abn amro’s response to climate change strictly private & confidential peter weiss, country...
TRANSCRIPT
ABN AMRO’s response to climate change
STRICTLY PRIVATE & CONFIDENTIAL
Peter Weiss, Country Executive, ABN AMRO Romania
Teia Marina Catana, Group Sustainable Development, Amsterdam
Presentation at the annual conference on the environment organized by FinMedia
Bucharest, September 28th
Plaatjes van de gletsjer
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Executive summary
ABN AMRO, an introduction
- international profile,
- operations in Romania,
- the way we conduct our business The context of climate change
- the issue,
- the risks and opportunities,
- the global solutions, The carbon markets
- the flexible mechanisms,
- how they operate,
- EU ETS - activity so far, industrial sectors
- Romania’s position ABN AMRO’s response
- direct and indirect footprint,
- financial services for your climate related activities Contact information
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1ABN AMRO,
an introduction
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ABN AMRO – the international profile
ABN AMRO is one of the world’s leading financial institutions with one of the strongest balance sheets in the industry
We believe in building strong teams and strong relationships. The rich diversity of cultures, expertise and experience we possess is harnessed to work on your behalf
Our goal is to create value for our clients through a constant focus on their financial services needs. There is more than one solution to every challenge. We aim to find the one that suits you best
We implement our strategy through a number of (Strategic) Business Units - Consumer & Commercial Clients, Wholesale Clients, Private Clients, Asset Management, Transaction Banking Group, Group Shared Services and Group Functions
The Consumer & Commercial Clients, which serves almost 20 million consumer clients and clients in the small and medium-sized enterprises sector worldwide. ABN AMRO is among the leading players in these segments in its three home markets (the US Midwest, Brazil and the Netherlands) while targeting other high-growth regions through its Business Unit New Growth Markets (like Romania)
Strong Balance Sheet(1)
EUR (bn)
Total assets 701.8
Group capital 33.2
Risk weighted assets 231.6
Global Resources(1)
Employees worldwide 97,000+
Branches and offices 3,000+
Countries/territories 59
Solid Credit Rating
Long-term
Moody’s Aa3
Standard & Poor AA-
Fitch IBCA AA-
Ranking
Total assets
- Worldwide 16
- European 10
Tier One Capital
- Worldwide 20
- European 11
Well-positioned Bank(2)
(1) 31 December 2004(2) Federal Reserve Board report on US offices of foreign banks, April 2005(3) The Banker, July 2005
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ABN AMRO – the operations in Romania
Ten years since the establishment of ABN AMRO’s Romanian operations, it already has an impressive history of developing strong business relationships with multinational corporations, medium-sized international companies doing cross-border business with Romania, and local companies especially those with export and growth potential. It is the bank’s aim to continue such relationships as it grows with the Romanian business market.
45o employees in 15 branches covering the entire territory of the country
Ten-years of providing comprehensive banking services
Sixth-largest bank in Romania by total assets
Wholly owned by ABN AMRO Bank NV
Part of the Wholesale Clients SBU, ABN AMRO in Romania focuses on: Consumer Industries, Automotive Industries, Diversified Industries, Integrated Energy, Telecommunications, Media, Technology and Healthcare & Financial Institutions and Public Sector.
Starting with September 2004, ABN AMRO offers also consumer services and products to its Romanian customers.
ABN AMRO presence
A comprehensive branch network
The goal of ABN AMRO in
Romania is to create value for our clients
Key in our relationship approach is a constant
focus on the financial service needs of our
chosen client segments
It is through the professionalism and
motivation of our staff that we realise this value, resulting in
maximum benefits for our customers
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ABN AMRO – the way we conduct our business
ABN AMRO employees
Our shareholders
Our clients
Our business partners
Society
Compliance
1. We are the heart of our organisation 2. We pursue excellence
3. We aim to maximise long-term shareholder value
4. We manage risk prudently and professionally
5. We strive to provide excellent service 6. We build our business on confidentiality
7. We assess business partners on their standards
8. We are a responsible institution and a good corporate citizen
9. We respect human rights and the environment
10. We are accountable for our actions and open about them
Business Principles:
Corporate Values
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ABN AMRO – ambition for sustainable development
“We are committed to continuously improving the integration of sustainable development into our working environment and business processes. Our aim is to play a proactive role in contributing to sustainable development, within our spheres of influence. We are committed to accountability and transparency in our sustainable development performance.”
We are the leader in the European banking sector according to the Dow Jones Sustainability Index – Stoxx (2004, 2005)
Active dialogue with NGOsIntegrating environmental,
social and ethical considerationsSustainable products
and services
Client engagement
A great place to work
Supporting local communities
Minimising impact from business operations
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2The context of
climate change
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The context of climate change – the issue
A critical challenge to the world The average surface temperature has
increased by about 0.6°C and the CO2e in the atmosphere increased from 280ppm to 380ppm (faster than any times in the last 1000 years
Human activity (burning fossil fuels and deforestation) is a major contributor to climate change, according to most studies.
Climate change is now regarded as the world’s most pressing environmental problem (with social and economic consequences as well).
Sustainable management of an ever-changing planet? (looking into the future)
Source: IPCC report 2001
Sustainable Management
Ever-Changing Planet
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The context of climate change – the risks…
In 2003, drought in Australia cost farmers and businesses A$3.8 billion and reduced winter crop yield by 40%
The 2003 European heat wave lead to 27,000 premature deaths, reduced grain yields by 30-40% and caused economic losses far exceeding $ 10 billion
Warmer than average weather pushed up benchmark contracts for crude oil, gasoline pump prices, and futures for grain, soy beans and wheat. In 2004 soybeans rose above $10 a bushel for the first time in 15 years as insufficient rain in South America threatened to damage crops.
“The magnitude of effects that climate change may have on the global economy dwarfs any other environmental risk” (World Resource Institute and CERES – coalition of institutional
investors from US)
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The context of climate change – … and the opportunities.
Reducing GHG is not just costly or “anti-growth” but can bring savings and new jobs
Low-carbon corporate leaders have achieved a reduction of 60% or more and companies like BP, IBM and DuPont report savings of $650 million, $791 million and $2 billion respectively;
In the UK, emissions dropped by 15%, while the economy grew by 30% between 1990 and 2002;
Cities like Portland, Toronto and Heidelberg have also realized millions of dollars in energy savings, freeing-up public funds for other purposes.
(Findings from “The Climate Group”)
“The EU could save at least 20% of its present energy consumption in a cost-effective manner, equivalent to EUR 60 billion per year.. Such an initiative could potentially create a million new jobs in Europe” (European Commission, Green Paper on energy
efficiency, 2005)
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The context of climate change – the global solutions
Count down to Kyoto and EU ETS
IPCC “Intergovernmental Panel on Climate Change” formed1988
UNFCCC enters into force- Aspirational objectives, no specific targets or timeframes
1994
COP3: Kyoto Protocol- Emission limits on 34 Countries: Avg -5.2% on 1990 by 2008-12- Meet limits by emission reductions and/or buying compliance credits
1997
COP7: Marrakech Accords kickstarts the Credits Mechanism2001
2005 16th February 2005: Kyoto Protocol entered into force
2005 1st January 2005: starts EU ETS
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3The carbon markets
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The carbon markets – the Kyoto flexible mechanisms
The flexible mechanisms of the Kyoto Protocol
International Emissions Trading (Allowances) – AAU (assigned amount units)
- allocated to Annex B countries based on 1990 emissions levels
- “Hot air” are excess AAUs of countries whose current emissions are lower than base year / GIS initiatives
Clean Development Mechanism (Carbon Credits) – CER (certified emission reductions)
- Designed to assist developing countries in achieving sustainable development by permitting industrialized countries to finance projects for reducing greenhouse gas emission in developing countries and receive credit for doing so
Joint Implementation (Carbon Credits) – ERU (emission reduction units)
- If takes places between industrialized countries (including countries with economies in transition)
- Does not have a sustainable development component
- ERUs can be used by companies under the EU ETS for compliance in the period 2008 – 2012
ABN AMRO can play a role as advisory to governments to maximize their AAUs value, financing GIS projects, providing access to clients interested in the credits
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The carbon markets – EU ETS activity so far
EU ETS
In Phase 1, over 6 billion allowances (EUAs) have been allocated, equivalent to a value of some €120 billion. Trading is now around €20/EUA
Currently most activity is in the brokered OTC market. Market share of exchanges is between 25-30 %. But exchanges are gaining market share.
Approx. 5 million EUAs exchange hands weekly
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Almost 50 public and private carbon funds and carbon tender programmes launched, with more than $1.5 billion in dedicated capital (Carbon Disclosure Project, 2005)
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The carbon markets – Romania’s position
Romania ratified the UNFCCC by law 24/1994 and the Kyoto Protocol by law 3/2001
Total net GHG emissions decreased by about 50% in 2002 compared to the reference year 1989 – the emission scenarios show that a gap of at least 50 million tons CO2e annually is expected to remain
National Strategy on Climate Change of Romania 2005-2007
Objective 5
•To participate in flexible mechanisms under the KP (JI and IET) to the maximum benefit of the Romanian environment and economy in compliance with UNFCCC and EU regulation, and in a stable and transparent domestic policy, institutional and regulatory framework
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4ABN AMRO’s response
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ABN AMRO’s response – direct and indirect footprint
Transparency/disclosure
Sustainability reports – 2003, 2004, including data on our CO2 emissions
Signatory of Carbon Disclosure Project – 2003, 2004, 2005.
Minimising emissions – through technical and behavioral changes, applying alternative technologies and using green energy
Green banking – through financing projects that prevent environmental harm and promote the use of sustainable technologies
ABN AMRO's CO2 footprint - 2004
From energy-end
use
Busines Air Travel
0%
20%
40%
60%
80%
100%
Total CO2 tonnes: 366,293
ABN AMRO was selected part of the Climate Leadership Index within the banking sector based on an assessment by Innovest of the strategic awareness, management accountability, emissions management and reporting, emissions trading, programs in place, establishment of targets.
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ABN AMRO’s response – financial services for your climate related activities
ACCESS TO MARKET (after joining EU ETS-2007): Over the counter (OTC)
ABN AMRO offers access to the OTC market with the bank as counterparty
– Client buys/sells EUAs to ABN AMRO
– Avoids counterparty risk for client
Master agreements (contracts) between ABN AMRO and client must be negotiated
– ABN AMRO will trade under ISDA, IETA, and EFET
In addition, client must have credit line with ABN AMRO
– OBSI lines calculate maximum exposure bank is willing to accept with counterparty
ABN AMRO can also post Exchange-For-Physical contract on the exchange
– Exchange will take over credit risk
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ABN AMRO’s response – financial services for your climate related activities
FORWARD TRADING
A forward transaction is a contractual commitment to transact in the future on terms agreed today. The vast majority of transactions have been forward transactions in the OTC market
– Role of exchanges are becoming more important
– Future will see much more spot trading
If the market as a whole is confident that the price will rise, the seller’s forward price will likely reflect this
– Little potential for “upside”
Both buyer and seller are exposed to counterparty risk. Banks can play a role in establishing creditworthiness
ABN AMRO facilitates forward trading in OTC market and on exchanges
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ABN AMRO’s response – financial services for your climate related activities
ACCESS TO MARKET: Exchanges
ABN AMRO Futures is very active on the European Climate Exchange and is planning to join several more exchanges
Companies cannot trade on the exchange directly but must have an account with a clearing member
– ABN AMRO Futures is one of the largest clearing members on the ECX
Companies must deposit collateral as ‘initial margin’. If the market moves against your position, company must make addition payments:
– ABN AMRO can finance these ‘margin calls’
The first trade on carbon futures on the European Climate Exchange’s (ECX) trading platform was between BP an E.ON and was cleared by ABN AMRO Futures in April 2005.
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ABN AMRO’s response – financial services for your climate related activities
COMPANY RISK MANAGEMENT
Trade EUAs on exchange and OTC
Access to carbon credits
Monetise EUAs
Plan for Phase II
Develop trading strategy
Calculate abatement costs
Where to build new plants
Replacing current stock
Developing renewable electricity
Near term: Focus on compliance
Medium term: Focus on
Risk Management
Long term:
Strategic
considerationsSimilar advisory possible for the government too
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Conclusions
What ABN AMRO Bank can do for the Government and the business environment
ADVISORY
PRODUCTS
MARKET INTERMEDIATION
MANAGEMENT/
PROJECT FINANCE
Risk, strategy, legal, hedging, industry knowledge
Futures, forwards, spot
Access to exchanges, trading, cross border intermediation
With Equator Principles
Monetization, custody, registration(clearing)
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5Contact information
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Contact information
Gerhard MulderVice PresidentGroup Sustainable Development
Gustav Mahlerlaan 10, 1082 PP Amsterdam, The Netherlands
Telephone +31 20 629 9272Mobile: +31 6 1371 9003E-mail: [email protected]
Eva KarraVice PresidentABN AMRO Futures Ltd
199 Bishopsgate, London EC2M 3XW
Telephone +44 20 7678 6588Mobile: +44 7070 603603E-mail: [email protected]
Richard CornieljeDirectorCommodity Derivatives Marketer
Gustav Mahlerlaan 10, 1082 PP Amsterdam, The Netherlands
Telephone +31 20 464 5547Mobile: +31 6 5163 1942E-mail: [email protected]
Peter M. Weiss
Chairman of the Board and Country Executive
ABN AMRO Bank Romania
10, Montreal Square, WTCB
Bucharest - 1, Romania
Tel: +(40 21) 20 20 400
Fax: +(40 21) 31 91 169
E-mail: [email protected]
Roxana Moldovan
Head of Financial Institutions and Public Sector / VP Member of the Board
ABN AMRO Bank Romania
10, Montreal Square, WTCB
Bucharest - 1, Romania
Tel: +(40 21) 20 20 400
Fax: +(40 21) 31 91 169
E-mail: [email protected]