tbli conferenceâ„¢ nordic 2014 - green bonds - mats olausson - seb

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  1. 1. Green Bonds TBLI Conference Nordic 2014Oslo, 10 September 2014Mats OlaussonSenior Advisor, Sustainable Products+46 8 50 62 32 62STRICTLY CONFIDENTIAL
  2. 2. 1The Green Bond StoryA concept developed by SEB and the World BankDesigned to encourage sustainable investmentsSimplicity Green Bonds are issued under the samedocumentation as regular bondsGreen Bonds can be used to finance new projects and torefinance existing onesGreenBondmile-stoneswhereSEBhasbeeninvolved
  3. 3. 2Green Bonds in response to investor demandGrowing demand for Green investment opportunities amongst global investorsIncreasing number of investors signing off on the 6 Principles for Responsible Investments (PRI) (1)Incorporate ESG(2) into investment analysis and decision 1 making process2 Incorporate ESG into ownership policies and practices3 Seek appropriate disclosure on ESG by entities in which we invest4 Promote acceptance and implementation of the Principles within the industry5 Work together to enhance our effectiveness in implementing the Principles6 Report our activities and progress towards implementing the Principles6,5Number of signatories Assets under management (USDtn) (right axis)10131821241 4001 2001 000800600400200Source: Unpri.org(1) PRI is an investor driven initiative in partnership with UNEP Finance Initiative and the UN Global Compact(2) ESG=Environmental, SocialGovernance3234455045403530252015105002006 2007 2008 2009 2010 2011 2012 2013 2014
  4. 4. Ambition of the marketMarket development3Supra-nationalsMunici-palities CitiesStaterelatedagenciesProjectFinancingCorporatesThe Green Bond market To engage and educate mainstream stakeholders of the potential effects climate change can have on financial assets To develop solutions that enable existing mainstream financial mandates to engage in climate finance To create a unified development of the Green Bond market Our ambition is to make Green Bonds available across the credit and yield curves with various types of issuers (supranationals, corporates, governments)and risk classes and to create Green Bond indexes Additionally, we are developing other Green investment vehicles to widen the investor demographic in co-operation with various stakeholder groups, andwe continue to invite both investors and issuers to join us to develop the platform
  5. 5. Green Bond project examples: The World BankProject summaryPurpose: To improve flooding and drainageinfrastructureProject term: 2010-2016IBRD financing: USD 200 millionAdaptation: Flood preventionHuai River Basin Flood Management and DrainageInvolvementThe Huai River Basin is the third largest river basin inChina with a population of 165 million people in itswatershed. Severe flooding and associated disastersoccur every 3-5 years with extraordinary human andeconomic consequences. Climate change is estimated toincrease average precipitation in the summer season by5% over the next 50 years. The project supports improvedflooding and drainage infrastructure (e.g., better dikes,drainage channels, maintenance) and institutionalstrengthening for disaster assessment and management.These kinds of infrastructure investments are needed toincrease resilience of communities to the impacts ofclimate change, particularly floods. When the project iscompleted, about 9,500 km of rural and urban areas willbe better protected from flooding, affecting about 6,6million people.Project summaryPurpose: To reduce carbon emissions and transformpublic transportation efficiencyApproval: 2010IBRD financing: USD 150 millionUrban Transport Transformation ProgramMexico has one of the most carbon-intensive transportsectors in Latin America, accounting for 18% of Mexicostotal GHG emissions. The rise in traffic, lack of streetspace, and the old technologies of traditional urbantransportation (including inadequate fuel standards)account for some of the many reasons behind theinefficiency of urban transportation that contribute toovercrowding and high GHG emissions in Mexicos manycities.The Urban Transport Project will help transform urbantransportation efficiency in Mexican cities. It will alsoreduce its transport sector carbon footprint by improvingthe quality of service provided by the urban transportsystems in a cost efficient manner, by deployingequipment, infrastructure, and operational strategies thatreduce CO2 emissions. The implementation of thesemeasures can be seen in the modernization of the busrapid transit system and the technology being used tolower its carbon emissions.Project summaryPurpose: To strengthen Indias transmissioninfrastructure resulting in decreased GHG emissionsthrough efficiency gainsProject term: 2008-2014IBRD financing: USD 600 millionProject ID: P101653Power System Development Project IVMitigation: Access to renewable energy (hydropower) inunderserved areas through better interregional powerexchange. Also increased efficiency of transmission.Indias weak power infrastructure constrains Indias fullgrowth potential and leaves many households withoutelectricity services. The inefficiency of the power systemcontributes to environmental problems by forcing 60% ofIndian firms and 40% of households to use dieselgenerators as back-up power sources. In addition, thepoor connectivity between regions restricts Indias abilityto transfer surplus hydropower resulting in growingpressure to build additional coal-based power generation.The project will have a positive development impact byhelping expand the transmission system and capacity andreduce transmission losses. It supports Indias cleanenergy initiative by strengthening Indias ability to transfersurplus hydro energy to power deficit regions in India,increase transmission efficiency, and avoid buildingadditional coal-based generation.Source: The World Bank4
  6. 6. 5The five pillars of the Green Bond frameworkSimplicity 1 scalability2 Governance selection process3 Credibility vetting of Green4 Traceability earmarked account5 Transparency reporting
  7. 7. Green Bond market developmentA fast growing market6Top Green Bond underwriters 2008- 1Q2014 Total issuance of Green Bonds (cumulative4540353025201510502008 2009 2010 2011 2012 2013 aug-14USD bnAug 2014
  8. 8. Issuers and investors deepen engagement in tandemSEB is a pioneer and the global leader within the field of Green BondsSelected Green Bond issuesSEK 500m2.750% fixed bondSeptember 2032Joint LeadSEK 2,100m3.000% fixed bondApril 2019Joint LeadSEK 500m2.915% fixed bond/ FRNOctober 2019Sole LeadUSD 500m0.750% fixed bondOctober 2016Joint LeadUSD 300m0.875% fixed bondJanuary 2017Joint LeadUSD 250m1.625% fixed bondApril 2018Joint LeadUSD 1billion0.625% fixed bondNovember 2016Joint LeadUSD 550m0.375% fixed bondAug 2015Joint LeadSEK 1,300m1.774% / FRNMay 2016Sole LeadSEK 3,250m3.500% fixed bondNovember 2014Sole LeadUSD 500m1.750% fixed bondFebruary 2018Joint LeadUSD 500m0.750% fixed bondNov 2016Joint LeadSEB Green Bond placements7Source: Bloomberg and SEB5 year SEK 1bn/500m2.500% / FRNApril 2019Sole Bookrunner5 year SEK 850mFRNApril 2019Sole BookrunnerInvestors are being activated at an increasing pace but are at differentstages in developing their Green Bond strategies:- Socially Responsible Investors (SRI) - Pension funds- Insurance companies - Asset Managers- Corporate / institutional liquidity pools - Bank treasuries- Central banks
  9. 9. Constantly increasing media attention8
  10. 10. 9Green Bond issuersSEB has worked with the following issuers developing their Green Bond frameworksIssuer Issuer type Allocations Earmarked a/cCICEROSecondopinionInvestorreportingWorld Bank(IBRD)Supranational Mitigation AdaptationY Y YAfrican Development Bank Supranational Mitigation AdaptationY Y YCity of Gothenburg Municipality Renewable Energy Energy Efficiency Water ManagementY Y YEuropean Bank of Reconstruction andDevelopmentSupranational Mitigation AdaptationY Y YExport Development Canada Export Import Agency Renewable Energy Energy Efficiency Water ManagementY Y YEuropean Investment Bank Supranational Renewable Energy Energy EfficiencyY YInternational Finance Corporation Supranational Mitigation AdaptationY Y YKommunalbanken, Norway Municipality Renewable Energy Waste ManagementY Y YKfW Regional DevelopmentBank Energy Efficiency Y Y YKorea Export Import Bank Export Import Agency Renewable Energy Energy EfficiencyY Y YNederlandse Waterschapsbank (NWBBank)Water agencyWater management Y Y YNordic Investment Bank Supranational Renewable Energy Energy EfficiencyY YStockholms Lns Landsting County Renewable Energy Energy EfficiencyY Y YSvenska Cellulosa AB (SCA) Corporate Sustainable Forestry Renewable Energy Energy EfficiencyY Y YSkanska CorporateSustainable buildings Y Y YVasakronan Corporate Sustainable Buildings Renewable EnergyY Y YFirst Green BondissuerFirst municipalGreen Bond issuerFirst non-supranationalGreen Bond issuerFirst Nordic listedGreen Bond issuerFirst corporateGreen Bond issuer
  11. 11. This presentation has been prepared solely for informational purposes and is not to be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell, any securities or related financial instruments, or to engagein a particular trading or investment strategy. The company should not construe the contents of this presentation as legal, tax, accounting or investment advice or a recommendation in respect of asset allocation or aparticular investment. This presentation does not purport to be all-inclusive or to contain all of the material information that the company may require when making an investment decision. The instruments presented hereinmay not be appropriate for all investors. Prior to making any investment decision, the company should conduct an independent investigation of the instruments described herein and should consult its own counsel, tax andfinancial advisors as to legal and related matters concerning any potential investment decision.