UNEP - Investing In Sustainable Infrastructure by Yuki Yasui at GIB Summit


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

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UNEP - Investing In Sustainable Infrastructure by Yuki Yasui at GIB Summit

  1. 1. Click ! Investing in Sustainable Infrastructure - Moving from Billions to Trillions Yuki Yasui, Deputy Head, UNEP Finance Initiative 4th Global Infrastructure Basel Summit 21 May 2014 Basel
  2. 2. UNEP’s'Partnership'with'the'Finance'Sector' UNEP'Finance'Ini6a6ve' Since'1992:'Pla=orm'associa6ng'the'United'Na6ons'and'the' financial'sector'globally'to'encourage'financial'ins6tu6ons'to' fulfill'its'role'towards'a'sustainable'world' 2014:'Over'230'members'globally'from'banking,'investment' and'insurance'sectors' Mission:'To'be'a'catalyst'for'systemic'change'in'the'financial' sector'to'ensure'its'ac6ve'par6cipa6on'in'sustainable' development'
  3. 3. • Mobilizing*new*green*finance/ investments* • Reducing*flows*to*brown*&*greening* the*brown* Inves=ng*in* sustainable* infrastructure* Baseline! •  Meeting the energy/transport/communication needs! Addition! •  More costly green technologies (eg. Coal fired power plants vs offshore wind farms)! Addition! •  Greening existing infrastructure (eg. Modal shift from road to rail) !
  4. 4. Barriers to private sustainable infrastructure financing 1)*New*Kids*on*the*Block:** Tradi=onally*financed*by*the*public*sector,** especially*in*developing*countries* Public finance! (European) banks! Long Term investors!
  5. 5. Barriers (continued) 2)*Financial*Stability* M*Basel*III*Capital* Requirements*for*Lenders* M*Solvency*II*for*Insurers* (EU)* Increase*capital*charges* against*LMT*infrastructure* loans* Motivated by one-sided negative effect of unstable financial system to the economy! What happens to the finance sector under an unsustainable economy? ! Stress test banks on the extreme effects of climate change?!
  6. 6. Barriers (continued) 3)*Brownfield*over*Greenfield*Projects* M*World’s*largest*offshore*wind*project*finance* deal*agreed*in*Holland*($3.8bln,*15*May*2014)* M*Largest*funding*gaps*in***
  7. 7. Energy intensity gains in 2000-2010: ! Only 0.5% per year! Commercial bank lending to coal industry up by 400% from 2005.! 90% of future funding expected from private sector ! $1.4 trillion new investments in renewable energy 2005-2013.! $244 billion in 2012" Competition for infrastructure investments
  8. 8. Financiers'&' Investors' Strengthen**direct* business*interests* to*a*vibrant* sustainable* economy* Insurers'' Business* interest*to* reduce* impact*of* climate*risks* Institutional Investors! Long-term investment horizon! Need*to*Strengthen** Mo=va=ons*of*Financiers/Investors* Moving'from'' millions'to'trillions'
  9. 9. Solution 1: Green Infrastructure Bonds Short'term:'Public'Green'Infrastructure'Bonds' →*Build*exper=se*&*investor*confidence*in*LMT* investments* MediumQterm:'Expand'Green'Corporate'Bonds* →*Develop*standards'&'tools'on*innova=ve*financing* structures*for*the*private*sector* →*Develop*capacity'&'training' →*Develop*enabling*policy/regulator*environment**
  10. 10. BUILDING TOOLS FOR INVESTORS Link to download the publications www.unepfi.org/publications/property
  11. 11. UNLOCKING ENERGY EFFICIENCY INVESTMENT OPPORTUNITIES A seven-step approach can effectively increase the the supply of financeable energy retrofit projects. Ensure executive awareness of the business case Measure and benchmark building energy performance Set portfolio energy efficiency targets Link asset manager compensation to energy performance Align lease clauses to enable retrofits (green leases) Include impact on asset value in investment analysis Take a portfolio approach to determine next steps
  12. 12. THE BUSINESS CASE Significant long-term results: Energy efficiency measures can pay back quickly, depreciate slowly and deliver returns for decades: 30% improvement in building efficiency has 28.6% 10-year IRR - US 30% energy savings opportunity from buildings 1930s-1990s - France 1 17% energy savings from a sample of post-retrofit buildings – Singapore 2 1.*Kamelgarn,*Y.*&* Hovorka*F.*(2013)* 2.*World*Green* Building*Council*
  13. 13. Solution 2: Align'financial'regulatory' framework'with'SD'goals SD ackowledged as an interest to financial regulators - SD as additional regulatory goal - review impact of existing regulations Only%when%the%last%tree%has% died%% And%the%last%river%poisoned%% And%the%last%fish%caught%% Will%we%realise%% We%cannot%eat%money% 19th*Century*Cree*Indian*
  14. 14. Solution 2: Align'financial'regulatory' framework'with'SD'goals →*Stakeholder*Dialogue* Policy*makerand/or*financial*regulator*dialogue* with*financiers/*investors* Examples*of*UNEP*FI*ac=vi=es:* M*Research*paper:*Basel*III’s*effect*on*sustainable* finance* M*EC*DG*Energy*coMconvened*WG*on*energy* efficiency*financing*in*buildings**