Jurgen Rigterink Chief Investment Officer TBLI - Retooling the Economy November 12 th , 2009 Walking the Talk on Climate Change Banks as Agents of Change

Climate Change – Annual Impact on People > 300 million people affected > 300 thousand people die Source: Human Impact Report, 2009

Climate Change – Annual Impact on People

> 300 million people affected

> 300 thousand people die

Climate Change – Annual Financial Impact I USD 2.0 - 4.5 trillion loss of natural capital Result of deforestation and degradation Source: The Economics of Ecosystems and Biodiversity (TEEB), 2008

Climate Change – Annual Financial Impact I

USD 2.0 - 4.5 trillion loss of natural capital

Result of deforestation and degradation

Source: The Economics of Ecosystems and Biodiversity (TEEB), 2008

Climate Change – Annual Financial Impact II Cost of inaction on climate change 5-20% of global GDP Depending on the range of risks and impacts Source : Stern Review, 2007

Climate Change – Annual Financial Impact II

Cost of inaction on climate change 5-20% of global GDP

Depending on the range of risks and impacts

Climate Change – Annual Financial Impact III Cost of climate adaptation USD 75 - 100 billion Two third needed for developing nations Source: World Bank Report, 2009

Climate Change – Annual Financial Impact III

Cost of climate adaptation USD 75 - 100 billion

Two third needed for developing nations

Source: KPMG (2008) Readiness to tackle Climate Change

Source: KPMG (2008) Financial sector readiness to tackle Climate Change

Linking Copenhagen 2009 and future role of Banks

How Financial Institutions Impact Climate Change Minimal impact from direct emissions Significant impact through assets in portfolio

Minimal impact from direct emissions

Significant impact through assets in portfolio

Emerging markets and low income countries Access to Finance Access to Energy Access to Housing a

Emerging markets and low income countries

Access to Finance

Access to Energy

Access to Housing

a

FMO’s approach to addressing climate change Access to Energy Quantitative targets for renewable and clean energy Access to energy prevails in low income countries Only where no options for renewable energy Best available technologies and mitigating measures Access to Finance Financial institutions - risk management system Access to Housing Affordable and sustainable housing

Access to Energy

Quantitative targets for renewable and clean energy

Access to energy prevails in low income countries

Only where no options for renewable energy

Best available technologies and mitigating measures

Access to Finance

Financial institutions - risk management system

Access to Housing

Affordable and sustainable housing

Client selection - exclusion list, environmental and social impact Client engagement - present business case Finance conditions - best practices (IFC Performance Standards) Contract clauses - mutually agreed action plans, pricing incentives

Client selection - exclusion list, environmental and social impact

Client engagement - present business case

Finance conditions - best practices (IFC Performance Standards)

Contract clauses - mutually agreed action plans, pricing incentives

Risk management Opportunities FMO’s Business Case Approach

Risk management

Opportunities

FMO’s Business Case Approach – Pricing Incentives Pricing incentives to reinforce the business case Risk based and linked to action plan Market pricing is starting point Based on ‘SMART’ agreements with clients Pilots started in 2009 Positive experience to support implementation of action plans

Pricing incentives to reinforce the business case

Risk based and linked to action plan

Market pricing is starting point

Based on ‘SMART’ agreements with clients

Pilots started in 2009

Positive experience to support implementation of action plans

FMO’s Business Case Approach – Case Study Pricing Incentive Bank in Africa active in high risk sectors Action plan: - implement environmental & social management system - use FMO exclusion list for own investments - appoint coordinator and assign budget Clear milestones defined with concrete deadlines External consultant paid by client After implementation: 25 bps reduction in margin Experience – client starts implementation right after contract signing

Bank in Africa active in high risk sectors

Action plan:

- implement environmental & social management system

- use FMO exclusion list for own investments

- appoint coordinator and assign budget

Clear milestones defined with concrete deadlines

External consultant paid by client

After implementation: 25 bps reduction in margin

Experience – client starts implementation right after contract signing

Conclusion and final thoughts on Copenhagen Banks CAN be Agents of Change as proven in various initiatives: - UNEP-FI, UN-PRI - Equator Principle Banks - Development Finance Institutions Banks SHOULD be Agents of Change on a larger scale to: - Get out of the ‘danger zone’ and improve risk management - Proportionally contribute to investing in a sustainable future - Stimulate and support their clients to do so

Banks CAN be Agents of Change as proven in various initiatives:

- UNEP-FI, UN-PRI

- Equator Principle Banks

- Development Finance Institutions

Banks SHOULD be Agents of Change on a larger scale to:

- Get out of the ‘danger zone’ and improve risk management

- Proportionally contribute to investing in a sustainable future

- Stimulate and support their clients to do so

Thank you Questions ?