Green Finance for Green Growth ~ Public Private Financial Partnership ~

17 November 2010

Takashi HongoSpecial Advisor and Head of Environment Finance Engineering DepartmentJapan Bank for International Cooperation

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Green Finance for Green Growth

Financial CrisisEnvironment ConstraintEnergy ConstraintGreen StimulusGreen GrowthEconomic Growth ofAsiaTechnology DrivenPrivate DrivenMarket-base MechanismLevel Playing FieldsAccess to Clean EnergyTriple Threats

Demand and Supply of Additional Investment

USD billion

Source IEA

Additional Investment Demand 2010-2030

*Source: UNFCCCKeep the increase in global temperature below 2 degrees.Emissions targets of Annex I Parties for 2020 are to be submitted by 31 January 2010.Nationally appropriate mitigation actions (NAMAs) by Non-Annex I Parties are to be communicated every two years. NAMAs seeking international support are to be recorded in a registry.Crucial role of REDD-plusAdditional funding to developing countries: USD 30 billion (2010-2012) Mobilizing USD 100 billion a year by 2020 (public & private, bilateral & multilateral)Copenhagen Green Climate FundTechnology mechanism to accelerate technology development and transferAssessment of the implementation of this Accord is to be completed by 2015.

Copenhagen Accord

Green Banking/Green FinancingGreening of OperationGreening of FinanceContribution for New MechanismMinimum RequirementProactive Financing3R, Low Carbon OperationEnvironment Guideline-Commercially Viable BAT-Measurement of CO2 Reduction (MRV)Voluntary actions-Carbon Offset-Sustainable Forest Rating-Weather Index Insurance for AgricultureCSR to New Business Model

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JBICs Green Finance

JBIC

Negative impactPositive contributionFinanceConsideration of future systemProjectProjectFinanceEnvironment Guideline(Avoid, minimize )OrganizationalOperation3RCO2 reductionplanStudyProposalEnvironment Finance( LIFE, GREEN)Knowledge contributionJBIC for Environment and Bio Diversity(4 arrows approach)

JBIC GREENFuturecarbon marketFinanceJ-MRVCommercially viable BAT(best available technology)DeploymentPossibilityIndustriesCarbon PlayersHost GovernmentDialogueShareGHG emission reduction projectsGHG emission reductions

JBIC will review the followings 1. Climate change policy of the host country 2. Technology to be used 3. Reduction amount by J-MRVJ-MRVScaling up low carbon investmentsimple, practical and internationally acceptable guidelineFollowing investors decision making process

(MRV: Measurement, reporting and verification)Reduction amountOwnershipNew Financial Program (GREEN) and J-MRV(Global action for reconciling economic growth and environmental preservation)

Scaling up low carbon investmentsimple, practical and internationally acceptable guidelineFollowing investors decision making process

Baseline amounts = Emissions in the case without investmentOption of Baselinea/ Actual emissions before investment, b/ Emissions from similar installations in operation in the country or in the regionc/ Emissions from similar installations recently invested in the country or in the region

Reduction amounts = Baseline emissions - Emissions from projectsTaking into account ofinvestment climate such as economy, energy, technology, regulation.availability and reliability of dataSampling and theoretical value may be applicablehttp://www.jbic.go.jp/en/about/news/2010/0730-01/100730_mrv_guideline.pdfJ-MRV

*Source: IEEJ CO2 emission reduction potential by using Japanese BAT (000 ton/Y )Reduction Potential of Proven Technology

*Energy saving and CO2 reduction 18,410Kwh120,000 ton/y(China, 5000ton X2 units)Cooling TowerPHBoilerDemineralizer buildingAQC BoilerTurbine / GeneratorBuildingSource KawasakiHeat Recovery System of Cement Plant

Environment GuidelineJBICs Environment GuidelinePollution control, Natural Environment, Social EnvironmentRisk Analysis Department and Independent Third PartyECA Common ApproachAlliance with more than 20 institutionsSustainability of Projects (Risk Mitigation)Responsibility of Financial SectorInternational Standard and Custom Local RegulationEquator PrincipleProject Finance in developing countriesAround 60 institutions

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Innovative Instrument for Green Finance

Stock Market NetworkRatingEvaluationAdvisoryThe GoodBankersFundManagerInvestment FundInstitutional and Individual InvestorsRating System

Forest-friendly AssetsInvestmentAdvisory BoardFinancialReviewInvestmentReviewing Forest Friendly Activities of companiesBusinesses Finances AcademiaPoliciesCitizensForest Eco Fund190 items reviewedServiceContractManagementContractSource : The Good Bankers Co., Ltd.Forest Eco Fund

FarmersBAACJBICSonpo JapanStudyPremiumPaymentDevelopment of]WIIAMOUHostParticipationWeather Index Insurance for Agriculture (WIIA)Rain FallMinimum Rain Fall (Contract)Rain FallNo Insurance PaymentInsurance Payment(Compensation of drop of income)Monitoring Periodmonth

We enjoy biodiversity services.We need to maintain biodiversity for future generations.Many medicines originate through or were developed by studying biodiversity services.Fishing and agriculture depend on biodiversity services.Today we enjoy biodiversity freely because of its externalities, but without sustainable usage it would be exhausted. Biodiversity must be internalized to the economyThey will need to use biodiversity services just as now, such as genetic businesses developed through science and technology. Value of biodiversity

Financial risk Financial losses realized on projects because of inadequatemanagement of biodiversity-related riskReputation and funding riskMission risk Loss of reputation and financial strength through improper management of biodiversity-related riskFailure to realize sustainable growth through projectfinancing Short term riskLong term riskEnvironmental due diligence including biodiversityProactive finance for projects with biodiversity componentsCSR activities for biodiversity componentsContribute to mechanism for BES Risk MitigationBiodiversity-Related Risk for Financial Institutions

Estimation of precipitation by the integrated satellite monitoring systemCan we use this system for dam operation or weather derivative? New Technology and Finance

Biomass stock monitoring systemCan we use this for forest management and forest credit system? New Technology and Finance

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Green Finance Proposal

Awareness of Environment ConstraintReview of environment impactGreen Finance Alliance(consideration and proposal)Climate Finance (with MRV)Water FinanceEnvironment Guideline (safe guard)Pollution controlNatural environmentSocial environmentProactive ActionRisk MitigationSystem for the future Creating new market(Forest, Biodiversity etc)Green Finance

*Public Sector(Improvement of investment climate)Private Sector(Driving force)Financial Sector (Push last one mile)Capacity of Our PlanetChange of LifestyleBetter investment climate, More investmentUse of Technology Public Private Financial Partnership

Slide 5, pink boxBefore:IndustriesCarbon PlayersHost GovernmentAfter:IndustriesCarbon playersHost government*Slide 11, green boxBefore:Change of Life StyleAfter:Change of Lifestyle