SEB Bank - Green Bonds Framework by Mats Olausson at GIB Summit

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Presented at the 4th Global Infrastructure Basel Summit 21 & 22 May 2014.
Read more about the world leading platform for Sustainable Infrastructure Finance at www.gib-foundation.org.
Next Summit: 27 & 28 May 2015 in Switzerland

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SEB Bank - Green Bonds Framework by Mats Olausson at GIB Summit

  1. 1. Mats Olausson Senior Advisor Sustainable Products The Green Bonds Framework – where it comes from and where it is going Global Infrastructure Basel Summit, 22 May 2014
  2. 2. 1 The Green Bond Story History of the Green Bond market A concept developed by SEB and the World Bank in 2007/08 Linking environmental and financial risks Linking short and long term perspectives Designed to encourage sustainable investments
  3. 3. 2 Green Bonds – in response to investor demand Increasing number of investors signing off on the 6 Principles for Responsible Investments (PRI) (1) Source: Unpri.org (1) PRI is an investor driven initiative in partnership with UNEP Finance Initiative and the UN Global Compact (2) ESG=Environmental, Social & Governance Growing demand for Green investment opportunities amongst global investors Incorporate ESG(2) into investment analysis and decision making process1 Incorporate ESG into ownership policies and practices2 Seek appropriate disclosure on ESG by entities in which we invest3 Promote acceptance and implementation of the Principles within the industry4 Work together to enhance our effectiveness in implementing the Principles5 Report our activities and progress towards implementing the Principles6 6.5 10 13 18 21 25 3432 - 200 400 600 800 1,000 1,200 1,400 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 0 5 10 15 20 25 30 35 Number of investor signatories Assets under management, US$ trillion (right axis)
  4. 4. Market development 3 Supranationals Munici- palities & Cities State related agencies Project Financing Corporates The Green Bond market Engage and educate mainstream stakeholders of the potential effects climate change can have on financial assets To develop solutions that enable existing mainstream financial mandates to engage in climate finance To create a unified development of the Green Bond market Across the credit and yield curves with various types of issuers
  5. 5. Green Bond market development A fast growing market 4
  6. 6. Top Green Bond underwriters 2007 – end of Q1 2014Select Green Bond issues SEK 500m 2.750% fixed bond September 2032 Joint Lead SEK 2,100m 3.000% fixed bond April 2019 Joint Lead SEK 500m 2.915% fixed bond/ FRN October 2019 Sole Lead USD 500m 0.750% fixed bond October 2016 Joint Lead USD 300m 0.875% fixed bond January 2017 Joint Lead USD 250m 1.625% fixed bond April 2018 Joint Lead USD 1billion 0.625% fixed bond November 2016 Joint Lead USD 550m 0.375% fixed bond Aug 2015 Joint Lead EUR 250m (increase) 1.375% Nov 2019 Joint Lead SEK 1,575m 3.250% fixed bond December 2017 Sole Lead SEK 1,300m 1.774% / FRN May 2016 Sole Lead SEK 3,250m 3.500% fixed bond November 2014 Sole Lead USD 500m 1.750% fixed bond February 2018 Joint Lead USD 500m 0.750% fixed bond Nov 2016 Joint Lead SEB Green Bond placements 5 Source: Bloomberg and SEB 5 year SEK 1bn/500m 2.500% / FRN April 2019 Sole Bookrunner 5 year SEK 850m FRN April 2019 Sole Bookrunner SEB in the Green Bond market SEB is a pioneer and the Global leader within the field of Green Bonds Source: Climate Bond Initiative 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000
  7. 7. 6 Green Bond issuers SEB has worked with the following issuers developing their Green Bond frameworks Issuer Issuer type Programme name Allocations Earmarked a/c CICERO Second opinion Investor reporting World Bank (IBRD) Supranational Green Bond Mitigation Adaptation Y Y Y African Development Bank Supranational Green Bond Mitigation Adaptation Y Y Y City of Gothenburg Municipality Green Bond Renewable Energy Energy Efficiency Water Management Y Y Y European Bank of Reconstruction and Development Supranational Green Bond Mitigation Adaptation Y Y Y Export Development Canada Export Import Agency Green Bond Renewable Energy Energy Efficiency Water Management Y Y Y European Investment Bank Supranational Climate Awareness Bond Renewable Energy Energy Efficiency Y Y International Finance Corporation Supranational Green Bond Mitigation Adaptation Y Y Y Kommunalbanken, Norway Municipality Green Bond Renewable Energy Waste Management Y Y Y Korea Export Import Bank Export Import Agency Green Bond Renewable Energy Energy Efficiency Y Y Y Svenska Cellulosa AB (SCA) Corporate Green Bond Sustainable Forestry Renewable Energy Energy Efficiency Y Y Y Skanska Corporate Green Bond Sustainable buildings Y Y Y Vasakronan Corporate Green Bond Sustainable Buildings Renewable Energy Y Y Y First Green Bond issuer First municipal Green Bond issuer First non-supranational Green Bond issuer First corporate Green Bond issuer First Nordic listed Green Bond issuer
  8. 8. 7 The five pillars of the Green Bond framework Simplicity – scalability1 Governance – selection process2 Credibility – vetting of Green3 Traceability – earmarked account4 Transparency – reporting5
  9. 9. The Green Bond Principles 8 The Green Bond Principles (GBP) are a set of voluntary guidelines for: - use of proceeds - process for project evaluation and selections - management of proceeds and - reporting The purpose of the GBP is: to encourage transparency, disclosure and integrity of the Green Bond market Signed by 13 + 12 banks ICMA Secretatiat: - facilitate information exchange with issuers, investors, underwriters, and other stakeholders - gather input for the annual update of the Green Bond Principles
  10. 10. Cautiously welcomed - with strings attached 9 NGOs demand clarification: include real commitments by banks to ensure high standards of transparency and disclosure for bond issuances they underwrite; reference clear and science-based definitions and criteria of what constitutes “green” under the Principles; and commit unambiguously to third party, independent verification of the information on sustainability and use of proceeds reported by Green Bond issuers.
  11. 11. At the hart of it - Verification of Green 10 1. World Bank 2. AfDB 3. EBRD 4. IFC 5. Kommunalbanken 6. KEXIM 7. EDC 8. City of Gothenburg 9. Vasakronan 10. SCA 11. Skanska 12. Stockholm County Council 13. Rikshem 1. EDF 2. Unibail-Rodamco 3. Iberdrola 4. Ile-de-France 5. GDF Suez 1. Unilever 2. Arise 1. Credit Agricole 2. TD-Bank 3. Toyota 4. BAML 5. Solar City 6. Hannon Armstrong 7. NRW Bank 8. Landwirtsch Rentenbank 9. FMO 10. Massachusetts 11. Regency Centers LP 12. Aligera Holding No 2’nd opinion No official comment: • EIB • NIB • ADB
  12. 12. Green Bonds Framework: where to from here? 11 Other potential providers of third party verification: MSCI, McKinsey, KPMG…? Uncertain outcome – a process involving various stakeholders Issue at stake: establishing a solid framework to permit the Green Bonds market to grow and make a difference Expanding the CICERO model – work in progress Purpose of the CICERO – SEB cooperation - Establish a prudent framework - Secure the dialogue between banks and academics ”Warehousing arrangement” until a prudent model is in place Objective to give equal access to all Network of environmental research institutes needed to meet demand Possible ways forward: - Consultancy service – banks pay for vetting of green - Green Bonds Platform (response to investor demand) * Information services * Second opinions
  13. 13. Thank you!

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