Simone Dettling, GIZ

Emerging Markets Dialogue on Green Finance
Simone Dettling
PRI: Critical ESG Themes for 2015
April 1st, 2015
Outline
1) The Emerging Markets Dialogue on Green Finance
2) Study: Quantifying the Natural Capital Risk
Exposure of Financial Institutions in Brazil
3) Tool for Integrating Water Risk in Corporate (Bond)
Analysis
1) The German Government’s Emerging
Markets Dialogue on Green Finance
Platform for Financial Institutions
Development of
Tools and
Methodologies
Share efforts: Work in international group
of FI on specific methodologies/tools and
benefit from experts provided through the
program
Creating
Country-Specific
Knowledge
Jointly create knowledge relevant
for the financial sector in your
country/region and benefit from
experts provided through the program
Promote Market
Development for
Green Financial
Instruments (e.g.
Green Bonds)
Learn from experienced peers
and benefit from the
program‘s ability to bring
together private and public
sector actors as well as
scientific institutions
1) Quantifying the Natural Capital Risk
Exposure of Financial Institutions in Brazil
Creating
Country-Specific
Knowledge
Approach and Objectives
Approach
1. Quantify the natural capital costs of 45 business sectors in Brazil
• for six key environmental impacts: greenhouse gases
(GHGs), land-use conversion, water consumption, water
pollution, air pollution, waste
• differentiated by five different major ecosystems/regions in
the country
Objectives
2. Map the amounts of investment/lending to sectors and regions
by a given financial institution
 Get figures on the magnitude of the natural capital risk exposure
through different sectors and regions and identify high-risk
sectors for the financial institution to focus on
 Understand and compare the natural capital risk exposure of
different investment portfolios or loan books
Main Findings
The highest natural capital intensity sectors (unpriced natural capital
costs per R$m of production) include cattle ranching, fats & oil refining,
aquaculture, cotton farming, sugarcane farming and cement manufacturing.
Main Findings
Brazilian banks are more than twice as exposed to natural capital costs as
pension funds.
Banks are most exposed through their financing of cattle ranching, agriculture,
fishing, and food and beverage, while pension funds are most exposed through
their investments in food and beverage companies.
Main Findings
Mining
Livestock
Natural capital risk exposure can differ significantly: Comparison of two
participating banks demonstrates that Bank A has significantly greater
exposure (2.5 times higher) to natural capital risks than Bank B
Main Findings
Indirect Natural Capital Cost Exposure of Brazilian Banking Industry by Environmental
Impact
2) Integrating Water Risk in Corporate
(Bond) Analysis
Development of
Tools and
Methodologies
Tool - Snapshot
Example: Barrick Gold
Location Name
Buzwagi, Tanzania
Zaldivar Copper, Chile
Lagunas Norte, Peru
Super Pit, Australia
Pueblo Viejo, Dominican Republic
Veladero, Argentina
Nevada, USA
Porgera, Papua New Guinea
Hemlo, Ontario, Canada
Lumwana Copper, Zambia
Latitude
Longitude
-6.76
39.28
-33.23
-70.8
-12.06
-77.1
-30.79
121.5
18.4
-70.77
-27.91
-68.92
38.8
-116.42
-5.46
143.15
48.68
-85.98
-11.82
25.13
Thousand m3
%age of TEV $/m3
Water Use TEV, $/m3 Water Use x %age of Water Use
3,330
13.33
3%
0.44
6,920
12.73
7%
0.87
732
11.59
1%
0.08
18,631
8.19
18%
1.51
18,484
5.55
18%
1.02
1,473
2.80
1%
0.04
15,158
2.80
15%
0.42
32,410
0.51
32%
0.16
1,042
0.02
1%
0.00
2,729
0.02
3%
0.00
100,909
100%
4.55
Additional water cost (water use X TEV) = $483 million in 2013
Launch at PRI in Person, 9th September 2015
Thank you very much for
your attention!
Contact:
Simone Dettling ([email protected])
Website: www.emergingmarketsdialogue.org