Gerard van baar tbli presentation hfc 10 nov

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TBLI CONFERENCE™ EUROPE 2011- London - United Kingdom …

TBLI CONFERENCE™ EUROPE 2011- London - United Kingdom

TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing.

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  • 1. Green InvestmentCorporationNovember 1, 2011Gerard van BaarManaging DirectorFinance & Sustainability
  • 2. Holland Financial CentrePublic private foundation representing the financial industryincluding government• banks, brokers, pension funds and asset managers, consultants, accountancy and legal firms, the Dutch government, the Authority for the Financial Markets (AFM), the Dutch central bank (DNB), and the city of Amsterdam.• 70 participants per 2010Objective• to develop initiatives aimed at preserving a strong, open, internationally competitive financial industry in the Netherlands 2
  • 3. Holland Financial CentreHFC focuses its attention to four priority areas, based on theareas of expertise in the Netherlands• Finance & Sustainability• Retirement Management• Financial Logistics• Trading Venue 3
  • 4. Finance & SustainabilityTrack record− ABN AMRO -> equator principles – project finance− PGGM / APG -> Responsible Investment− Triodos -> business model− SNS -> micro finance− Robeco -> integrated sustainability, clean tech− SAM / Robeco-> Dow Jones Sustainability Index− Rabobank -> Food & Agribusiness principles− Alpinvest -> clean tech private equity− Fortis/ABN AMRO -> innovator in carbon trading− Carbon policy -> high profile within UN− Princess Amalia -> first project finance off-shore wind park− Pension model -> highly capitalized (EUR 800 billion) and sustainable asset management− Global Reporting Initiative (GRI) -> based in Amsterdam− Sustainalytics -> Amsterdam 4
  • 5. But the track goes back to the originof HollandYou can’t go lower…Schiphol Airport 13 meters belowsea levelBut still dry,because of ‘polder’Mills were not for touristsbut to make ‘polders’ dry 5
  • 6. With financial innovations stillused…Oldest share in the worldVereenigde OostindischeCompagnie - VOCSo you need a stock exchangeWhich also allowed you tofinance poldersSuch as De Beemster 6
  • 7. That’s the crux of Finance &SustainabilityThe real ‘poldering’ of Holland only took off after a financialinnovation: the share.Technical innovation (the mill) alone is not enough.Holland Financial Centre for Finance & Sustainabilityis the knowledge centre for financing the necessary transition toa sustainable future 7
  • 8. Centre for Finance & SustainabilityClusters:− Responsible Investment− Sustainable Finance− Transition to sustainable energy including clean tech− Carbon trade and financeObjective:Transfer knowledge & initiate Financial innovation 8
  • 9. Knowledge transfer− Duisenberg School of Finance − Master program Finance & Sustainability − Executive program− Global webportal with Dutch Universities, Berkeley, Singapore (NUS), Mistra (Sweden) and soon also China www.fsinsight.org , start January by Vice Prime Minister− Publish research papers 9
  • 10. Innovation: Green InvestmentCorporation• HFC initiates & coordinates. Working with 17 participants who sponsor the Dutch initiative• Triggered by several international initiatives (UK, Korea)• Focused on transition towards a low carbon economy, especially sustainable energy and energy efficiency• Transition is going too slow• Calculated investment need for the Netherlands is € 100 billion up till 2020 (based on European targets)• While market now picks up at a rate of € 10 – 20 billion till 2020• At least extra € 80 billion needed 10
  • 11. Investments needed for theNetherlands up to 2020 11
  • 12. Green Investment Corporation• Initiatives in other countries are public, and based on policy• In the Netherlands GIC will be public/private and based on market: • There needs to be proof of market need • not competitive with existing activities and regulations (both private and public!) Important to note: • It is not about just another bank: it is about a catalyst • GIC is not the object. • The object is to accelerate the transition to clean energy • BUT ALL THE TIME: NEEDS TO GENERATE RETURN 12
  • 13. Time frameNov 2010 May 2011 Sept 2011 Febr 2012 Dec 2012 Proposal to Fact finding Feasibility Implementation Invest • UK Visit • Broadbased • Legal structure • Depending on the • Ecofys report support • Roles & products proposal to invest • Teaser ECF • Theoretical • Capitalisation and • BCG report framework funding • Initial support: • Pipeline of Cases • Governance and > Government • Conclusion: operations > Financial sector - Feasible - Added value - Green Deal Go/No Go 13
  • 14. The Green InvestmentCorporation Not succesfullSubsidies in acquiring Commercial (public) Funding (private) 0% >15% Return on Equity 14
  • 15. The Green InvestmentCorporationSubsidies GIC Commercial (public) (public/private) (private) 0% >15% Return on Equity 15
  • 16. Looked from a different angle Risks too highReturn Return too low Risk Figuur: Speelveld GIM in termen van risico/rendement 16
  • 17. Feasibility study: Why is the marketnot there? Risks becoming BarriersSustainable energy projects are typical in the sense that they have certaincommon characteristics which make it difficult to get them financed. Certain risksbecome barriers for them, effectively blocking funding:1. Information barrier: New techniques are accompanied by new regulations, legal constructions, and complex proposals.2. Scale Often too small to make up for the start up costs. Projects should be replicable.3. Market Fossil fuels are still the benchmark and these are very volatile. (the higher oil prices > the better for renewable energy)4. Regulatory Unstable regulations and subsidy schemes make investors nervous5. Financial Markets Crisis combined with Basel III and Solvency 2 makes it more difficult to raise capital for long term investments 17
  • 18. Feasibility Study: Conclusions1. 4 GIC roles • Co-financer 100 Cases • Matchmaker • Aggregator 40 researched • Knowledge Centre cases2. Focus within the Dutch Economy • Decentral energy production 11 analysed • Energy-efficiency in built environment cases3. GIC characteristics • Public/Private • Precompetitive • Initial capital: 100 mln (first 3 years) • Estimated RoE: 5-8%4. Government policy 2 business Need for a long term green growth policy cases from the Dutch government 18
  • 19. The GIC may have two legs Green Investment Corporation Match Match Private EquityBanks Making Debt Equity Making Funds − Mezzanine Innovation − Bundling CapitalMatchfund (ICM) Definition of Match-making: Pre-competitive, pari passu (or at least keeping the risk and rewards in balance) and alongside the banks/private equity funds 19
  • 20. The life cycle and the two roles for GIC (Debt & Equity)Equity Source: UNEP & SEFI Debt(ICM) 20
  • 21. Sustainable innovation equity fund withrelevant parties Partners Innovation Capital Matchfund Objectives Objectives Key figures• Enhance Partner’s Committed capital: profile as a • Government: € 20 mio sustainable • Financial Participants: company or institute • Accelerate the seed € 60 mio (2 times € 10 capital market for mio* and 8 times € 5 mio)• Sharing risks with a Dutch sustainable public/private investments Management: institute • Team size: 3-4 FTE** • Co-invest with • 3% management costs,• Underline mature funds long term sustainable commitment to both incentives government and • Allign partner financial industry networks in dealflow Launch date: • 1st closing: March 2012• Open up a new • Positive IRR • 2nd closing: Sep 2012 portfolio in The Netherlands Targeted IRR: • 8-15% * This includes a seat in the Investment Cee Board 21 ** If the ICM is going to manage local revolving funds there will be a need for more FTE’s
  • 22. What is the added value of a GIC?For the market:• Standardising financing process new concepts• Bundle & share knowledge from all parties to get better insight in risksFor authorities• Bundling/coordinating local initiatives• Better form of subsidies, tailor made, higher public/private leverage 22
  • 23. Opportunities for key stakeholdersBanks Institutional Investors Government / Society• Possibility to shorten • Extra opportunity • Substantial balance sheet (by for maturity contribution to focus on project matching climate goals and finance and instit. • Access to asset other government Investors who take class that is now targets over long term difficult to enter • Acceleration of finance) because of scale market financed• Additional business and structuring energy transition and because of projects • Opportunity to show reduction of that otherwise society coporate subsidies wouldn’t be done social responsibility • Employment• Opportunity to show • Enhance society coporate competitiveness social responsibility 23
  • 24. Way forward: Proposal to InvestDeliverables Strategy and Implementation Capitalisation and Funding ►P&L ►Concrete Pipeline of Cases Marketing and Sales Governance and Operations Legal StructureGo/No Go Decision: Implementation of the GIC 24
  • 25. Thank you for your attention!Gerard van Baarvanbaar@hollandfinancialcentre.nlwww.hollandfinancialcentre.comwww.fsinsight.org 25
  • 26. Gerard van BaarGerard van Baar is responsible for the Finance & Sustainability section withinHolland Financial Centre (HFC). HFC is a public private foundation withparticipants from the financial industry, consultants, audit and legal firms as wellas government (both central and local) and regulators. The objective of HFC is todevelop initiatives aimed at preserving a strong, open internationally competitivefinancial industry in the Netherlands. Gerard is in charge of the initiatives forFinance & Sustainability a.o. the Green Investment Corporation, the launching of adedicated global web portal for finance and sustainability together with Universitiesof Tilburg, Maastricht, Berkeley, Singapore and Duisenberg School of Finance(www.fsinsight.org), and integrating education on F&S into the existing masters atDuisenberg.Before joining HFC in 2010, Gerard was in charge of Deloitte’s European Centreof Excellence on Energy & Commodity Risk Management. He worked with themajor European utilities and was Trustee on several electricity auctions throughoutEurope. He lived several years in Vietnam and was involved in the CDM marketand wind farm development.Gerard holds a Masters in Economics from the Vrije Universiteit Amsterdam. 26
  • 27. Dit is de titel van deze presentatie | 13 january 2010 27