Green Finance for Green Growth  ~ Public Private Financial Partnership ~

17 November 2010

Takashi HongoSpecial Advisor and Head of

Environment Finance Engineering Department

Japan Bank for International Cooperation

22

Green Finance for Green Growth

3

Financial Crisis

Environment Constraint

Energy Constraint

Green Stimulus

Green Growth

Economic Growth of 　 Asia

Technology DrivenPrivate DrivenMarket-base MechanismLevel Playing FieldsAccess to Clean Energy

Triple Threats

4

0

200

400

600

800

1 000

1 200

2015 2020 2025 2030

Billio

n doll

ars (

2008

)

そOther

Emerging

OECD+

Source IEA WEO2009

From OECD to non-OECD

低炭素社会実現のための追加投資～資金需要と資金供給～

0

100

200

300

400

500

Demad Supply

Supply from non-OECD

Supply fromOECD+

Demad from others

Demad of Emerging

Demad of OECD+

Demand and Supply of Additional Investment

0500

1,0001,5002,0002,5003,0003,500

DevelopingAsia

US J apan

AseanIndiaChina

USD billion

Source IEA

Additional Investment Demand 2010-2030

55

Source: UNFCCC

Keep 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-plus Additional funding to developing countries:

• USD 30 billion (2010-2012) • Mobilizing USD 100 billion a year by 2020 (public & private, bilateral &

multilateral)• Copenhagen Green Climate Fund

Technology mechanism to accelerate technology development and transfer

Assessment of the implementation of this Accord is to be completed by 2015.

Copenhagen Accord

6

Green Banking/Green Financing

Greening of Operation

Greening of Finance

Contribution for New Mechanism

Minimum Requirement

Proactive Financing

3R, Low Carbon Operation

Environment Guideline

-Commercially Viable BAT-Measurement of CO2 Reduction (MRV)

Voluntary actions-Carbon Offset-Sustainable Forest Rating-Weather Index Insurance for Agriculture

CSR to New Business Model

77

JBIC’s Green Finance

8

JBIC

Negative impact Positive contribution

FinanceConsideration

of future system

Project Project

Finance

Environment Guideline

(Avoid, minimize )

OrganizationalOperation

・ 3R・ CO2 reduction 　

plan

・ Study・ Proposal

Environment Finance

( LIFE, GREEN)

Knowledge contribution

JBIC for Environment and Bio Diversity(4 arrows approach)

9

“LIFE” (Leading Investment to Future Environment) Initiative by JBIC

●LIFE will …　　　・ support both public and private sectors, 　　　　　　　　　　　　　　　・ cooperate with multilateral development banks (MDBs) and mobilize private financing. 　　●JBIC’s financial support under the Initiative will be around 5 billion USD for the next 2 years.

Four main targeted sectors of the Initiative are ... ・ Clean power generation - Solar, geothermal, wind power, clean coal power plant, etc ・ Energy efficiency improvement - Upgrading of existing transmissions and distributions, modernization and heat recovery of steel furnaces and cement

kilns, ESCO (energy service companies), etc. ・ Water - Water purification and supply, sewage system, wastewater treatment, desalination and water processing, etc ・ Urban transportation - Modal shift in densely populated areas, etc

　　 Cooperation(Co-finance, information sharing, etc)

Loans /

Loans, etc

Catalytic role

Loans, etc

MDBs(ADB, World Bank Group, etc)Private financial

institutions

J B I C

Equity Investment

10

JBIC “GREEN”

Futurecarbon market

Finance

J-MRV

Commercially viable BAT

(best available technology)

Deployment

Possibility

・ Industries・ Carbon Players・ Host Government

Dialogue

Share

GHG emission reduction projects

GHG 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-MRV

J-MRV・ Scaling up low carbon investment・“ simple, practical and internationally acceptable” guideline・ Following investor’s decision making process

(MRV: Measurement, reporting and verification)

Reduction amount

Ownership

New Financial Program (GREEN) and J-MRV(Global action for reconciling economic growth and environmental preservation)

11

・ Scaling up low carbon investment・“ simple, practical and internationally acceptable” guideline

・ Following investor’s decision making process

Baseline amounts = Emissions in the case without investment

Option of Baselinea/ Actual emissions before investment,

b/ Emissions from similar installations in operation in the country or in the region

c/ Emissions from similar installations recently invested in the country or in the region

Reduction amounts = Baseline emissions - Emissions from projects

Taking into account of・ investment climate such as economy, energy,

technology, regulation.・ availability and reliability of data

Sampling and theoretical value may be applicable

http://www.jbic.go.jp/en/about/news/2010/0730-01/100730_mrv_guideline.pdf

J-MRV

1212

-400-350-300-250-200-150-100-500

SteelIndustry

Cement Paper　&Pulp

Refrigerator AirConditioner

Lighting

Developed　Countries Developing　CountriesSource: IEEJ CO2 emission reduction potential by using Japanese BAT

(‘000 ton/Y )

Reduction Potential of Proven Technology

1313

Energy saving and CO2 reduction 18,410Kwh120,000 ton/y(China, 5000ton X2 units)

Cooling Tower

PHBoiler

Demineralizer building

AQC Boiler

Turbine / GeneratorBuilding

Source Kawasaki

Heat Recovery System of Cement Plant

14

Environment Guideline

JBIC’s Environment Guideline・ Pollution control, Natural Environment, Social Environment・ Risk Analysis Department and Independent Third Party・ ECA Common Approach・ Alliance with more than 20 institutions

・ Sustainability of Projects (Risk Mitigation)・ Responsibility of Financial Sector・ International Standard and Custom Local Regulation

Equator Principle・ Project Finance in developing countries・ Around 60 institutions

1515

Innovative Instrument for Green Finance

16

Stock Market

Network

RatingEvaluationAdvisory

The GoodBankers

FundManager

Investment Fund

Institutional and

Individual Investors

Rating System

Forest-friendly Assets

Investment

Advisory Board Financial

Review

InvestmentReviewing

Forest Friendly Activities of companies

Businesses Finances AcademiaPoliciesCitizens

Forest Eco Fund

190 items reviewed

ServiceContract Management

Contract

Source : The Good Bankers Co., Ltd.

Forest Eco Fund

17

最低降雨量（契約上）

降雨量

降雨量

降雨量チェック対象期間

月

降雨不足の場合保険金支払い

降雨量が契約以上保険金支払いなし

農業天候保険の仕組み

Farmers BAAC

JBIC

Sonpo Japan

Study（２００８）

Premium

Payment

Development of]WIIA

MOUHost

Participation

Weather Index Insurance for Agriculture (WIIA)

Rain Fall

Minimum Rain Fall (Contract)

Rain Fall

No Insurance Payment

Insurance Payment(Compensation of drop of income)

Monitoring Period month

18

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 economy

・ They will need to use biodiversity services just as now, such as genetic businesses developed through science and

technology.

Value of biodiversity

19

Financial risk

Financial losses realized on projects because of inadequate

management of biodiversity-related risk

Reputation and funding risk

Mission risk

Loss of reputation and financial strength through improper management of

biodiversity-related risk

Failure to realize sustainable growth through project

financing

Short term risk

Long term risk

Environmental due diligence including

biodiversity

Proactive finance for projects with

biodiversity components

CSR activities for biodiversity components

Contribute to mechanism for

BES

Risk Mitigation

Biodiversity-Related Risk for Financial Institutions

20

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

New Technology and Finance

21

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

New Technology and Finance

2222

Green Finance Proposal

23

Awareness of Environment Constraint

Review of environment impact

Green Finance Alliance(consideration and proposal)

Climate Finance (with MRV)Water Finance

Environment Guideline (safe guard)・ Pollution control

・ Natural environment・ Social environment

Proactive Action Risk Mitigation

System for the future Creating new market

(Forest, Biodiversity etc)

Green Finance

2424

Public Sector(Improvement of investment climate)

Private Sector(Driving force)

Financial Sector (Push last one mile)

Capacity of Our Planet

Change of Lifestyle

Better investment climate, More investment

Use of Technology

Public Private Financial Partnership