financing the change for the future zero-konferansen gardermoen, november 19, 2012 idar kreutzer,...
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Financing the change for the future
ZERO-konferansenGardermoen, November 19, 2012Idar Kreutzer, CEO, Finance Norway
Business as usual is not an option
Today and BAU: The world is on an unsustainable track
Vision 2050: Around nine billion people live well, and within the limits of the planet
Source: World Business Council for Sustainable Development, Vision 2050
The pathway to Vision 2050
Significant needs for investments
Expected investment needs for urban infrastructure up to 2030 (US$ billions)
Systems planning
Infrastruture
Water Technology
Buildings Finance
Many opportunities...
Source: Booz Allen Hamilton, 2007
A good match
DemandCumulative investment in green infrastructure: $40 trillion between 2012 and 2030 = approximately $2 trillion or 2% of
global GDP per year = a doubling from current levels
SupplyImportance of pension funds relative to the size of the economy, 2010 (Assets under Management % GDP)
Pension funds total: $ 28 trillion in assets
Long term investmentsSustainable investments
Source: G20/OECD Policy Note on Pension Fund Financing for Green Infrastructure and Initiatives
Barriers
•Lack of political commitment over the long term
•Lack of infrastructure project pipeline
•Fragmentation of the market among different levels of government
•Regulatory instability
•High bidding costs
Problems with government support
for infrastructure projects
•Lack of expertise in the infrastructure sector
•Problem of scale of pension funds
•Regulatory barriers
•Short-termism of investors
Lack of investor capability
•Negative perception of the value of infrastructure investments
•Lack of transparency in the infrastructure sector
•Misalignment of interests between infrastructure funds and pension funds
•Shortage of data on infrastructure projects
Problems with investment conditions
Source: G20/OECD Policy Note on Pension Fund Financing for Green Infrastructure and Initiatives
Examples
South Africa:The Government Employees Pension Fund (GEPF)
Africa’s largest pension fund ($138 bn AUM)
Largest investor on JSE
5 % invested in developmental projects, mostly infrastructure:
Economic infrastructure Social infrastructure Economic growth and
transformation Environmental sustainability
ESG framework to measure impact
Peru: In 2009, the Pension Fund
Association created an Infrastructure Investment Trust, investing only in infrastructure project debt
Managed by a company authorized by the supervisory authority, with representatives of the 4 PFAs on the investment committee
Structure believed to overcome some of the difficulties pension funds encounter in investing in infrastructure projects
Source: G20/OECD Policy Note on Pension Fund Financing for Green Infrastructure and Initiatives
The financial hub of society
The financial industry plays a key role in our lives. It paves the way for the growth and development underlying our common welfare.
The industry’s contribution: Financing the change Private Public Partnership – sustainable infrastructure Responsible investments Sharing of core competence ( i.e. understanding of risk
and losses caused by climate change) Cooperating with governments and local authorities Raising the awareness of customers
8
Strong growth in sustainable AuM
2006 2007 2008 2009 2010 20110
5000
10000
15000
20000
25000
30000
35000
1. We will incorporate ESG issues into investment analysis and decision-making processes.
2. We will be active owners and incorporate ESG issues into our ownership policies and
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4. We will promote acceptance and implementation of the Principles within the investment industry.
5. We will work together to enhance our effectiveness in implementing the Principles.
6. We will each report on our activities and progress towards implementing the Principles.
UN PRI The 6 principles
CSR/ESG in general corporate lending
Who’s responsibility? Role of creditor (credit) vs role of owner (equity)
Banks’ ”modus operandi” on CSR Hot topics:
Human rights – because business is fundamentally about people Climate change – because financial institutions have an
increasing need to understand and manage climate change-related risks in their portfolios
Building competence and increase understanding
«An environmental metro» to Fornebu
• Plans to build a metro from Majorstuen via Skøyen to Fornebu
• Private vendors want to build, finance and maintain the metro in a 30 year period
• Private financial institutions can finance the metro
Today’s situation
• 14.000 employees at Fornebu
• 50 busses per hour
• 6.000 residences after completion
• Large businesses: Aker Solutions, Telenor, Statoil, Kværner, OBOS, KLP Eiendom, Norwegian Property, IT-Fornebu, Aspelin-Ramm
Joint funding and public involvement
• 500 MNOK is missing
• The largest businesses will profit from a metro to FoRnebu - are they able and do they want to give something back?
• The municipality of Bærum may allow increased density and the profit can form an instructure fund
The Fornebu metro – a Norwegian test case
Active disengagement
Culture eats strategy for breakfast!
…it is about leadership and culture
Leadership for sustainability
Sustainability is the single biggest business opportunity of the 21st century
Sustainability is the single biggest business opportunity of the 21st century
The most important thing I have learned since becoming CEO is context. It’s how your company fits with the world and how you respond to it.
The most important thing I have learned since becoming CEO is context. It’s how your company fits with the world and how you respond to it.
Jeff Immelt, CEO The General Electric Company
Harold Lee Scott, Jr, former CEO Wal-Mart
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