Climate and carbon finance nov 17

Climate Financeand

Carbon Finance:The Development

Bank of the Philippines Experience

DEVELOPMENT BANK OF THE PHILIPPINES

100% government- owned, sources its own funds

DFI with universal banking license

Main conduit for ODA funds

DBP’s Environmental Commitment ...........................................................

..... Started in 1992 under the US $ 175

million World Bank structural adjustment program

Facility to improve efficiency and international competitiveness of Philippine industries with component for environmental concerns.

Challenges

◦ Difficulties of borrowers related to

Requirement to conduct environmental impact assessments

Compliance with environmental regulatory requirements

◦ Inclusion of environmental risks in loan evaluation

Challenges

◦ Delays in loan processing because of new credit guidelines

◦ Identification of environmental projects Technologies to reduce waste, recycle or

use of cleaner technology not yet appreciated at that time

Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . .

DBP to influence industries to be more pro-active in environmental management and protection

Introduce a new mindset and new approaches to Environmental Management for the Bank and its clients

Strategies and Initiatives

1. Capacity building◦ Production of environmental manuals

and guidebooks◦ Workshops and seminars

2. Financial credits and technical assistance for environmental investments

◦

Strategies . . . .

3. Establish Partnerships Government Agencies Non-governmental organizations and

peoples organization Academe Industry and businesses

4. Promotion of good environmental stewardship

Credit Strategies

Require clients to conduct EIAs Ensure client compliance with

regulatory requirements Relate environmental policy reforms

to financial concerns Impose environmental conditions in

the Omnibus Loan Term and Conditions

Credit Strategies

Integrate environmental due diligence in project evaluation

Introduce conduct of Environmental Performance Monitoring (EPM) by Account Officers (AOs) , PFIs and clients

Issuances of Credit Policy Memorandum

Climate and Environmental Loan Facilities

◦ Pollution Abatement and Control◦ Clean Technology◦ Solid Waste Management◦ Natural Resources Conservation◦ New and Renewable Energy◦ Rural Power and Electrification◦ Urban Water Supply and Sanitation◦ Watershed Management◦ Environment Development Program◦ Carbon Investment

General Loan Features

◦ Eligible borrowers Public and private enterprises with at least

70% Filipino Ownership◦ Maximum Loan Amount Per Project

80 to 90 % of total project cost, in pesos to avoid forex risk

◦ Interest rate Fixed rate

◦ Repayment Term Based on cash flow. Maximum of 15 years

with a maximum 5 years grace period

DBP supports clients with potential carbon credits claim for their carbon offsets by registering them with the Clean Development Mechanism (CDM).The CDM is one of the 3 enabling mechanisms under the 1997 Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). It allows Annex I countries to reach their GHG emissions reduction targets by implementing GHG abatement projects in developing nations.

The CDM is one of the 3 enabling mechanisms under the 1997 Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). It allows Annex I countries to reach their GHG emissions reduction targets by implementing GHG abatement projects in developing nations.

November 21, 2003: Carbon Investment Banking Facility (CIBF)

1. Preparation, development, packaging and financing of projects that provide solutions for environmental protection (i.e. GHG emissions reduction and carbon sequestration) and sustainable development

2. Registration with the CDM of projects that reduce emission of greenhouse gases ( stand alone or bundling schemes)

August 10, 2010: Carbon Finance Program (CFP) Allows use of DBP internally-generated funds to finance

the registration of eligible CDM projects

Translates borrowers’ CDM projects into CER units1. Enhancing project viability with additional revenues 2. Promoting environmental conservation and climate

change mitigation and adaptation

DBP acts as the CDM project managing entity and registers with the UNFCCC CDM Executive Board for and on behalf of the project owners

DBP puts together resources and requirements needed to register, takes active role in project monitoring, initiates request for the issuance of carbon credits and monetizes the carbon credits

Current direction of assistance : Program of Activity (PoA) Scheme of Registration

PoA Scheme entails the design of a sector program under which business or operational activities contribute to the reduction in GHG emission.

PoA Scheme entails the design of a sector program under which business or operational activities contribute to the reduction in GHG emission.

• registration is made simpler through the enrolment of simpler projects to a CDM registered PoA

• gives qualified small players the opportunity to financially benefit from the CDM while contributing to the sustainable development of host communities

• registration is made simpler through the enrolment of simpler projects to a CDM registered PoA

• gives qualified small players the opportunity to financially benefit from the CDM while contributing to the sustainable development of host communities

DBP as CDM Project Consolidator and Managing Entity

CPAs under PoA Y

composed of Proj 1Proj 2Proj n

CPAs under PoA Z

composed of Proj 1Proj 2Proj. n

PoA Z(with aggregated CER gen. of 25,000 tons/annum)

CPAs under PoA X

composed ofProj 1Pronj 2Proj n

PoA X(with aggregated CER gen. of 25,000 tons/annum)

MOA coveringregistration assistance andsharing of proceeds

CER Trading

Pro-rated Distribution of CER

Sales to Project Owners



CERs

PoA Y(with aggregated CER gen. of 25,000 tons/annum)

CERs CERs

DNA/ CDM Executive

BoardCDM Approval/Registration

Distribution of Share of CER Proceeds (Peso)

Carbon Market

$$$

DBP Carbon Account

CDM Registration Experience

1.Bundle of 3 mini-hydro power plants

2.Program of Activity (PoA) for Generation of Electricity from micro and mini-hydro power plants 1 MW and below

3.PoA for Composting

4.PoA for Methane Capture from Hog Farms

5.Heat recovery from blast furnace for power generation

Environmental projects such as mini-hydro power plants, biomass-fueled power generating plants, solid waste management projects, water sanitation, air and water pollution control and carbon sequestration projects are perceived as having high risks and low returns.

DBP pioneered in financing these projects in the Philippines, showing that these projects are also viable and have high returns for the environment.

Many other banks, esp. commercial banks, are now following DBP’s path of climate finance and carbon finance.

Year Award

2010 ADFIAP, Environment Award for Rural Power ProjectADFIAP, 1st Sustainable Development Report

2005 - 2008 “A” Grade for Energy Conservation Program given by the Office of the President, Department of Energy Efficiency and Conservation Program in Government Buildings

2006 ADFIAP, Most Outstanding Environmental Development Project for the DBP Forest Project

2003 ADFIAP, Technology Development Award

2002 ISO 14001 Certification of DBP’s Environmental Management System by the SGS Switzerland SA. This made DBP the first Philippine Bank to be EMS certified.

2001 ADFIAP, Environmental Development Award for DBP’s Environmental Management SystemAsian Banking Awards, New and Renewable Energy Financing Program

2000 World Bank Recognition of Excellence for DBP’s LGU Urban Water and Sanitation Program

1999 4th Asian Banking Awards, Environmental Program Category

THANK YOUMARIA ANA VISITACION M. DOMINGOAssistant Vice PresidentDevelopment Bank of the PhilippinesMakati Avenue corner Senator Gil Puyat Avenue, Makati CityTelephone No. - +632 8934912Email – [email protected]

Climate and carbon finance nov 17

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