gerard van baar tbli presentation hfc 10 nov
TRANSCRIPT
November 1, 2011
Green Investment Corporation
Gerard van BaarManaging DirectorFinance & Sustainability
Holland Financial Centre
Public private foundation representing the financial industry including government• banks, brokers, pension funds and asset managers, consultants,
accountancy and legal firms, the Dutch government, the Authority for the Financial Markets (AFM), the Dutch central bank (DNB), and the city of Amsterdam.
• 70 participants per 2010
Objective• to develop initiatives aimed at preserving a strong, open,
internationally competitive financial industry in the Netherlands
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Holland Financial Centre
HFC focuses its attention to four priority areas, based on the areas of expertise in the Netherlands
• Finance & Sustainability• Retirement Management• Financial Logistics• Trading Venue
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Finance & SustainabilityTrack record− ABN AMRO -> equator principles – project finance− PGGM / APG -> Responsible Investment− Triodos -> business model− SNS -> micro finance− Robeco -> integrated sustainability, clean tech− SAM / Robeco-> Dow Jones Sustainability Index− Rabobank -> Food & Agribusiness principles− Alpinvest -> clean tech private equity− Fortis/ABN AMRO -> innovator in carbon trading− Carbon policy -> high profile within UN− Princess Amalia -> first project finance off-shore wind park− Pension model -> highly capitalized (EUR 800 billion) and sustainable asset
management− Global Reporting Initiative (GRI) -> based in Amsterdam− Sustainalytics -> Amsterdam
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But the track goes back to the origin of HollandYou can’t go lower…
Schiphol Airport 13 meters below sea level
But still dry, because of ‘polder’
Mills were not for touristsbut to make ‘polders’ dry
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With financial innovations still used…Oldest share in the worldVereenigde OostindischeCompagnie - VOC
So you need a stock exchange
Which also allowed you tofinance polders
Such as De Beemster
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That’s the crux of Finance & SustainabilityThe real ‘poldering’ of Holland only took off after a financial innovation: the share.
Technical innovation (the mill) alone is not enough.
Holland Financial Centre for Finance & Sustainabilityis the knowledge centre for financing the necessary transition to a sustainable future
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Centre for Finance & Sustainability
Clusters:
− Responsible Investment− Sustainable Finance− Transition to sustainable energy including clean tech− Carbon trade and finance
Objective:Transfer knowledge & initiate Financial innovation
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Knowledge transfer
− Duisenberg School of Finance− Master program Finance & Sustainability− Executive program
− Global webportal with Dutch Universities, Berkeley, Singapore (NUS), Mistra (Sweden) and soon also China www.fsinsight.org , start January by Vice Prime Minister
− Publish research papers
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Innovation: Green Investment Corporation• HFC initiates & coordinates. Working with 17 participants
who sponsor the Dutch initiative• Triggered by several international initiatives (UK, Korea)• Focused on transition towards a low carbon economy,
especially sustainable energy and energy efficiency• Transition is going too slow• Calculated investment need for the Netherlands is € 100
billion up till 2020 (based on European targets)• While market now picks up at a rate of € 10 – 20 billion till
2020• At least extra € 80 billion needed
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Investments needed for the Netherlands up to 2020
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Green Investment Corporation
• Initiatives in other countries are public, and based on policy
• In the Netherlands GIC will be public/private and based on market:
• There needs to be proof of market need• not competitive with existing activities and regulations
(both private and public!)
Important to note:• It is not about just another bank: it is about a catalyst• GIC is not the object. • The object is to accelerate the transition to clean energy• BUT ALL THE TIME: NEEDS TO GENERATE RETURN
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Time frame
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Fact finding
Nov 2010
Feasibility
May 2011
Proposal to Invest
Sept 2011
Implementation
Febr 2012 Dec 2012
• UK Visit• Ecofys report• Teaser ECF• BCG report• Initial support: > Government > Financial sector
• Broadbased
support• Theoretical framework• Pipeline of
Cases• Conclusion:
- Feasible- Added value- Green Deal
• Legal structure • Roles & products • Capitalisation and funding• Governance and operations
• Depending on the
proposal to invest
Go/No Go
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>15%0%
Subsidies(public)
Not succesfullin acquiring
Funding
Commercial(private)
The Green InvestmentCorporation
Return on Equity
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>15%0%
Subsidies(public)
GIC(public/private)
Commercial(private)
The Green InvestmentCorporation
Return on Equity
Looked from a different angle
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Figuur: Speelveld GIM in termen van risico/rendement
Risk
Ret
urn
Risks too high
Return too low
NO GO
Feasibility study: Why is the market not there? Risks becoming BarriersSustainable energy projects are typical in the sense that they have certain common characteristics which make it difficult to get them financed. Certain risks become barriers for them, effectively blocking funding:
1. Information barrier: New techniques are accompanied by new regulations, legal constructions, and complex proposals.
2. Scale Often too small to make up for the start up costs. Projects should be replicable.
3. MarketFossil fuels are still the benchmark and these are very volatile.(the higher oil prices > the better for renewable energy)
4. RegulatoryUnstable regulations and subsidy schemes make investors nervous
5. Financial Markets Crisis combined with Basel III and Solvency 2 makes it more difficult to raise capital for long term investments
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Feasibility Study: Conclusions
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1. 4 GIC roles• Co-financer• Matchmaker• Aggregator• Knowledge Centre
2. Focus within the Dutch Economy• Decentral energy production• Energy-efficiency in built environment
3. GIC characteristics• Public/Private• Precompetitive• Initial capital: 100 mln (first 3 years)• Estimated RoE: 5-8%
4. Government policyNeed for a long term green growth policy from the Dutch government
100 Cases
40 researched cases
11 analysed cases
2 business cases
The GIC may have two legs
− Mezzanine− Bundling
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Green Investment Corporation
Debt EquityBanks Private Equity Funds
Innovation CapitalMatchfund (ICM)
MatchMaking
MatchMaking
Definition of Match-making: Pre-competitive, pari passu (or at least keeping the risk and rewards in balance) and alongside the banks/private equity funds
The life cycle and the two roles for GIC (Debt & Equity)
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Source: UNEP & SEFIEquity(ICM)
Debt
Sustainable innovation equity fund with relevant parties
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PartnersObjectives
Innovation Capital MatchfundObjectives Key figures
• Enhance Partner’s profile as a sustainable company or institute
• Sharing risks with a public/private institute
• Underline commitment to both government and financial industry
• Open up a new portfolio in The Netherlands
• Accelerate the seed capital market for Dutch sustainable investments
• Co-invest with mature funds
• Allign partner networks in dealflow
• Positive IRR
Committed capital:• Government: € 20 mio• Financial Participants:
€ 60 mio (2 times € 10 mio* and 8 times € 5 mio)
Management:• Team size: 3-4 FTE**• 3% management costs,
long term sustainable incentives
Launch date:• 1st closing: March
2012• 2nd closing: Sep 2012
Targeted IRR:• 8-15% * This includes a seat in the Investment Cee Board
** If the ICM is going to manage local revolving funds there will be a need for more FTE’s
DRAFT
What is the added value of a GIC?
For the market:• Standardising financing process new concepts• Bundle & share knowledge from all parties to get better
insight in risks
For authorities• Bundling/coordinating local initiatives• Better form of subsidies, tailor made, higher public/private
leverage
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Opportunities for key stakeholders
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• Possibility to shorten balance sheet (by focus on project finance and instit. Investors who take over long term finance)
• Additional business because of projects that otherwise wouldn’t be done
• Opportunity to show society coporate social responsibility
Banks Institutional Investors
• Extra opportunity for maturity matching
• Access to asset class that is now difficult to enter because of scale and structuring
• Opportunity to show society coporate social responsibility
Government /Society
• Substantial contribution to climate goals and other government targets
• Acceleration of market financed energy transition and reduction of subsidies
• Employment• Enhance
competitiveness
Way forward: Proposal to Invest
Deliverables
Strategy and Implementation Capitalisation and Funding
►P&L►Concrete Pipeline of Cases
Marketing and Sales Governance and Operations Legal Structure
Go/No Go Decision: Implementation of the GIC
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Thank you for your attention!
Gerard van Baarvanbaar@hollandfinancialcentre.nlwww.hollandfinancialcentre.comwww.fsinsight.org
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Gerard van Baar
Gerard van Baar is responsible for the Finance & Sustainability section within Holland Financial Centre (HFC). HFC is a public private foundation with participants from the financial industry, consultants, audit and legal firms as well as government (both central and local) and regulators. The objective of HFC is to develop initiatives aimed at preserving a strong, open internationally competitive financial industry in the Netherlands. Gerard is in charge of the initiatives for Finance & Sustainability a.o. the Green Investment Corporation, the launching of a dedicated global web portal for finance and sustainability together with Universities of Tilburg, Maastricht, Berkeley, Singapore and Duisenberg School of Finance (www.fsinsight.org), and integrating education on F&S into the existing masters at Duisenberg. Before joining HFC in 2010, Gerard was in charge of Deloitte’s European Centre of Excellence on Energy & Commodity Risk Management. He worked with the major European utilities and was Trustee on several electricity auctions throughout Europe. He lived several years in Vietnam and was involved in the CDM market and wind farm development. Gerard holds a Masters in Economics from the Vrije Universiteit Amsterdam.
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