O slideshow foi denunciado.
Seu SlideShare está sendo baixado. ×



Confira estes a seguir

1 de 33 Anúncio

Mais Conteúdo rRelacionado

Diapositivos para si (20)



Mais de zubeditufail (20)

Mais recentes (20)



  2. 2. OUTLINE • The concept of ESRM • Global ESRM programme • Challenges faced by the bankers • Why ESRM is important for clients • Why ESRM is important for Banks • Way forward 2
  4. 4. QUICK STATS “Annual cost of environmental degradation in Pakistan is about 4.3 % of GDP (US $ 4.3 billion)”. ---SUPARCO “Pakistan had needed to spend Rs82.5 billion on industrial environment management between 1997 and 2010, but actually spent only around Rs7.5 billion, leaving a deficit of Rs75 billion. If we continue polluting our ecosystem at the current rates, this deficit could climb to Rs140 billion by 2025.”--- Express Tribune, 2012 “741 cases registered against factory owners for not complying with the National Environmental Quality Standards (NEQS), 339 have been settled while remaining 402 cases are still under consideration of the Environmental Tribunals”.---The Nation, 2010 4
  5. 5. WHAT IS ENVIRONMENTAL & SOCIAL RISK MANAGEMENT (ESRM) FOR FINANCIAL INSTITUTIONS? Sustainable finance (ESRM for FIs) can be defined as the provision of financial capital and risk management products and services in ways that promote or do not harm economic prosperity, the ecology and community well-being. Sustainable Finance does not mean saving the environment just for the sake of saving it. Sustainable Finance means good business for FIs. Scope of ESRM Project Finance Corporate Finance SME
  6. 6. WHY IS SUSTAINABILITY IMPORTANT FOR CLIENTS? 6 Reputational Risk Compliance Access to New Markets Cost saving Loss reduction Clients don’t care for the Environment because of the goodness of their heart. Caring for the environment is a pure business decision. Banks should also care about sustainability for pure business reasons
  7. 7. Why Banks should worry about Sustainability? Campaigners gave out the mock newspaper, “The Daily Whale” to employees outside each of the 3 banks, Standard Chartered, BNP Paribas and Credit Suisse in London. 7
  8. 8. This is an example what the banks should avoid--- a reactive approach once reputational harm has been done. 8
  9. 9. 9
  10. 10. WHY IS SUSTAINABLE FINANCE IMPORTANT FOR BANKS? Litigation, shut down leading to increase in NPL Decrease in the value of collateral and additional cost of cleaning up. Disruption of operation Reputational risk Pressure from investors, government International Commitments: Equator Principle, Climate Principles 10 The question is not “WHY” Banks should consider ESRM. The Question is “HOW”
  11. 11. E&S RISK ASSESSMENT (ESRA) FRAMEWORK 11 POLICY ESRM Guideline E&S Capacity Development •Roles and responsibilities •Training: E learning, Webinar PROCEDURE E&S risk Assessment Exclusion List E&S Risk Assessment Tool Risk rating Escalation Conditions/ Action Plan REPORTING • Annual Sustainability Review Monitoring E&S risk Annual review: monitor performance Managing non compliance
  12. 12. CHALLENGES FACED BY RMS AND CREDIT IN E&S DUE DILIGENCE  Perceptual Barrier  Not important  Climate Change is a myth  Institutional Barrier  Lack of valid data  Misalignment between RMs target and E&S requirements  Policy and regulatory Barrier  Country laws not conducive  Skill, knowledge, information barriers  Lack of proper understanding of E&S issues  Lack of training  Lack of tools and processes 12
  13. 13. SUSTAINABILITY IS A SHARED RESPONSIBILITY 13 Regulator/Government - Policy - Enforcement - Tax/incentive -Institutional strengthening Business -obtain social license to operate -Ensure safety, efficiency -Compliance Banks -Mission, vision -Policies procedures -skilled workforce -Moving from only compliance to value addition to clients Media -Understand and sensitize the public - Publish case studies -Demystify technical issues Sustainability
  14. 14. ENVIRONMENTAL & SOCIAL RISK MANAGEMENT (ESRM) FOR FIS ADVISORY SERVICES PROGRAM Objectives: Creating regulatory drivers through support for banking regulators and associations with E&S risk management guideline development Market capacity development for trainer and consultant networks to provide technical support for FIs ESMS diagnostic and implementation support to FIs Raising awareness through the Sustainable Banking Network, developing business case studies and best practices 14
  15. 15. ESMS DIAGNOSTIC AND IMPLEMENTATION SERVICES 15 Policies Processes Implementation support People, Training, Culture Sustainability Strategy Credit, Liability, Reputation risk management E&S Risk Management
  16. 16. IMPLEMENTATION SUPPORT 16 ESRM Framework ESMS Core Module ESMS Implementation Support Capacity Development & Training ESMS Data, Ratings and KPI development External Communication Support for Internal Audit
  17. 17. 17 E&S Risk Management / EP Implementation • Built system, procedure and tools • Created dedicated team and built capacity • Actively communicated with client and multi- stakeholders • Developed reporting system Sustainability Products • First FI Green Bond (approved by authority, to be launched in 2015 ) • Carbon finance • Low carbon credit card • First carbon assets backed lending • First emission rights backed lending • First IFC partner bank in China for energy-efficiency lending to support SMEs Strong contributor to overall business: • Strong business results: assets grow 15 times (2003 to 2014), ROE over 20% since 2006, NPL ratio <1%, • Reputation and brand value: brand value of US$1.09 billion (by Interbrand, 2012), 50% increase over 2011; won many top national and international awards • Increased value to shareholders – 2013 Asia Best Shareholder Return Bank • Better access to international capital and cooperation (IFC, ING, Citibank, etc.) Green Finance Expansion: • Green finance about 12% of total lending, highest among the Chinese banks (national average is 8%) • Climate benefits: reduced 68 mn tons of CO2, saved 255 mn tons of water. The energy conserved and emission reduced is equivalent to shutting off 157 thermal power plants of 100 MW. China Industrial Bank’s Green Banking Journey: “From Green to Gold”
  18. 18. 18 2006 First Chinese bank to sign Energy Efficiency Finance (CHUEEE) with IFC, Beijing 2007 Runner-up of FT Sustainable Deal of the Year; Joining UNEP Finance Initiative . Stage I: Piloting Green Lending Product 2008 Adopting Equator Principles, Beijing, becoming the first EP bank in Asia emerging market; Launched CHUEE Ⅱ . 2009 Establishment of Sustainable Finance Center; FT Emerging Markets Sustainable Bank of the Year (Asia) First Sustainability Report in China Banking sector; “The Best Green Bank” &“Environmental Information Disclosure Award” by 9 Chinese NGOs. Stage II: Adopting & Implementing Equator Principles Stage III: Fully Integrated Sustainable Finance Model 2012 Establishment of Sustainable Finance Department, sets up regional green finance business units across China 2010 Launched the first Low-carbon Credit Card; Included in the “Hang Seng (China A) Corporate Sustainability Index ”&“Hang Seng (Mainland and HK) Corporate Sustainability Index” 2011 Promoting 8+1 green financial products; Annual Most Social Responsible Institutions Award and Best Green Finance Award by the China Banking Association; . 2013 Green finance clients hit 2,472, about 12 times vs. 2009; and green finance based financing balance reached US$30 billion, 13 times vs. 2009 IB’s 3-Stage Journey to be the Leading Green Bank in China and Asia
  19. 19. Bank of Philippine Island (BPI): A Pioneer in Green Banking In the Philippines • 1st phase largely focused on energy efficiency loans ($ 26.9 Million) • 2nd phase included renewable energy loans ($110.1 Million) • 3rd phase expanded to green mortgage, carbon finance and energy performance contracting ($216.1 Million) • 4th phase included green buildings and continuous capacity building (ongoing, $130.1 Million) • As of December 2014, $483 Million total loan volume IFC helped generate with SEF since 2008 • Over 1 Million metric tons of GHG emissions reduced • RSF 1 signed in 2009 ($46 Million), expanded to ($114 Million) in 2012 • BPI has utilized 78% of the guarantee facility as of end 2014. • BPI’s entry focused on sustainable energy finance for SMEs • Recognized among 345 innovations submitted from 75 countries. • International recognition for its SEF program • USD 1.4 Million grant for market development and capacity building Management system Capacity building for bank loan officers • Demonstration impact for other Philippine banks • Consider to join the EPs 19 1st Philippine bank to partner with IFC on Sustainable Energy Finance in 2008 Risk Sharing Facility Winner, G20 SME Finance Challenge in 2012 E&S risk management
  20. 20. EE INVESTMENT MATRIX FOR INDUSTRY IN PAKISTAN (SECTOR VS. TECHNOLOGY) 20 Technology Estimated Investment (Million PKR) Textile Spinning Textile Process Sugar Leather Paper Cement Fertilizer Other Sectors Total Payback Period (Yrs) Co-generation 100,800 22,500 30,850 154,150 4-5 Compressor 6,000 5,300 165 880 3,100 15,445 1-3 Heat recovery 43,300 35,000 84 272 22 540 19,750 98,968 - Heat transfer 4,000 15,600 25 58 4,950 24,633 2-3 Lights 2,800 400 800 4,000 1-2 Meters 4,600 4,300 60 2,200 11,160 - Motors 16,000 9,200 840 110 440 6,700 33,290 1-2 Power Factor 350 100 110 140 700 1-4 Process 1,350 1,200 6,250 7,900 5,220 5,500 27,420 2-4 Process Control 14,350 420 275 22 100 3,800 18,967 1-2 Steam system 550 4,500 600 165 1,450 7,265 1-4 VFD 4,100 1,750 840 53 63 1,700 8,506 1-2 Total 82,700 90,750 104,809 1,145 7,777 30,623 5,760 80,940 404,504 • The overall investment potential for the Energy Efficiency (“EE”) measures identified in the industrial sectors in Pakistan is in the order of PKR 400 billion…  Payback times for the investments identified are generally below 5 years…  The opportunities are there for FIs to develop an entirely new business
  21. 21. Benefits for Pakistani Banks and their Clients 21 For Clients: • Cost savings – Improved Productivity/Quality of Output – Competitiveness • Reasonable pay-back period – Investments recovered from energy cost savings • Reduced footprint – Sustainable access to global supply chains For FIs: • Expanded market through a new business line:  Innovative product- First mover advantage/differentiation  Sell on value to customer, not pricing  Monetize existing client base- Attract quality new clients  New marketing channels through vendor partnerships • Improved risk profile of portfolio:  Cost efficient clients = Better performing clients  Energy cost savings as a part of cash-flow • Positive social and environmental impacts:  Enhanced brand reputation, PR opportunities
  22. 22. IFC’S SUPPORT TO CLIMATE CHANGE MITIGATION THROUGH SEF Under Sustainable Energy Finance (SEF) product line, IFC provides financial products and/or advisory services to FIs in following areas: • Energy Efficiency (EE): Investing into fixed asset to reduce energy bill of end-users through increased efficiency of energy use • Renewable Energy (RE): Investing into technologies generating power or heat from renewable resources • Resource Efficiency (Ref): Investing into technologies minimizing water, raw material, waste and emissions from industrial processes and maximizing product output 22
  23. 23. IFC’S COMPREHENSIVE APPROACH TO OPTIMIZING SEF IMPACT Financial products tailored to the needs of diverse markets Credit lines and senior loans (medium- to long- term) Risk sharing products and partial guarantees Trade guarantees Mezzanine financing and subordinated debt Risk capital Mobilizing donor funding for concessional finance Advisory to build a profitable SEF business Market analysis and product development Enabling the FI to build a pipeline of EE/RE sub-projects Training for loan officers, credit risk managers, marketing personnel Tools and resources to add value with low transaction cost Work with contractors/energy service companies /vendors 23
  24. 24. About the Sustainable Banking Network (SBN) SBN • Launched in 2012 • A unique, knowledge-sharing network of banking regulators and banking associations • Supports a level playing field for E&S risk management by financial institutions • Promotes green and inclusive lending IFC • Supporting development and implementation of national policies/guidelines • Facilitating South-South learning and cooperation • Co-hosting SBN annual meetings • Developing and disseminating tools and knowledge resources 24 Facilitator and Technical Advisor
  25. 25. 25 25 Sustainable Banking Network The Network currently consists of banking regulators and banking associations from16 countries
  26. 26. 26 Heads of the interested institutions confirm their decision to join SBN. IFC VP sends a formal invitation letter Interested institutions contact SBN coordinator* *contacts at the last slide 26 Sustainable Banking Network How to become a member
  27. 27. 27 Click the picture or here to watch the video of the First International Green Credit Forum Sustainable Banking Network Events 1st International Green Credit Forum in China 2nd Sustainable Banking Network Meeting In Nigeria Click the picture or here to watch the video of SBN Annual Forum in Lagos, Nigeria, Mar. 2014 27
  28. 28. 28 Asia Bangladesh Bangladesh Bank- Environmental Risk Management (ERM) Policy China China Banking Regulatory Commission (CBRC) - Green Credit Guidelines China CBRC-M&E mechanism launched Indonesia OJK (financial regulator) -- Roadmap for Sustainable Finance in Indonesia 2015- 2019 Mongolia Mongolia Banking Association- Mongolia Sustainable Finance Principles and 4 Sector Guidelines China CBRC-Green Credit Guidelines KPIs Checklist launched Bangladesh Bangladesh Bank-ESRM Guidelines of 8 Sector Guidelines (planning) Vietnam The State Bank of Vietnam-the Directive on Promoting Green Credit and Managing Environmental and Social Risks and 10-sector checklists Nepal The Central bank- Sustainable Banking Policy (planning) Philippines The Central bank-Roadmap to Banking Policy (planning) Latin America Colombia Banking Association (Asobancaria) - Green Protocol Brazil Central Bank’s Guidelines of Social Responsibility Policy for FIs Peru Peru Superintendency of Banking and Insurance (SBS) -Resolution No. 1928-2015. Mexico Mexico Banking Association (ABM) - Voluntary Green Protocol (planning) Africa Nigeria Central Bank of Nigeria -Nigerian Sustainable Banking Principles & 3 Sector Guidelines Kenya The Kenya Bankers Association (KBA)-Sustainable Finance Initiative (SFI) SBN Members – Timeline of Initiatives 2011 2012 2013 2014 2015 2016 28
  29. 29. 29 29 Common Success Factors on industry- wide guidelines guidance based on  Multi-stakeholder consultation and collaboration on industry-wide guidelines  Combining local E&S requirements and international good practice (e.g. IFC Performance Standards, Equator Principles, WBG EHS Guidelines)  Market-based policy mechanisms; economic incentives and new business models  Mandatory or voluntary guidance tailored to country context and culture  Capacity Building for key stakeholders  Monitoring and supervision mechanisms
  30. 30. 30  Supports creation of a level playing field in line with international good practice  Removes impediments and strengthens the business case for sustainable banking  Supports country-level frameworks For Financial Institutions SBN – Key Benefits  Access to global trends, knowledge, practical experiences and lessons learned  Support from IFC and other members when developing and implementing effective E&S risk management standards and sustainable banking guidance  Platform for collaboration on a shared vision for sustainable banking For Banking Regulators / Banking Associations  Supports capacity building of local service providers, such as training and technical institutions, to assist FIs on E&S risk management  Encourages consideration of E&S regulations in financial sector due diligence  Supports national climate change and green growth agendas For Local Markets
  31. 31. 31 IFC Advisory Services ESRM for FIs Program Policy/regulatory support to develop E&S risk management guidance Awareness raising and promotion Direct technical support for FIs through training and consultancy services Regulatory & market environment Training Partners Consultants Banking Associations ESMS diagnostic reports ESMS development Individual FIs IFC ESRM Advisory Service Program Regulatory and Market Drivers Market Capacity FIs Capacity
  32. 32. WAY FORWARD • The ESRM Survey for the Financial sector • Partnering with Key Stakeholders (SBP, PBA) • ESRM Guideline • Training and Capacity Building on ESRM • Development of relevant tools and processes • Pilot with FIs • Develop M&E tool for Central Bank 32
  33. 33. More resources SBN Website: http://firstforsustainability.org/sustainable-banking-network/ IFC Sustainability Framework and Advisory Services www.ifc.org/sustainability CONTACTS Name Title E-mail Rong Zhang SBN Global Coordinator rzhang@ifc.org Atiyah Curmally ESRM AS Program Global Product Specialist acurmally@ifc.org Quyen Nguyen ESRM AS Program Manager nquyen@ifc.org Afifa Raihana Regional Specialist araihana@ifc.org 33