FINANCING SUSTAINABLE DEVELOPMENT

Dr. PHAM HOANG MAI

Director General

Dept. of Science, Education, Natural Resources and Environment

MINISTRY OF PLANNING AND INVESTMENT OF VIETNAM

CONTENT

1. SDG 2030 and Business Opportunities

2. SDG Private Investment Review

3. The Way Ahead

4. Challenges

VIETNAM SDG 2030

Vietnam SDG 2030 Action Plan with 17 Vietnam Sustainable Development Goals (VSDGs) and 115 specific targets.

Many VSDGs have been integrated into the national development policy and strategies, plans.

6 Ministries and 25 Provinces have formulated and approved their sectoral or provincial SDG 2030 Action Plan

SDG 2030 – US$12 trillion in business opportunities

Demand for Green Finance for Green Growth - 2020

Sector/subsector Emission reductions

cost (million USD) ERs (MtCO2)

Average MAC

(USD-ton CO2)

Construction 3,33 0,17 -69,46

Construction material 17,54 0,49 -14,39

Cement 725,00 2,61 -45,27

Household 2.279,19 16,54 -32,32

Paper and pulp 0,00 0,19 -93,46

Power generation 27.625,00 61,37 16,11

Iron, steel 79,50 0,22 -44,60

Total 30.729,56 85.12 -36,10

Sector 8% emission reductions (billion

USD)

17% ER with international

support

Total 25% ER

Energy 1,9 5,3 7,2

Agriculture 0,9 12,1 13

Total 3,2 17,9 21,2

Demand for Green Finance for ER committed by NDC- 21-30

1. Review of green finance policy framework - Demand GF

Gap of Investment for Climate Change Adaptation and Green Growth 2016 -2020 (billion USD)

CC Adaptation

(at 4% of GDP)

Green Growth ($9 Bil.)

Green Growth (NDC)

Total Demand

MTIP 2016-2020

Gap

46.85 30 21.1 24

1st

Option

76.85 52.85 2nd Option

67.95 43.95

Total Investment

(billion, VND)

Total Investment (billion, VND)

Percentage for Green Growth

(%)

1. State Budget 1.120.000 201.265 – 207.991 2% - 4%

1.1. Target programs 147.306 67.811 0% - 25% -

100%

1.2. ODA 300.000 120.000 40%

1.3.Allocation for programs, projects and 02 target programs

672.694 13.454 - 20.180

2. Local budget 880.000 26.400 -35.200 3% - 4%

Total 2.000.000 227.665 –243.191

(10 – 10.7 bil. USD) 11% - 12,2%

PUBLIC INVESTMENT PLAN 2016 - 2020

Private investment

• Enterprises

• Financial institutions

• Households

• Other private sources.

Capital source and

financial instruments

• Equity

• Loan

• Financial aid

• Government bond

Investments and

Spending in climate change

• Direct and indirect related (Mitigation, Adaptation, Mitigation & Adaptation)

Capital Sources for Private Investment

Item Sep 2016,

billion

VND

(%) Increase

from

12/2015

June

2017,

billion

VND

(%) Increase

from

12/2016

Green credit outstanding 84.789 1.57% 14.7% 109.729 1.7% 29.4%

Credit outstanding, for which

E&S risk evaluated

129.160 2.49% 562% 449.468 7.72% 348.1%

Number of banks with green

finance reports

11 20

Number of banks with E&S risks evaluation reports

20 20

Green credit remains low at 1.6%-1.7% of the total credit outstanding for the economy, but growing very fast at 14.7% and 29.4%.

Review of green finance policy framework- Summary of green credit and social & environmental risk evaluation (Directive No. 03/CT)

Private Investment Needs – Energy Efficiency

Industrial

Sector

Investment

Need

(millions

USD)

Measures considered

Investment

2010-2015

(millions

USD

Iron and

Steel 450.0

WHR, closed production lines, replacement low EE air

compressor, installation of inverter for motor etc. 169.6

Cement 650.0

WHR in about 36 cement companies (a capacity above

2,500 tons clinker per day) about 325 MW from WHR

and other types of investment in EE.

226.7

Pulp and

paper 306.0

WB study: 85 million USD (EE investment in new

efficient boilers for cogeneration, replacement of

motors, switching to biomass fuel technology, and

chemical waste recovery for heating.); ENERTEAM and

RCEE-NIRAS study, based on the energy saving

potential: 306 million USD.

104.5

Sugar 360.0

Estimated on the basis of investment in cogeneration

systems at sugar mills, the installed capacity is

approximately 360 MW.

127

Total 1,766.0 627.8

RE Project To 2020

(MW)

Investment

needs (million

USD)

Capacity

added in

2010 – 2015

(MW)

Investment

made in 2010-

2015 (USD,

millions)

Small

hydropower,

<30 MW

1,100 1,210 to 1,430 2,000 2,800

Wind power 810 1,620 to 1,863 190 428

Solar power 850 1,190 to 1,530 5 Grant funded

Total 2,760 4,020 to 4,823 3,228

Private Investment Needs – Renewable Energy

Vietnam Green Growth Strategy

National Green Growth Strategy (VGGS) - 9/2012;

National Green Growth Action

Plan (GGAP) - 3/2014;

Contents

• Reducing the intensity of GHG emissions

• Greening production

• Greening lifestyle and consumption

Green Growth Action Plan

• 12 groups of actions, 66 activities

GREEN GROWTH TO SUPPORT VSDGs

DIRECT IMPACT

INDIRECT IMPACT

Relate to 91 VSDGs (79.1%)

Provinces/ Cities have developed and promulgated the Provincial / Municipal PGGAP

07 Ministries have developed and promulgated their

GGAP including: MOF, SBV, MONRE, MOT, MOIT,

MOC, MARD to specify assigned tasks in GGAP.

39 cities/provinces have issued their GGAP

GGAP has proposed scenarios of emission

reduction, policy interventions and prioritized

projects

15

Description Unit Quantifi-

cation

GHG emissions in 2010 Mil.tCO2 equip

0,18

GHG emissions base (2020)

Mil.tCO2 equip

1,15

Applied mitigation solutions - Voluntary

11

The amount of voluntary GHG emission reduction by 2020

Mil.tCO2 equip

0,61

Reductions level compared to basic emission

% 53%

Applied mitigation solutions - with support

17

GHG emission reductions with support in 2020

Mil.tCO2 equip

1,17

The reduction level compared to basic emissions

% 101%

1.15

0.54

-0.01

-1.50

-1.00

-0.50

-

0.50

1.00

1.50

2.00

2.50

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

2010 2015 2020

Ph

át t

hải

KN

K (

MtC

O2

)

Lâm nghiệp

Nông nghiệp

Quá trình công nghiệp

Năng lượng

Kịch bản cơ sở (BAU)

Kịch bản TTX - Tự nguyện

Kịch bản TTX - Có hỗ trợ

Ninh Thuan Green Growth Action Plan

16

No. Action/Project Objectives Implementing

agency, and

supporting agencies

Budget

(bil. VND)

GHG

emission

reduction

(th. tCO2tđ)

Expected

financial

source

A AGRICULTURE 823 352,92

1 Selection of short-termed rice seed

with high productivity and quality

Farming area of 20,000 ha in

2020

DARD/ local farmers

association

455 44,6 PPP, ODA

2 Application of “1 must – 5 less” rice

farming technique

Application area of 10,000 ha

til 2020

DARD/ local farmers

association

60 48,23 State budget,

PPP

3 Replacing rice farming of low

productivity with sugarcane farming

Replacement of

approximately 5,000ha in

2020

DARD/ local farmers

association

25 100,2 PPP, PDI

4 Replacing rice farming of low

productivity with corn farming

eplacement of approximately

4,000ha in 2020

DARD/ local farmers

association

68 80,6 State budget,

PDI

5 Replacing rice farming of low

productivity with bean farming

eplacement of approximately

3,000ha in 2020

DARD/ local farmers

association

150 60,12 State budget,

PDI

6 Application of biogas techology in

agriculture

Target of 6,570 biogas

digesters in 2020

DARD/ local farmers

association

66 19,17 PPP, PDI

B FORESTRY 205 679

1 Mangroves forestation for coastal

protection, erosion prevention

Target of 1000 ha mangroves

of 12 year production cycle in

2020

DARD 6,72 321 State budget,

PDI

2 Reforestation for natural forest with a

focus of indigenous trees

Target of 5000 ha in 2020 DARD 30 145 PPP, ODA

3 Effective organization of production

forestration on bare hills

Target of 2,400 ha new area

in 2020

DARD 168 213 PPP, PDI

Priority projects & sources of funding for Ninh Thuan

Recommendations: Green Banking • SBV continues to streamline and issue policy framework on green

finance in order to encourage banks to give preferential loans for green projects.

• International green finance programs should be continuously mobilized

• Green finance fund should be established that can access international sources of funding such as the Green Climate Fund (GCF).

• Financial institutions should be encouraged and obliged to establish internal policies on green banking, green credit, policies on social and environmental risk management and particularly periodical reporting in accordance with the Directive No. 03/CT-NHNN.

• Support for green bond issuance, attracting domestic and international investors, funding for green projects.

Establishing a Project Structure for Indirect Investment

Potential Lenders / Sources of Funding

Loans

$ $

$

Equity & Debt Financing

$

Risks and Costs

Risks:

- Foreign Exchange Risk;

- Sovereign Risk + Institution Risk;

- Green Risks (i.e. Technology, Natural Conditions, Governmental Regulations)

Costs:

- Domestic refinancing (bank’s deposit): 4-6,5%

- Management fees.

Market Lending rate: 9-11% for long-term loans

Commercial banks

Investment Fund, Fund Loans

Governmental Financial Organisations (VDB, SBV…)

Projects

Loan and / or Investment agreement

Investment: • Equipment • Installation • Services

1-3% Less than market

refinancing

Refinancing + FX Back up +

institution risk

Loans

- Governmental regulations;

- WB, JICA, GCF…

Commercial banks

Foreign Investment Fund

Governmental Financial Organisations (VDB, SBV…)

Projects

Loan Up to 70-80%

of invest volume

Refinancing + FX Back up +

institution risk

Equity investment

Local Investors

Equity Investment

- Governmental regulations;

- WB, JICA, GCF…

Owner Equity

Implementation of the Decision No.

622/QĐ-TTg by the banking sector and

(draft) Green Banking Development Master

Plan in Vietnam

Phạm Xuân Hòe

Banking Stratregy Institute

State Bank of Vietnam

Possible damages to Vietnam due to climate change

Agenda

• Part I: Overview on implementation by the banking sector of the Decision No. 622/QĐ-TTg on National Action Plan to implement the Agenda 2030 on Sustainable Development

• Part II: Brief on the Green Banking Development Master Plan

I. Necessity and legal basis

II. Current status of green banking in Viet Nam

III. Objectives, 4 main pillars and recommended solutions

Part I:

Overview on implementation by the banking sector of the Decision No. 622/QĐ-TTg on National Action Plan to implement the Agenda 2030 on Sustainable Development

Tasks Implementation status

1. Legal framework for micro finance activities

Decision No. 20/2017/TTg governing microfinance activities.

2&3 Banking restructuring

The Credit Institutions Restructuring Scheme approved in the Decision No. 1058/QĐ-TTg dated 19/7/2017: positive achievements; increase in share prices of banks; improvement in credit ratings of many banks; banks mergers

4. Banks modernization Plan to develop banking IT infrastructure; Action plan to implement Directive No. 16/CT-TTg dated 4/5/2017 by the Prime Minister (the 4th industrial revolution); Circular on safety and security in banking operations

The State Bank of Vietnam is assigned as leading agency in implementing objectives No. 8.10, 9.3.a, 10.5.c

Tasks Implementation status

5. Prioritizing branches and transaction offices access to banking services

Circular No. 21/2013/TT-NHNN on operation network of commercial banks, Circular No. 09/2018/TT-NHNN on operation network of cooperative banks; Circular No. 43/2015/TT-NHNN on post transaction office of Lienvietpostbank: priorities are given to opening transaction offices in rural, remote areas; digital channels

6. Strengthening Agribank Approval of the Agribank restructuring plan; a number of improvements gained

7&8. Assets quality and corporate governance

Vietnam Article IV country report : 10 commercial banks are piloting adoption of Basel 2 standards

9. Improving capacity for VAMC

Resolution No. 42/2017/QH142 and its implementation by the VAMC in accordance with market mechanism market for buying and selling bad debt

Tasks Implementation status

10. Simplification of lending procedure

Decisions by the Governor to implement Resolution No. 19/CP; Circular No. 39/2016/TT-NHNN on lending activities by banks; automatic credit scoring; automated credit appraisal

11. Improving accessibility to banking services

Plan on improving accessibility to banking services (Decision No. 1726/QĐ-Ttg) has been implemented for 1 year; microfinance programes by the Bank for Social Policies

12. Enterprises – Banks linkage Activities and initiatives to promote cooperation between enterprises and banks are regularly implemented in 63 provinces, cities

13. Green banking products and services

Plan on green banking development (draft)

14. Strengthening cooperation with international financial institutions

Annual cooperation programs and plans are available

Part II:

Brief on the Green Banking Development Plan

Necessity

- The Guide on Banking and Sustainability which is introduced in this Conference, has emphasized: sustainability for customers and for the society is not only responsibility of the banks, but also important for development of the banks themselves

- Negative impacts by climate change, environment pollution, CO2 emission … necessity for the banks to be responsible toward communities and society. This derives from the mission and intermediary role of the banking sector in controlling and channeling funds and financial services (Concept of green banking; environment and social risks management standards, Equatorial principles; IFC Performance Standards; practical experiences from other countries);

- Case study: Treatment of bad debt by the Biodegradable Packaging Company Jsc.in the Vinh Phuc Industrial Zone

I – Necessity and legal basis

Legal basis:

Law on Environmental Protection (2014), which stipulates those

projects that need to have environmental impact assessment report, and those projects that need only registered environment protection commitment. The Law also specifies privileges as well as penalties relating to environment protection.

Decree No. 19/2015/NĐ-CP dated 14/02/2015 by the Government to provide detailed stipulations on implementation of selected articles of the Law on Environment Protection.

Vietnam Agenda 21 (promulgated under Decision No. 153/2004/QĐ-TTg dated 17/8/ 2004 by the Prime Minister) is the first legal document on sustainable development of Vietnam

I – Necessity and legal basis (cont.)

Resolution No. 24-NQ/TW dated 3/6/2013 by the 7th Congress of the 11th Central Executive Committee of the Communist Party on responses to climate change, natural resources management

The National target program on response to climate change, which is promulgated under Decision No. 158/2008/QĐ-TTg dated 02/12/2008:

The National strategy for climate change issued in Decision No. 2139/2011/QĐTTg dated 5/12/2011;

The National action plan on climate change for the period 2012 – 2020 promulgated under Decision No. 1474/QĐ-TTg dated 5/10/2012

The National strategy on green growth for the period 2011- 2020 with vision to 2050, which is promulgated under Decision No. 1393/2012/QĐ - TTg dated 25/9/2012, has specified 3 main tasks: (i) Reducing the intensity of greenhouse gas emissions and promoting the use of clean and renewable energy; (ii) Greening production (iii) Greening lifestyle and promoting sustainable consumption

The National Action Plan on Green Growth for the period 2014-2020 issued under Decision No. 403/2014/QĐ-TTg dated 20/3/2014, the Task No. 37 of which is: “Institutional improvement and capacity building in banking and finance activities of commercial banks for green growth in the period 2013 – 2030”

II – Current status of green banking in Viet Nam Key policy orientation of the banking sector :

1. The Action Plan of the banking sector to implement the National Green Growth Strategy (Decision No.1552/QĐ-NHNN dated 6/8/2015)

2. The Directive No. 03/CT-NHNN by the Governor of the State Bank of Vietnam on promoting green credit and management of environmental and social risks at credit institutions

3. The Banking sector development strategy by 2025 with vision to 2030 is being formulated, with key elements of green and sustainable banking being included

4. The Green Bank Development Plan is being drafted

5. Environmental and social risks management manual (for 10 environment – sensitive sectors/industries)

6. Green Projects Catalogue being piloted at 23 banks

7. Reporting requirements on Green Credit and E&S risks management by credit institutions

8. The “Green Finance – Credit Fund” proposal is being developed; and required conditions are being prepared for applying for NIE (National Implementing Entity) status of the Green Climate Fund GCF

9. Other proposals for projects in the “green” fields of renewable energy, energy efficiency, waste treatment, organic agriculture and high – tech agriculture are being prepared for accessing international funds, such as GCF

Key policy orientation of the banking sector (continued):

Practical implementation at 5 commercial banks

No. Banks Products

1 Vietnam Bank for Social Policies - VBSP

Loans to state budget to implement the National Target Program on Clean water and Environmental Sanitation Loans to projects in forestry development Loans to projects on protection and development of coastal underwater lands in the south of Vietnam

2

Vietinbank

Loans to RE and EE projects EIB Environment Credit Program GCPF Credit Program RE lending Program REDP

3

ACB

Loans in the framework of the Rural Finance Project RDF Loans guaranteed by the SME green credit Fund SMESC RE lending program REDP

Practical implementation at 5 commercial banks (continued) TT Ngân hàng Sản phẩm

4

Sacombank

Loans in the rural areas and forestry sector Loans to support household business development Loans to projects on waste recycling, renewable energy

5

BIDV

Loans to hydro power, wind power projects Loans to ecological tourism projects Loans to renewable energy sector, to clean water supply system

Difficulties/challenges

1. Understanding of and awareness about green and

sustainable development : society, enterprises and banks

2. Limited availability of funding resources (in terms of

amount, time and interest rate)

3. Lack of adequate and sufficient policy framework,

procedures, green banking products and services

III – Objectives and suggested solutions in green banking pillars

• Overall objective:

To enhance awareness and responsibility of the banking system

toward environment protection and climate change response;

to support gradual greening of banking operations; to channel

bank funding sources to financing environmental – friendly

projects, thus promoting green production, green service

industries, green consumption, clean and renewable energy; to

actively contribute to green and sustainable growth.

Specific objectives

To increase percentage of funding sources alocated to green credit

To adapt green and environmentally – friendly technologies

In 2025: 100% of the banks have internal regulations on E&S risks management; 60% of the banks get access to green funding and green loans; 10 -12 banks have organizational structure supporting E&S risks management

3 main pillars and their respective solutions as specified in the Green Banking Development Plan

Pillar I: Capital/Funding

Pillar II: Strategies, policies, procedures,

products

Pillar III: Training, internal and external

communication

Key sollutions in the Pillar I

Increase capital and total assets; increase proportion of green credit in the bank lending;

To increase investment in new technologies that enable energy saving, paper and other resources saving

To gain access to various funds: Environment Protection Fund (banks to issue guarantees for enterprises); Green Credit Trust Fund GCTF (limited capital base)…

To study an acceptable “risk conversion factor” to be applied to green loan outstanding to encourage credit institutions to extend green loans and at the same time, to ensure minimum CAR ratio

Key sollutions in the Pillar II

To integrate this Green Banking Development Plan into

the Banking Development Strategy by 2025, with vision

to 2030;

The State Bank of Vietnam: to study and issue policies

on applying relevant monetary tool(s) in accordance

with the specific targets for each period

Key sollutions in the Pillar II (cont.)

Re-discount rate/preferential refinancing rate

Reserves Requirement

OMO

• (Green) valuable papers

• Green credit documentation

• Lower rate of reserves requirements if green outstanding loans account for 10% of total portfolio

• Purchase of green local/ government bonds is prioritised

• Issuance of green government bond in cooperation with MOF

Key sollutions in the Pillar II (cont.)

SBV

• Development of the Manual on environmental and social risk assessment in credit activities of the banks to be applied to the remaining 11 economic sectors/industries.

• Periodical updating the green project catalogue

SBV

• Promulgation of circular on environmental and social risks management

• Consideration of various approaches to establish a NIE (National Implementing Entity) accredited by the GCF (Green Climate Fund) to get access to its private sector facility

SBV

• Implementation of pilot stress test to evaluate vulnerability of commercial banks to impacts by climate and environment changes

Key sollutions in the Pillar II (cont.)

Banks

• Formulation of green development strategies by commercial banks

• Establishment of policies, procedures, organisational structure for better E&S risks management

Banks

• Application of the industry 4.0 to develop banking products and services, which are simple, convenient and allow for saving of energy and paper;

• Development of a database of those customers using green credit products and services, which will be integrated with the national environment database

Banks

• Proactive study of perquisites for UNEP FI membership status, so that the sustainable banking initiatives could be applied nationwide in Vietnam

• Disclosure on the annual report those data/information on green lending products, green banking services; arrangement of a customers advisory component on the bank’s website

Key sollutions in the Pillar III • Internal training and communication

Implementation of training, re-training activites to provide staff of SBV and commercial banks with knowledge on social responsibility, environment protection; Updating training curriculum and training materials at the relevent universities and bank training centers;

Conferences, workshop on sustanable develppemnt and green banking;

Identification of criteria for an annual Green Bank Award (Vietnam Banks Association)

Reseaches, publications, books, reports

Key sollutions in the Pillar III (cont.)

• With regard to the communities

Organisation by big commercial banks of annual customer conference with focus on green and sustainable development;

Publications, leaflet, communication via mass media on responsibility of the banking sector in joining hands with other communities in environment and society protection, in promotion of sustainable development;

Provision of advices on green products and services; supporting customers in their sustainable development;

Annual awards to projects, customers using green products and services

Thank you!

Practical experiences in Green and Sustainable Banking implementation

Srinath Komarina President, Responsible Banking

1

2

1,741 ATMs

19,597 employees

1,105 Branches

Balance Sheet

USD 49.99 Billion

Deposit USD 32.08

Billion

Advances USD 32.27

Billion

All figures as on June 30, 2018

Economic Performance

YES BANK: The journey so far Empowering business through Professional Entrepreneurship

3

Financial & Investor Strategy • Sustainability linked Investor

Communications

Responsible

Banking

Branch Business & Retail Banking • Green Product development • YES COMMUNITY • ISO 14001 certification

Marketing and Corporate Communication • YES COMMUNITY • Thought Leadership

Risk Management • Environment & Social Policy • Climate Risk Integration

Infrastructure and Digical Network Management • ISO 14001 Certification • Internal Carbon Pricing

YES GLOBAL INSTITUTE • Thought Leadership • Social Finance

Digital Banking • Digitizing RESP

initiatives

Human Capital Management • Employee Payroll Giving • Sustainability training and

awareness

Government Banking

• CSR Advisory & Partnerships

Corporate Finance • Climate Finance • Thought Leadership

International Banking

• International Finance for Sustainable Development

Inclusive and Social Banking • CSR Partnerships and

Projects

Responsible Banking Core plank weaving sustainability across functions

Facilitating Sustainable

Finance

Positive Impact CSR & Sustainable Development

Policy Advocacy through Thought

Leadership

Transparency & Accountability

Responsible Banking - A 360○ Framework Innovating Pathways towards building ‘World’s Greenest Bank’

FACILITATING SUSTAINABLE FINANCE

Climate Finance Strategy Mainstreaming green products and

practices Innovative financing and modelling Environment and social risks

management Climate literacy

POLICY ADVOCACY through THOUGHT LEADERSHIP

Knowledge Reports – Climate Finance, Water, Renewable Energy, Energy Efficiency, Natural Capital, SROI

Thought leadership – UN, UNEP-FI, NCFA, MoEFCC, MNRE, MoF, TERI, ISA, IBA, CAFRAL

Policy advocacy as a catalyst within financial sector

TRANSPARENCY AND ACCOUNTABILITY

Triple Bottom Line reporting Enhanced climate disclosures Environmental, Social & Governance (ESG)

disclosures GHG accounting and Portfolio mapping

(SDG) Environment Management Systems (ISO

14001) Green bond assurance and disclosure

POSITIVE IMPACT CSR & SUSTAINABLE DEVELOPMENT

Sustainable Transformation through Alliances Relationships and Technology (A.R.T)

Livelihood and Water Security Employability and Entrepreneurship Environment sustainability Media for social change Social Value Creation

Inn

ov

ati

ve m

ech

an

ism

s fo

r fi

na

nci

ng

SD

Gs

Green Bonds

Pioneered India’s 1st Green bond in

2015

First Green Infra bonds in India USD 160 million

Green Masala Bonds- private placement by IFC USD 50 million

MoU with LSE to facilitate offshore rupee green bonds

Commits to mobilizing USD 5 billion on climate action

Green Bond – private placement by FMO USD 50 million

Market Creator versus Market Follower

YES BANK’s approach towards facilitating Sustainable & Digital Economy

6

Public-Private Partnership

Committed USD 24 million to fund Sewage Treatment

Plant under Namami Gange

project

Market Creator versus Market Follower

Hybrid Annuity PPP Model

Construction Phase O&M Phase

Upto 40% of capital cost by Government

60% of the cost paid as annuity along

with O&M expenses

Yes Bank

Government Private firm

Inn

ov

ati

ve m

ech

an

ism

s fo

r fi

na

nci

ng

SD

Gs

Green Bonds

Pioneered India’s 1st Green bond in

2015

7

YES BANK’s approach towards facilitating Sustainable & Digital Economy

Blended Finance

Undertaking a pilot project in

transformational blended finance

Market Creator versus Market Follower In

no

vati

ve m

ech

an

ism

s fo

r fi

na

nci

ng

SD

Gs

Green Bonds

Pioneered India’s 1st Green bond in

2015

Public-Private Partnership

Committed USD 24 million to fund Sewage Treatment

Plant under Namami Gange

project

9

YES BANK’s approach towards facilitating Sustainable & Digital Economy

Social Bond

Sole arranger for India’s First Social Bond in December

2017

Assurance

Adherence to International Capital Market Association’s Social Bond Principles 2017

Allocation

Proceeds would be allocated to Affordable Housing

Market Creator versus Market Follower In

no

vati

ve m

ech

an

ism

s fo

r fi

na

nci

ng

SD

Gs

Green Bonds

Pioneered India’s 1st Green bond in

2015

Public-Private Partnership

Committed USD 24 million to fund Sewage Treatment

Plant under Namami Gange

project

Blended Finance

Undertaking a pilot project in

transformational blended finance

10

YES BANK’s approach towards facilitating Sustainable & Digital Economy

Social Bond

Sole arranger for India’s First Social Bond in December

2017

Market Creator versus Market Follower In

no

vati

ve m

ech

an

ism

s fo

r fi

na

nci

ng

SD

Gs

Green Bonds

Pioneered India’s 1st Green bond in

2015

Public-Private Partnership

Committed USD 24 million to fund Sewage Treatment

Plant under Namami Gange

project

Blended Finance

Undertaking a pilot project in

transformational blended finance

10

Green Future: Deposit

Launched India’s first green retail liability product

in June 2018

Booking of Deposits through online channels only, for a

given tenure

Retail Customers

Assurance of Sustainable deployment of equivalent

proceeds

1. Best in class interest rate 2. E-certificate honouring the

customer with a tree for each deposit booked

YES BANK’s approach towards facilitating Sustainable & Digital Economy

USD 1,052 Million Financial Inclusion (ISB & MFI)

USD 273.5 Million Healthcare (BB portfolio)

USD 3,757 Million Sustainable infrastructure (Renewable Energy)

USD 8,267 Million MSMEs

USD 239.6 Million Affordable housing

USD 13.7 billion (INR 90,414 Crores)

SDG Financing target of USD 10 billion till FY 2020

Mapping current SDG-aligned portfolio & SDG financing targets

11

`

PROJECT 1

PROJECT 2

PROJECT 3

PROJECT 4

Socially & Environmentally sustainable Respect Rights of local staff and local communities Compliant with applicable regulatory requirements of the Exclusion List, Host Country and IFC Performance Standards and Good International Practice

For All Projects Compliance to Exclusion List (Annexure I of ESP) and Host Country Regulations

For Projects Exceeding USD 5 Million Compliance to Exclusion List, Host Country Regulations and applicable IFC Performance Standards

PROJECT 3

PROJECT 1

The Environment and Social Policy (ESP)

VISION: Be the Benchmark Financial Institution for Inclusivity and Sustainability

Listed on the Carbon Disclosure Leaders Index for five consecutive years

Listed on the DJSI - Emerging Markets for 3rd year in a row (2015, 2016 & 2017)

Positive Impact Steering Group member

Global Steering Committee member, 2013-2016

APAC Chair, 2013-2016

Launched India’s First Green Infrastructure Bonds raising INR 1000 crores in February 2015

Green Masala Bonds - private placement by IFC for INR 315 crores in August 2015

Issued INR 330 crores of Green Bonds with FMO, on a private placement basis in September 2016

744 locations certified with ISO 14001:2015 environment management standard

Chair of Natural Capital Finance Alliance Steering Committee

2008 | 2011 | 2012 2012 | 2013 | 2014 | 2015 |

2017

2014 | 2016 | 2017

2016

First Indian Signatory First Indian Signatory First & Only Indian Bank

First & Only Indian Banking Signatory

First Indian Bank to launch Green Bonds

First Bank Globally to migrate to ISO 14001:2015

ESG Leadership

2013 | 2014 | 2015 | 2016 | 2017 Best Community Initiative in Water 2017

Best Social Bank (mid-size) 2017

Sole arranger for India’s First Social Bond

First Indian Bank to launch Green Retail Product

SKOCH Blue Economy Award

(Silver) 2017

Sole arranger & subscriber to India’s First Social Bond, investing INR 1000 crores in December 2017

Proceeds would be allocated to Affordable Housing

Adherence to International Capital Market Association’s Social Bond Principles 2017

First Indian Bank to align Sustainability Disclosures to TCFD

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India’s first Green Retail Liability product

Earmark equivalent proceeds for SDG- aligned sectors

Raised USD ~51 million in 30 days

Sustainable & Responsible Banking Leadership

www.yesbank.in

Thank you

Srinath Komarina President – Responsible Banking

Srinath.Komarina@yesbank.in @kvsrinath

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CONFERENCE: GREEN BANKING TOWARDS SUSTAINABILITY

Hanoi, 7 August 2018

Yuki Yasui, Asia Pacific Region Co-ordination Manager

3

Guide to Banking and Sustainability

1. WHAT AND WHO

IS THE GUIDE FOR? Hands-on guidance for practitioners on integrating sustainability across the bank, including real-life examples from banks around the world

Helps banks to fulfil their commitments as UNEP FI members

(Statement of Commitment on Sustainable Development)

◼

◼

Senior management and board members seeking to educate themselves

and their employees on banking and sustainability

Sustainability teams seeking to engage employees across the bank

Employees seeking to understand the relevance of sustainability issues to their work

Banking associations seeking to understand and promote sustainability among their membership

◼

◼

◼

◼

WH

O

WH

AT

2. HOW IS IT STRUCTURED ?

CASE STUDIES

Current practice of UNEP FI

banks

Chapter I: Leadership

Chapter II: Sustainability

Chapter III: Risk

Chapter IV: Legal

Chapter V: Corporate Banking

THE BUSINESS

CASE

Why is

sustainability relevant for

your department?

GUIDANCE

How to go about it?

Chapter VI: Retail Banking Chapter VII: Communications

Chapter VIII: Human Resources

Chapter IX: General Services

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3. HOW IS IT STRUCTURED ?

Risks of inaction:

• Lack of preparedness for regulatory and policy adjustments

• Failure to identify material risks • Disengagement of investors, etc

Opportunities:

• Competitive advantage and new business opportunities, • Increased resilience due to better risk management • Better rating – more valued bank

7

What can your bank do?

• Embed sustainability in the bank’s strategic vision

• Ensure accountability on sustainability issues for managers across the bank

• Corporate culture: actively communicate top-level buy-in and develop employee awareness and expertise

• Report on the bank’s sustainability approach and performance internally, as well as externally

CASE STUDY: Landesbank Baden-Wuerttemberg

• Sustainability integrated in mission statement and strategy

• Seven sustainability goals defined and operationalized through sustainability guidelines

• Accountability ensured through sustainability management system for all divisions

• Sustainability Committee consisting of division heads and chairman of the board to monitor performance and develop recommendations to the board for strategic decisions around sustainability

3. HOW IS IT STRUCTURED ?

4 . RESOURCES SECTION

◼ Relevant literature and reports on (aspects of) sustainable

banking

◼ List of sustainability Index providers and extra financial

rating agencies

◼ Links to relevant tools and frameworks

◼ Links to training and training providers

◼ Sustainable banking news outlets and magazines

9

UNEP FI activities highlights

1

0

Principles for Responsible Banking

The Why - Shaping the future of banking

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Define, shape and ultimately secure the banking industry’s role in the society and economy of the 21st century

Strengthen trust and customer engagement

Enable banks to credibly demonstrate and communicate their purpose and contribution to society

Set the global benchmark for responsible banking and provide actionable guidance to achieve it

Purpose

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“The purpose of these Principles is

to transform the banking industry

so it plays a leading role in

achieving society’s goals”

The 6 Principles for Responsible Banking

Alignment

Impacts

Customers & Clients

Stakeholders

Governance & Culture

Transparency &

Accountability

13

14

Core Group members

2019 Global Public Consultation

Signing Ceremony & Announcement of Targets at UN

HQ in NY

15

Timeline

Membership Consultation

CEOs launch draft Principles at UNEP FI GRT

Presentations at key events

July - Aug Nov 26 Sep - Dec

Q1 – Q2 Sep

1

6

Scenario-based climate disclosures

Transition Risks & Opportunities Physical Risks & Opportunities

Scenario-based approach for estimating the impact of climate change on corporate lending portfolios

FSB’s Task Force on Climate Related Financial Disclosures (TCFD) Recommendations

• Recognition of environmental risks as financial risks by the FSB

• Forward-looking assessment of risks

• Expanding time horizons

• Use of scenario-analysis (≠ stress testing scenarios)

• Dealing with climate change in a proactive vs. reactive way

19 © Oliver Wyman

The proposed framework integrates three modules in a structured approach that deploys expert judgment in credit analysis, informed by climate scenarios

Transition scenarios

Portfolio impact assessment

Borrower-level calibration

Calibration points

Scenario description

Risk factor pathways + sensitivities

Portfolio impact assessment uses a systematic and repeatable approach to extrapolate the risk assessed by the other modules to the remainder of the portfolio.

Borrower-level calibration addresses the lack of empirical data on corporate exposure to transition risk by using industry experts to estimate the scenario’s impact on individual borrowers. Calibration specifies the relationship between economic scenarios and credit outcomes.

Transition scenarios describe an evolving economic environment in a consistent manner across time, sectors, and geographies.

20 © Oliver Wyman

Power generation risk

factor pathway; US

2 degree scenario

2 degree scenario

3.9%

2.5%

Current / Baseline / 4 degree scenario

1.5 degree scenario

1.2%

Average Probability of Default Illustrative; 2040; Based on current portfolio

Illustrative results All data is illustrative

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Market development & capacity building

Market development & capacity building

◼ Green mortgage market development – Sri Lanka

◼ Green bonds market development - Mauritius

◼ Climate finance training – online (2019)

◼ Environmental & Social Risk Assessment Training – online

& in-person

THANK YOU

Contact:

Yuki Yasui

Asia Pacific Region Co-ordination Manager

yuki.yasui@un.org