Mats Olausson Senior Advisor Sustainable Products The Green Bonds Framework – where it comes from and where it is going Global Infrastructure Basel Summit, 22 May 2014
Jan 19, 2015
Mats OlaussonSenior AdvisorSustainable Products
The Green Bonds Framework –where it comes from and where it is goingGlobal Infrastructure Basel Summit, 22 May 2014
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The Green Bond Story
History of the Green Bond market
� A concept developed by SEB and the World Bank in 2007/08
� Linking environmental and financial risks
� Linking short and long term perspectives
� Designed to encourage sustainable investments
2
Green Bonds – in response to investor demand
Increasing number of investors signing off on the 6 Principles for Responsible Investments (PRI) (1)
Source: Unpri.org(1) PRI is an investor driven initiative in partnership with UNEP Finance Initiative and the UN Global Compact(2) ESG=Environmental, Social & Governance
Growing demand for Green investment opportunities amongst global investors
�Incorporate ESG (2) into investment analysis and decision making proces s1
�Incorporate ESG into ownership policies and practic es2
�Seek appropriate disclosure on ESG by entities in w hich we invest3
�Promote acceptance and implementation of the Princi ples within the industry4
�Work together to enhance our effectiveness in imple menting the Principles5
�Report our activities and progress towards implemen ting the Principles6
6.510
13
1821
25
3432
-
200
400
600
800
1,000
1,200
1,400
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
0
5
10
15
20
25
30
35
Number of investor signatories
Assets under management, US$ trillion (right axis)
Market development
3
SupranationalsMunici-palities& Cities
Staterelated agencies
ProjectFinancing
Corporates
The Green Bond market
� Engage and educate mainstream stakeholders of the p otential effects climate change can have on financial assets
� To develop solutions that enable existing mainstrea m financial mandates to engage in climate finance
� To create a unified development of the Green Bond m arket
� Across the credit and yield curves with various typ es of issuers
Green Bond market development A fast growing market
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Top Green Bond underwriters 2007 – end of Q1 2014Select Green Bond issues
SEK 500m
2.750% fixed bond
September 2032
Joint Lead
SEK 2,100m
3.000% fixed bond
April 2019
Joint Lead
SEK 500m
2.915% fixed bond/ FRN
October 2019
Sole Lead
USD 500m
0.750% fixed bond
October 2016
Joint Lead
USD 300m
0.875% fixed bond
January 2017
Joint Lead
USD 250m
1.625% fixed bond
April 2018
Joint Lead
USD 1billion
0.625% fixed bond
November 2016
Joint Lead
USD 550m
0.375% fixed bond
Aug 2015
Joint Lead
EUR 250m (increase)
1.375%
Nov 2019
Joint Lead
SEK 1,575m
3.250% fixed bond
December 2017
Sole Lead
SEK 1,300m
1.774% / FRN
May 2016
Sole Lead
SEK 3,250m
3.500% fixed bond
November 2014
Sole Lead
USD 500m
1.750% fixed bond
February 2018
Joint Lead
USD 500m
0.750% fixed bond
Nov 2016
Joint Lead
SEB Green Bond placements
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Source: Bloomberg and SEB
5 year SEK 1bn/500m
2.500% / FRN
April 2019
Sole Bookrunner
5 year SEK 850m
FRN
April 2019
Sole Bookrunner
SEB in the Green Bond market SEB is a pioneer and the Global leader within the field of Green Bonds
Source: Climate Bond Initiative
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
6
Green Bond issuers
SEB has worked with the following issuers developing their Green Bond frameworks
Issuer Issuer typeProgramme name Allocations
Earmarked a/c
CICERO Second opinion
Investor reporting
World Bank
(IBRD)Supranational Green Bond
� Mitigation
� AdaptationY Y Y
African Development Bank Supranational Green Bond� Mitigation
� AdaptationY Y Y
City of Gothenburg Municipality Green Bond
� Renewable Energy
� Energy Efficiency
� Water Management
Y Y Y
European Bank of Reconstruction and
DevelopmentSupranational Green Bond
� Mitigation
� AdaptationY Y Y
Export Development CanadaExport Import
AgencyGreen Bond
� Renewable Energy
� Energy Efficiency
� Water Management
Y Y Y
European Investment Bank SupranationalClimate
Awareness Bond
� Renewable Energy
� Energy EfficiencyY Y
International Finance Corporation
Supranational Green Bond� Mitigation
� AdaptationY Y Y
Kommunalbanken, Norway Municipality Green Bond� Renewable Energy
� Waste ManagementY Y Y
Korea Export Import BankExport Import
AgencyGreen Bond
� Renewable Energy
� Energy EfficiencyY Y Y
Svenska Cellulosa AB (SCA) Corporate Green Bond
� Sustainable Forestry
� Renewable Energy
� Energy Efficiency
Y Y Y
Skanska Corporate Green Bond� Sustainable
buildingsY Y Y
Vasakronan Corporate Green Bond� Sustainable
Buildings
� Renewable EnergyY Y Y
First Green Bond issuer
First municipalGreen Bond issuer
First non-supranationalGreen Bond issuer
First corporateGreen Bond issuer
First Nordic listedGreen Bond issuer
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The five pillars of the Green Bond framework
Simplicity – scalability1
Governance – selection process 2
Credibility – vetting of Green 3
Traceability – earmarked account4
Transparency – reporting 5
The Green Bond Principles
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� The Green Bond Principles (GBP) are a set of voluntary guidelines for:
- use of proceeds- process for project evaluation and selections
- management of proceeds and - reporting
� The purpose of the GBP is:
to encourage transparency, disclosure and integrity of the Green Bond market
� Signed by 13 + 12 banks
� ICMA Secretatiat:
- facilitate information exchange with issuers, investors, underwriters, and other stakeholders
- gather input for the annual update of the Green Bond Principles
Cautiously welcomed - with strings attached
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NGOs demand clarification:
� include real commitments by banks to ensure high standards of transparency and disclosure for bond issuances they underwrite;
� reference clear and science-based definitions and criteria of what constitutes “green” under the Principles; and
� commit unambiguously to third party, independent verification of the information on sustainability and use of proceeds reported by Green Bond issuers.
At the hart of it - Verification of Green
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1. World Bank2. AfDB3. EBRD4. IFC5. Kommunalbanken6. KEXIM7. EDC8. City of Gothenburg9. Vasakronan10. SCA11. Skanska12. Stockholm County
Council13. Rikshem
1. EDF2. Unibail-Rodamco3. Iberdrola4. Ile-de-France5. GDF Suez
1. Unilever2. Arise
1. Credit Agricole2. TD-Bank3. Toyota4. BAML5. Solar City6. Hannon Armstrong7. NRW Bank8. Landwirtsch
Rentenbank9. FMO10. Massachusetts11. Regency Centers LP12. Aligera Holding
No 2’nd opinion
No official comment:• EIB• NIB• ADB
Green Bonds Framework: where to from here?
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� Other potential providers of third party verification: MSCI, McKinsey, KPMG…?
� Uncertain outcome – a process involving various stakeholders
� Issue at stake: establishing a solid framework to permit the Green Bonds market to grow and make a difference
� Expanding the CICERO model – work in progress
� Purpose of the CICERO – SEB cooperation
- Establish a prudent framework
- Secure the dialogue between banks and academics
� ”Warehousing arrangement” until a prudent model is in place
� Objective to give equal access to all
� Network of environmental research institutes needed to meet demand
� Possible ways forward:
- Consultancy service – banks pay for vetting of green
- Green Bonds Platform (response to investor demand)
* Information services
* Second opinions
Thank you!