Your SlideShare is downloading. ×
0
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

WWF - Enabling Long Term Sustainable Investments by Timothy Hassett at GIB Summit

810

Published on



2 Views

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

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
810
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
11
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide
  • Eurotunnel
    Spanish Airport
    Berlin Airport
  • Transcript

    • 1. Enabling Long-term Sustainable Investments through Financial Regulation Timothy Hassett Director Sustainable Finance World Wildlife Fund - US 21 May 2013 © Kevin Schafer/WWF-Canon
    • 2. Objectives What Regulatory Frameworks are needed to enable Long- Term Sustainable Investments? How to Mainstream Sustainability in Financial Regulation and Policy?
    • 3. BASEL ACCORDS Drive the Global Regulatory Environment for Banks. Not designed to cope with the realities imposed by the Anthropogenic Era, which creates business opportunities and risks. • Private Sector Finance should support more clean technology transactions • Private Sector Finance should incorporate environmental and social issues in all transactions
    • 4. Supporting More Clean Technology Significant Sustainable Infrastructure Must be Financed to stay below 2C Climate Change Investing in the Clean Trillion* • $1 Trillion per annum through 2050 • $281 Billion in 2012 Does the Investment Gap Result from Financial Regulation? Can Financial Regulation serve as Catalyst for Clean Technology Investments? *CERES
    • 5. Does Investment Gap Result from Financial Regulation? Liquidity or Capital or Both? Liquidity? • Liquidity Coverage Ratio (LCR) is: • High Quality Liquid Assets (HQLA) divided by • Total 30-day Net Liquidity Outflows • LCR requires • 100% liquidity to be held against un-funded commitments to SPVs (outflows)? • Haircut on loans to non-financial customers (inflows)? Please refer to Basel Accords for exact definitions and details
    • 6. Does Investment Gap Result from Financial Regulation? Liquidity or Capital or Both? Liquidity? • Net Stable Funding Ratio (NSFR) is: • Available Stable Funding divided by • Required Stable Funding • NSFR allows for maturity transformation, but requires long- term liabilities to support long-term assets • Long-term project finance assets force Financial Institutions to extend the maturity structure of their liabilities? Please refer to Basel Accords for exact definitions and details
    • 7. Does Investment Gap Result from Financial Regulation? Liquidity or Capital or Both? Capital? • Basel III enhances the quality and quantity of capital to Risk Weighted Assets (RWA) o 4.5% Common Equity Tier 1 (increased from 2.0%) o 2.5% Common Equity Tier 1 for Capital Conservation Buffer o 2.5% Common Equity Tier 1 for Countercyclical Buffer (potential) • Long-Term Infrastructure Transactions can have higher Risk Weightings due to: - Completion Risk - Country Risk - Performance Risk - Tenor Please refer to Basel Accords for exact definitions and details
    • 8. Potential Regulatory Solutions Creating a New Asset Class for Long-Term Sustainable Transactions: • Employ Sustainability Infrastructure Rating for qualification • Show relationship of Rating to lower expected loss Making Long-Term Sustainable Transactions more Liquid Making Long-Term Sustainable Transactions less Capital Intensive.
    • 9. Potential Regulatory Solutions Making Long-Term Sustainable Infrastructure Transactions more Liquid. • Insuring Transferability in Loan Documentation • Standardizing Contract Terms (ISDA) • Including in definition of HQLA for the LCR o Eligible Central Bank Collateral • Reducing the Required Stable Funding factor on qualifying Sustainable Infrastructure Transactions for the NSFR
    • 10. Potential Regulatory Solutions Making Long-Term Sustainable Transactions less Capital Intensive. • Incorporate Sustainable Infrastructure Ratings in the Internal Ratings Based (IRB) Approach to determine RWA • Create lower risk category under the Standardized Approach • Encourage inclusion of Sustainability Ratings by Credit Rating Agencies
    • 11. Potential Regulatory Solutions What if a Sustainability Risk Rating does not reveal a lower expected loss? • Due to lack of sufficient data. • Because the data does not provide this result.
    • 12. Potential Regulatory Solutions Model the Resiliency Impact on Bank Portfolios of Sustainable Infrastructure Transactions in: • A future carbon constrained environment • A world impacted by climate change Sustainable Infrastructure Transactions would make a Financial Institution more resilient in an Anthropogenic World. Basel Liquidity and Capital Requirements should integrate this and not penalize, but promote these types of transactions.
    • 13. Mainstreaming Sustainability in Basel Accords Failure to integrate Environmental and Social Sustainability issues in financial decisions creates market distortions. Basel Accords should mandate their inclusion to assure the correct risk-return relationships are identified.
    • 14. Mainstreaming Sustainability in Basel Accords Mandating its inclusion in Basel Accords could be accomplished similar to the way Operating Risk was incorporated in Basel II. • When Acceptable Environmental and Social Risk Management Policies and Systems are in place, no capital penalty. • If Acceptable Environmental and Social Risk Management Policies and Systems are not in place, a capital penalty equal to X% of 3-year average positive gross income.
    • 15. Questions to Consider • Do the Basel Accords deter Long-Term Sustainable Investment? • Could the Basel Accords be used to incentivize Long-Term Sustainable Transactions? • Is action required to ensure ESG is included in risk ratings? • How could momentum be built to modify the Basel Accords quickly due to the opportunities and risks created by the Anthropogenic Era?

    ×