Designing Green Bonds for India A simple marketing concept that works Sean Kidney, CEO, Climate Bonds Initiative 8 January 2015 The challenge Huge ambition for renewables, rail, water investments Capital pools High interest rates Perception of high risk Fragmentation Investment, not cost India capital in property +gold; International institutional investors International interest $88tn assets under management $30tn Insurance $27tn Pension funds – 19 out of 20 are public sector US$9 trillion $6tn Sovereign wealth $25tn Fund managers, mutuals, foundations (SRI = $13tn global) US$8 trillion 50-60% bonds Green/brown US$22.5 trillion US$45 trillion Proceeds earmarked for qualifying investments Oversubscription usual Pricing slightly better than similar bonds $36bn $11bn $4bn USD $414m $909m $3.1bn $1.2bn 2015: Estimated $100bn+ Global Green Bonds market 2014 by issuer type Muni/ Key Themes provincial/ City 11% •Corporate bonds from zero to Regional bank 2% ABS 5% Bank 2% 35% market share •Development banks continue to dominate – 45% •Growing Municipal and city bond market growing to 11% US taking off in H2 2014 Corporate 35% Development Bank 45% Corporate loan 0% It’s about Use of Proceeds Proceeds to Green • Earmarking purpose • Reporting / transparency • Independent review Any entity • • • • Issuer benefits Governments & DFIs Corporates – this year’s growth area Asset backed: PPPs, banks, utilities, etc Municipalities • • • • Investor diversification Investor engagement: “stickiness” Longer tenors Multi-asset pools Examples Sub-national Governments Development banks Banks Corporations • Gothenburg: $350m. EV system, water purification, district heating. • Johannesburg: $136m. RE, EE, transport, waste management. • California: $300m. Public transport, flood protection. • DC Water: $350m. Tunnel to transport stormwater & sewage to wastewater treatment plant. • KfW: RE • EIB: RE. EE, transport • NRW Bank: water • Bank of America: RE, LEDs, EE • Credit Agricole: misc • Munchner Hypo: coop housing • GDF Suez: RE, hydro • EDF: RE • Vasakronan: green property • Toyota: EV’s & hybrids A broad universe = scale / liquidity Expert groups = science-based definitions Opportunities for India Renewable energy Energy storage 100 Gigawatt by 2020 Grid Solar water pumps Green buildings Rapid urbanisation : New Delhi, Bangalore, Mumbai Industrial Efficiency Manufacturing Steel, cement Rail, BRTs, EVs Huge rail expansion A broad universe = scale / liquidity Expert groups = science-based definitions Opportunities for India Clean water Water projects that are climate change resilient Waste mngtm Methane reduction Forestry Reduced deforestation. Biofuels for aviation Agri supply chain Food supply chain This image cannot currently be displayed. This image cannot currently be displayed. This image cannot currently be displayed. Maintaining trust: standards & certification $30tn Climate Bond Standards Board Numerous Technical Working Groups: Green Property, Low-Carbon Transport, Bio-energy, Agriculture, Water Industry Advisory Group Indices Next steps 1. Government to get the setting rights Remove barriers, e.g. withholding tax on foreign investment, 40% ceiling on re-financing from overseas investors Tax breaks National savings policy 2. Develop the toolkit Standards & certification = trust Credit enhancement Exchange risk liquidity fund 3. Industry education Green Bonds Market Development Committee Demonstration issuance by development banks 2015 expectations 1. Market growth National development banks expand issuance More corporate earmarked bonds Property, Energy, Rail, Water Green City Bonds 2. Market developments Standards adoption Clearer reporting requirements UN Climate Agenda embrace www.climatebonds.net