golden East Paper) Medium 30-Jul-10

DR-5 Bond Underwriter (Investment Banks) List (GAR, PT SMART, Golden East Paper) High 30-Jul-10

DR-6 Financial Advisors (Consulting, Law, Accounting Firms) List Low 31-Aug-10

FI-1 HSBC

FI-2 Credit Suisse High 15-Aug-10

FI-3 UBS High 31-Oct-10FI-4 Citi GroupFI-5 BNP ParibasFI-6 Other Financial Institutions

Debt Finance Research

Key Financial Institutions'

Transaction with Sinar Mas

Financial Monitoring

Equity Finance Research

Page 21

Convience, Lobby Hardly Manage, Align Closely

Mobilize, Keep InformedMonitor(Minimum Effort)

Interest

negative positive

Power

low

highRegulators

NGOs

Financial Media

Listed Companies

Index Makers

Equity Analyst

Shareholders Financial Research Firms

Stock Exchange

neutral

median

Underwriter

Tipping Points

Stakeholder Analysis – Equity FinanceRegulator, Index Maker and Equity Analyst are the Tipping Points

Size and Amount

- small

- median

- big

Page 22

Targeted Index Maker and Equity Analyst for Golden Agri-Resources Ltd

MSCI AC Far Est ex-Japan Index MSCI Singapore Free Index Strait Time Index Dow Jones Singapore Titans 30 Index Rogers-Van Eck Index etc.

BNP Paribas Michael Greenall CIMB Ivy Ng Lee Fang CLSA Wilianto Ie Daiwa Institute of Research Chris Sanda Deutsche Bank Niklas Olausson JP Morgan Chang Ying Jian Morgan Stanley Koh Miang Chuen Nomura Securities Ken Arieff Wong OCBC Carey Wong OSK Alvin Tai Phillip Securities Research Team Standard Chartered Adrian Foulger etc.

Source: Golden Agri-Resources Ltd Annual Report 2009

Example Equity Research Report on GAR by OCBC:

Adobe Acrobat Document

Page 23

Convience, Lobby Hardly Manage, Align Closely

Mobilize, Keep InformedMonitor(Minimum Effort)

Interest

negative positive

Power

low

high

Regulator

Bondholder

Bank Lender

Rating Agencies

neutral

median

Underwriter

NGOs

Financial Media

Financial Reserch Firms

Tipping Points

Fixed Income Analysts

Stakeholder Analysis – Debt FinanceRegulator, Rating Agency and Underwriter are the Tipping Points

Size and Amount

- small

- median

- big

Page 24

Rating Record for Golden East Paper

Agency Year Rating Report Contact

2007 A

郭冰[email protected]曹红丽[email protected]孙蕴[email protected]:010-66428877 Fax:010-66426100

2007-06 A-1 王丽丽[email protected]:021-54252513

A-1

A+A-1A-1

A+

安博尔ABE

CreditRating

2008-11 AAA 安博尔 [email protected]

中诚信Moody'sChina

2008-05 郭冰[email protected] 孙蕴[email protected]

2009-01 李燕 [email protected]栾淑伟[email protected]

2007金东纸业短期. pdf融资分析报告

2007 3金东纸业 年08. 3 . pdf月短期融资券跟踪评级报告（ ）

2008金东纸业 年. pdf度第一期短期融资券信用评级报告

2008金东纸业 年09. 1 . pdf度第一期短期融资券跟踪评级报告（ ）

安博尔中诚信中国0812 - . doc信用网联合公告 号 金东纸业评级

2007年金东纸业. pdf（江苏）有限公司信用评级报告 Report: Fitch

Ratings Global Corporate Finance 1990-2005 Transition and Default Study

Adobe Acrobat Document

Page 25

Campaign Leverage Points: Risks, Standards and Policies

“Green Credit” Policy《关于落实环保政策法规防范信贷风险的意见》 “Credit Blacklist” by Minister of Environmental

Protection (MEP) “Green Securities” Policy《关于进一步规范重污染行业生产经营公司申请上市或再融资环境保护核查工作的通知》 “Green Insurance” Policy《关于环境污染责任保险的指导意见》

United Nations Global Compact Initiative Equator Principles UNEP Financial Initiative UN Principles for Responsible Investments Climate Principles Global Reporting Initiative etc.

International Sustainable Finance Standard Country Level Policies in China

Policy and Regulatory Change in IndonesianPolicy and Regulatory Change in other import and production countriesCustomer Resistance through NGO AttackBusiness Partner ResistanceMoney Laudring by Sinar MasCurruption in IndonesianIncrease of Carbon Tax, Carbon PriceCommodity Price of Palm Oil and Timber (further analysis needed)Contract cancellation by large buyers and distributors (e.g. Unilever, Tesco)Retail Customer Resistance

Political Risks

Fraud Risks

Market Risks

Reputational Risks

Revenue Risks

Page 26

Actitivies and Achivements of the GAR Finance Campaign

Transaction Cancellation

Policy/Standard Improvement

HSBC, BNP Paribas Divestment and Business Suspension Credit Suisse, UBS Business Suspension

Consultation of World Bank / IFC Palm Oil Policy Palm Oil Policy Establishment of HSBC, Credit Suisse, BNP

Paribas

Regulatory Claim

Market Influence

Consultation of the Sustainability Reporting of SGX on Environmental Information Disclosure of Palm Oil Sector

Influence on Environmental and Social Performance Rating (Responsible Research, Sustainalytics, MSCI ESG Research)

Lobbied Equity Analysts and key shareholders

Page 26

Page 27

The Result of the GAR Corporate & Finance Campaign

Page 27

Agenda

1 Sustainable Finance Introduction

Page 28

3 GAR Finance Campaign Case

2 Policy Consultation Case

4 The Forthcoming Climate Finance Program

The Overall Strategy on Climate Change Mitigation & Adaptation

ClimateLegislation

Market & Financial Market & Financial Mechanisms Set-upMechanisms Set-up

Green Tech Deployment & Carbon Emission Reduction

With high carbon price, advocate renewable and clean tech as better alternative, as well as reduction in carbon intensive industries e.g. coal

Advise government setting up carbon tax and carbon market based on historical and international experiences, make it feasible and functional; boost the Low Carbon Investment and Banking

Lobby the government to actively participate in global treaty and set promising carbon mitigation and renewable energy target and the climate change legislation

Page 29

Page 30

The Forthcoming GPEA Climate Finance Program 2011-2013

Research on Price on Carbon and its Mechanisms: Tax & Trade

Policy Lobby & Advocacy on Voluntary & Internal Trading

Policy Lobby & Advocacy on Cap-and-Trade for the Energy Sector

Policy Lobby & Advocacy on Low Carbon Investment

Policy Lobby, Ranking & Advisory on Low Carbon Banking

Clean Energy Technologies Promotion to PE/VC

Clean Energy Projects Show-case to PE/VC

Financial and Economic Case for Clean Energy vs. Fossil Fuel

Thank You!