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Sustainable Finance Converting Risks in to Opportunities


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Keynote Address …

Keynote Address
Corporate Finance & Development Banking

given at the TBLI CONFERENCE ASIA 2008.

Published in: Economy & Finance, Technology

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    • 1. Sustainable Finance Converting Risks in to Opportunities Keynote Address by SOMAK GHOSH President Corporate Finance & Development Banking YES BANK Ltd.
    • 2. Paradigm Shift – Periphery to Mainstream
      • From the intellectual labyrinth to day-to-day lexicon of global businesses and core business strategy
      • Current thinking in Sustainability
        • Aligned to core strategy
        • Helps businesses understand and respond to changing social and environmental pressures/realities
        • Enables innovation in process and products
        • Helps identify new potential markets
        • Lends competitive advantage
    • 3.
      • Long-held beliefs….
        • “ Business of business is business ”
        • As a ‘an artificial person’ a corporation does not have responsibilities
        • Profits the only responsibility of business as long as it stays within the rules of the game
      • Realisation that businesse s do not operate in a vacuum ; taking cognisance of changing market realities and mainstreaming sustainability
        • Goal of business is to deliver long term value
        • Focus on short-term profits, ignoring long-term sustainable growth detrimental for business
        • Accounting for and using resources efficiently and responding to needs of society is the RESPONSIBILITY of business
      Paradigm Shift – Periphery to Mainstream
    • 4. Business Case for Sustainability – Drivers for Sustainability
      • Rapid Globalisation – increasing integration; what happens in one part of the world affects the rest
      • Changing Ecosystem – rising temperatures, melting glaciers, finite natural resources, significant demand-supply mismatch pushing up cost of resources
      • Consumer Preference – increasing awareness of and sensitivity to clean and green issues pushing up demand for clean products & services
      • Regulation – in 2000 Brazilian state-owned company Petrobras fined $ 28 million and $ 118 million for two oil spills, highest fines ever in Latin America
    • 5. Stakeholders for Sustainability GE - to invest $1.5 billion a year in clean tech R&D by 2010, part of Ecomagination strategy BP – alternative energy unit spending $8 billion over 10 years for solar, wind and hydrogen Toyota – $ 8 billion for its hybrid and fuel-cell development in 2006 C O M P A N I E S Goldman Sachs – clean energy investments of $2 billion in companies such as First Solar, GridPoint, Iogen and SunEdison Kleiner Perkins Caufield & Byers (investor in in, Google & Netscape) created $ 200 million Greentech investment fund Vinod Khosla , Founding CEO of Sun Microsystems , picked up a 15% stake in a leading Indian microfinance institution, SKS Microfinance F I N A N C I A L I N S T I T U T I O N S
        • Japan - 10 year programme in 1990s to fund growth of solar PV industry; today flourishing without significant subsidies
        • Germany – significant investment in solar and biodiesel industries
        • China – committed to investing $180 billion over 15 yrs for clean energy
        • India – government to deliver electricity to 56% of 700 million rural residents lacking access to electric power by 2012 – 50% from renewable resources
      G O V E R N M E N T S
    • 6. Banks & Sustainability
      • A bank transforms money in to place, term, size and risk in an economy
      • and, as such, it affects economic development. This influence is not only
      • quantitative but can be qualitative since banks can influence the nature of
      • economic growth ( Marcel Jeucken)
      Source: “Sustainable Finance: Strategy Options for Development Financing Institutions,” Gilbert Heim and Oliver Zenklusen (Sept, 2005)
    • 7. Banks & Sustainability
      • Equipped to weigh risks, can attach prices to risks and use price differentiation to foster sustainability
        • Can use carrot & stick approach – lend at higher rate to environmental laggards and lower rate to environmental front-runners
      Sustainability – Risk Mitigant for Banks Source: “ Just a Fad?”, Oliver Zenklusen and Gilbert Heim, Ecofact AG, Zurich (2005)
    • 8. Sustainability @ YES BANK
      • Cognizant of responsibility as a Public Trust Institution to mainstream sustainability within the Indian context
      • Vision to create a commercially viable financial institution that incorporates sustainability in core business focus through
      • Fourth Generation Sustainability not Philanthropy Identifying and fostering sustainable businesses in sunrise sectors including
          • Infrastructure
          • Information Technology
          • Bio-tech and Pharma
          • Agriculture
          • Social Infrastructure
          • Sustainable Livelihoods
    • 9. SUSTAINABILITY @ YES BANK Deal Generator Deal Generator SUSTAINABILITY in ACTION Deal Generator Not for profits Microenterprises Responsible Banking (CSR & Sustainability Initiatives) Agri & Rural Banking (ARB) Sustainable Investment Bank (SIB) Idea Formation “ development finance in thought ” Projects Microfinance Investment Banking Rural Lending Alternative Energy & Environment Carbon Finance Social Enterprises Microfinance Institutions Group (MIG) YES SAMPANN : Direct Lending Thought Leadership / Advisory Lending Lending Advisory / Private Equity / Funding SUSTAINABILITY in THOUGHT
    • 10. Sustainability Financing – Suzlon
      • Suzlon Energy Ltd – ‘ house banker’ to Suzlon, among worlds top 5 wind turbine manufacturer
        • Managed IPO in 2005
        • Sole Strategic & Financial Advisor to raise USD 25 mn. growth capital in 2004 (entry at a business valuation of USD 120 mm approx, grown to USD 3 bn. appx)
        • Sole Advisor on key acquisitions Hansen Transmission ( USD 565 mn) 2006 & RE Power Systems ( USD 1.2 Bn) 2007
      Advisory Date: Over 2004-2007 Bank’s Exposure to Company: USD 25-30 mil Region/Sector: South Asia / Wind Energy
    • 11.
      • Honey Beekeeping – structured trade transaction solutions to augment sustainable livelihoods of over 2000 honey beekeepers winning the EUROMONEY Deal of the Year
      • Paramparik Karigar – structured trade facility to Paramparik Karigar, NGO of Indian craftsmen, enabling 27 craftsmen to exhibit indigenous Indian handicrafts at “ Gateway of India Exhibition” held in New York, March 2007
      Sustainability Financing – Select Initiatives
    • 12. YES BANK - Bank of Choice for Business of the Future YES BANK – Future of Alternative Investments
    • 13.
      • THANK YOU