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Green Finance for Green Growth ~ Public Private Financial Partnership ~. 17 November 2010 Takashi Hongo Special Advisor and Head of Environment Finance Engineering Department Japan Bank for International Cooperation. Green Finance for Green Growth. 1. Triple Threats.

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Green Finance for Green Growth

~ Public Private Financial Partnership ~

17November 2010

Takashi Hongo

Special Advisor and Head of

Environment Finance Engineering Department

Japan Bank for International Cooperation



Triple Threats

Economic Growth ofAsia

Financial Crisis

Energy Constraint

Environment Constraint

Green Stimulus

Technology Driven

Private Driven

Market-base Mechanism

Level Playing Fields

Access to Clean Energy

Green Growth



Copenhagen Accord

  • 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.

Source: UNFCCC

4


Green Banking/Green Financing

3R, Low Carbon Operation

Greening of Operation

Greening of Finance

Minimum Requirement

Environment Guideline

-Commercially Viable BAT

-Measurement of CO2 Reduction (MRV)

ProactiveFinancing

Voluntary actions

-Carbon Offset

-Sustainable Forest Rating

-Weather Index Insurance for Agriculture

Contribution for New Mechanism

CSR to New Business Model



JBIC for Environment and Bio Diversity

(4 arrows approach)

JBIC

Finance

Organizational

Operation

Finance

Consideration of

future system

Environment Guideline

(Avoid, minimize )

Environment Finance

( LIFE, GREEN)

Knowledge contribution

Project

・3R

・CO2 reductionplan

Project

・Study

・Proposal

Negative impact

Positive contribution


“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 around5 billion USD for the next 2 years.

J B I C

Loans /

Equity Investment

MDBs

(ADB, World Bank Group, etc)

Private financial institutions

Cooperation

(Co-finance, information sharing, etc)

Catalytic role

Loans, etc

Loans, etc

Four main targeted sectors of the Initiative are ...

・Clean power generation - Solar, geothermal, wind power, cleancoal 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


New Financial Program (GREEN) and J-MRV Initiative by JBIC

(Global action for reconciling economic growth and environmental preservation)

J-MRV

・Scaling up low carbon investment

・“simple, practical and internationally acceptable” guideline

・Following investor’s decision making process

JBIC will review the followings

1. Climate change policy of the host country

2. Technology to be used

3. Reduction amount by J-MRV

Commercially viable

BAT

(best available technology)

JBIC

“GREEN”

GHG emission

reduction projects

Finance

Deployment

Reduction amount

Dialogue

Ownership

J-MRV

・Industries

・Carbon Players

・Host Government

Future

carbon market

Share

Possibility

GHG emission

reductions

(MRV: Measurement, reporting and verification)


J-MRV Initiative by JBIC

・Scaling up low carbon investment

・“simple, practical and internationally acceptable” guideline

・Following investor’s decision making process

Reduction amounts =

Baseline emissions - Emissions from projects

Baseline amounts =

Emissions in the case without investment

Option of Baseline

a/ 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

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


Reduction Potential of Proven Technology Initiative by JBIC

(‘000 ton/Y )

Source: IEEJ

CO2 emission reduction potential by using Japanese BAT

11


Heat Recovery System of Cement Plant Initiative by JBIC

Energy saving and CO2 reduction

18,410Kwh

120,000 ton/y

(China, 5000ton X2 units)

AQC Boiler

PH

Boiler

Turbine / Generator

Building

Demineralizer building

Cooling

Tower

Source Kawasaki

12


Environment Guideline Initiative by JBIC

・Sustainability of Projects (Risk Mitigation)

・Responsibility of Financial Sector

・International Standard and Custom Local Regulation

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

Equator Principle

・Project Finance in developing countries

・Around60 institutions


Innovative Instrument Initiative by JBIC

for Green Finance

14


Forest Eco Fund Initiative by JBIC

Network

Forest Eco Fund

Service

Contract

Businesses

Finances

Academia

Policies

Citizens

Management

Contract

Fund

Manager

The Good

Bankers

Rating

Evaluation

Advisory

Investment

Rating System

190 items reviewed

Investment

Fund

Institutional and Individual Investors

Advisory

Board

Financial

Review

Reviewing Forest Friendly Activities of companies

Investment

Stock Market

Forest-friendly

Assets

Source : The Good Bankers Co., Ltd.


Weather Index Insurance for Agriculture (WIIA) Initiative by JBIC

Rain Fall

No Insurance Payment

Minimum Rain Fall (Contract)

Insurance Payment

(Compensation of drop of income)

Rain Fall

Monitoring Period

month

Premium

Development of]

WIIA

Farmers

BAAC

Sonpo Japan

Payment

MOU

Participation

Host

JBIC

Study

(2008)


Value of biodiversity Initiative by JBIC

We enjoy biodiversity services.

・Many medicines originate through or were developed by studying biodiversity services.

・Fishing and agriculture depend on biodiversity services.

We need to maintain biodiversity for future generations.

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

Today we enjoy biodiversity freely because of its externalities, but without sustainable usage it would be exhausted. Biodiversity must be internalized to the economy


Biodiversity-Related Risk for Financial Institutions Initiative by JBIC

Risk Mitigation

Short term

risk

Financial risk

Environmental due diligence including biodiversity

Financial losses realized on projects because of inadequate

management of biodiversity-related risk

Reputation and funding risk

Proactive finance for projects with biodiversity components

Loss of reputation and financial strength through improper management of biodiversity-related risk

CSR activities for biodiversity components

Mission risk

Failure to realize sustainable growth through project

financing

Contribute to mechanism for BES

Long term

risk


New Technology and Finance Initiative by JBIC

Estimation of precipitation by the integrated satellite monitoring system

Can we use this system for dam operation or weather derivative?


New Technology and Finance Initiative by JBIC

Biomass stock monitoring system

Can we use this for forest management and forest credit system?


Green Finance Initiative by JBIC

Proposal

21


Green Finance Initiative by JBIC

Awareness of Environment Constraint

Review of environment impact

Proactive Action

Risk Mitigation

Climate Finance (with MRV)

Water Finance

Environment Guideline (safe guard)

・Pollution control

・Natural environment

・Social environment

Green Finance Alliance

(consideration and proposal)

System

for the future

Creating new market

(Forest, Biodiversity etc)


Public Private Financial Partnership Initiative by JBIC

Capacity of Our Planet

Change of Lifestyle

Use of Technology

Better investment climate, More investment

Public Sector

(Improvement of investment climate)

Private Sector

(Driving force)

Financial Sector

(Push last one mile)

23


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