Designing Green Bonds for India: Sean Kidney, Co

Designing
Green Bonds
for India
A simple marketing concept that works
Sean Kidney, CEO, Climate Bonds Initiative
8 January 2015
The challenge
Huge ambition for
renewables, rail, water
investments
Capital pools
High interest
rates
Perception of
high risk
Fragmentation
Investment,
not cost
India capital in property
+gold; International
institutional investors
International interest
$88tn assets under management
$30tn Insurance
$27tn Pension funds – 19 out of 20 are public sector
US$9 trillion
$6tn Sovereign wealth
$25tn Fund managers, mutuals, foundations
(SRI = $13tn global)
US$8 trillion
50-60% bonds
Green/brown
US$22.5 trillion
US$45 trillion
Proceeds earmarked for qualifying investments
Oversubscription usual
Pricing slightly better than similar bonds
$36bn
$11bn
$4bn
USD
$414m
$909m
$3.1bn
$1.2bn
2015: Estimated $100bn+
Global Green Bonds market
2014 by issuer type
Muni/
Key Themes
provincial/ City
11%
•Corporate bonds from zero to
Regional bank
2%
ABS
5%
Bank
2%
35% market share
•Development banks continue to
dominate – 45%
•Growing Municipal and city
bond market growing to 11%
US taking off in H2 2014
Corporate
35%
Development
Bank
45%
Corporate loan
0%
It’s about Use of Proceeds
Proceeds
to Green
• Earmarking purpose
• Reporting / transparency
• Independent review
Any entity
•
•
•
•
Issuer
benefits
Governments & DFIs
Corporates – this year’s growth area
Asset backed: PPPs, banks, utilities, etc
Municipalities
•
•
•
•
Investor diversification
Investor engagement: “stickiness”
Longer tenors
Multi-asset pools
Examples
Sub-national
Governments
Development
banks
Banks
Corporations
• Gothenburg: $350m. EV system, water purification, district heating.
• Johannesburg: $136m. RE, EE, transport, waste management.
• California: $300m. Public transport, flood protection.
• DC Water: $350m. Tunnel to transport stormwater & sewage to
wastewater treatment plant.
• KfW: RE
• EIB: RE. EE, transport
• NRW Bank: water
• Bank of America: RE, LEDs, EE
• Credit Agricole: misc
• Munchner Hypo: coop housing
• GDF Suez: RE, hydro
• EDF: RE
• Vasakronan: green property
• Toyota: EV’s & hybrids
A broad universe = scale / liquidity
Expert groups = science-based definitions
Opportunities for India
Renewable energy
Energy storage
100 Gigawatt by 2020
Grid
Solar water pumps
Green buildings
Rapid urbanisation : New Delhi,
Bangalore, Mumbai
Industrial
Efficiency
Manufacturing
Steel, cement
Rail, BRTs, EVs
Huge rail expansion
A broad universe = scale / liquidity
Expert groups = science-based definitions
Opportunities for India
Clean water
Water projects that are climate
change resilient
Waste mngtm
Methane reduction
Forestry
Reduced deforestation.
Biofuels for aviation
Agri supply chain
Food supply chain
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Maintaining trust: standards & certification
$30tn Climate Bond
Standards Board
Numerous Technical Working Groups: Green
Property, Low-Carbon Transport, Bio-energy,
Agriculture, Water
Industry Advisory
Group
Indices
Next steps
1. Government to get the setting rights
Remove barriers, e.g. withholding tax on foreign investment,
40% ceiling on re-financing from overseas investors
Tax breaks
National savings policy
2. Develop the toolkit
Standards & certification = trust
Credit enhancement
Exchange risk liquidity fund
3. Industry education
Green Bonds Market Development Committee
Demonstration issuance by development banks
2015 expectations
1. Market growth
National development banks expand issuance
More corporate earmarked bonds
Property, Energy, Rail, Water
Green City Bonds
2. Market developments
Standards adoption
Clearer reporting requirements
UN Climate Agenda embrace
www.climatebonds.net