Corporate Governance &

Climate Change:

The Banking Sector

Akshat Pathak N . Mohan Reddy Sushant

Reports Covered

Ceres Report-January 2008

• World Top 40 Financial Institutions

CDP-India 2008 Survey

• Indian Financial Institutions

3CEE Report – Financing Energy Efficiency

• Energy Efficiency (EE) Schemes of Indian Banks

CERES Report

January 2008

Participants

Worlds largest 40 publicly traded banks and financial services firms

Market capitalization of these is $3.6 trillion i.e. 60% of world’s

Data Collected from securities filings, reports, websites, media accounts and third-party questionnaires

Risk Metrics Group, in consultation with Ceres and the Investor Network on Climate Risk (INCR)

Key Findings

1. • Climate Governance

2.• Internal GHG

Management

3. • External Financing

4.• Investment Retail

Products

Climate Governance

CC Governance Checklist (100-ps)Boar

d Oversig

ht (16)

•Actively Engaged in Climate Change Policy•Assigned responsibility to member, committee or full board

Mgmt

Execution

(22)

•Chairman/CEO assumes leadership in articulating & executing Climate Change Policy

Public

Disclosu

re (18)

•Securities filings disclose material risks and opportunities posed by Climate Change

CC Governance Checklist (100-ps) contd.

Emissions

Accounting (14)

•Company Calculates & Registers GHG Emission Savings & Offsets from operations.

Strategic

Planning

(30)

•Company sets Absolute GHG Emission Reduction Targets for facilities, energy use, business travel and other operations

Board Oversight

9 banks have assigned a board member.

4 banks implemented training programs on sustainability issues.

HSBC, has extensive climate governance structure

Carbon Neutral Banks: HSBC, ABN AMRO

Management Execution

Public Disclosure

34 of the banks shared the results with CDP signatories

• Bank of America, Citi, Goldman Sachs, JPMorgan Chase

Spottier record on climate change communication with shareholders

Only nine of the banks mentioned climate change in their latest form 10-K or comparable regulatory filings

Public Policy Statements

Internal GHG Management

Investment/Retail Products

External Financing

Internal GHG Management

Emissions Inventory

Emissions Management and Carbon Neutrality

Renewable Energy Finance

Equator Principles

Investment/Retail Products

Investment Products

Retail Products

Carbon Trading

Emissions Trading Exchanges

Climate Considerations in Lending

CITI says it incorporates the potential costs of carbon in the firm’s financing of power generation

HSBC has called on clients to disclose their carbon emissions and mitigation strategies in a consistent way

Constraints on Lending

Renewable Energy Finance

Kiribati Principles

CC as a material risk

Key Findings

Disclosure 9/40

Emissions Management

24/40

Investment Opportunities

22/40

Carbon Trading 23/40

High Scores

BANK REASON SCORE

HSBC Broad Overview 13/16

HSBC Strategic Planning 14/15

ABN AMRO Management Execution 4/4

RBC Risk Management 9/10

CITI Emissions Accounting 10/14

Barclays Carbon Neutrality 7/10

Road Ahead

To become Centre of Economic Transformation.

Finding Timely, Practical & Cost-effective solutions to Mitigations

Financing withdrawal from Carbon-Intensive energy sources and technologies

“Climate Friendly” financial products and services

CDP India 2008 Survey

3 Country Energy

Efficiency Report

The Risks Identified

Regulatory

• National Policies

• Efficiency Standards

Physical

• Rise in Temperature

• Rise in Sea Level

General

• Scarcity of Resources

• Disruption in Logistics

Key Findings

Concern about the indirect effect of new climate policy regulations

Informational Transparency & Brand Value

Physical Risk : Financial Valuation & Insurance Claims

Physical Risk : Investment in Infrastructure Projects

Key Findings

Risk Management : Spreading CC awareness & Responsible Lending

Risk Management : Re-insurance against natural calamities & considerations for Infrastructure Projects

CDM : Opportunities to partake in Carbon Market

Financing Renewable Energy Equipments

3CEE Project & Indian Banks

Aim: To achieve increase in EE investments by Domestic Financial Sectors• Development of Commercial Banking Windows for EE• Support for ESCOs• Guarantee Funds for EE• Equity Funding for EE/ESCOs Projects

Multiple Activities were designed for the following areas:

• IREDA – Responsible for day-to-day management of project• Formation of Active Core Group – Major Stakeholders• Cost Effective Approach for deployment of Financial Resources• Systematic & Transparent Implementation & Monitoring

Project Design:

Objectives & Scope of Project Uptech

To enhance Efficiency & Competiveness of Cluster

Cluster Level Interventions

R&D Projects

Training & Awareness

Marketing Support

Key Findings

• Technical Experts for Auto Clusters (Pune)

• Identifying Technological Options (Firozabad)

SBI

Canara Bank

Union Bank of India

Bank of India

Bank of Baroda

Marketing new & existing Schemes

Empanelling Energy Auditors

Developing Standardized Templates

Improving Appraisal Process

Thank You!!!