1. Aligning the allocation of capital with low-carbon development
Translating climate and environmental science into finance
Aneil Tripathy
Climate Bonds Initiative
SOAS – 27 April 2017

2. Agenda Why realign financial flows? How to realign financial flows
Translation
ESG
“Stranded asset” (aka quantifying climate risk)
Macro-prudential regulation
Momentum building
Green bonds
Climate Bond Standard (backed by scientific expertise)
Q&A

4. Nine planetary thresholds
Source: SEI

5. Source: CISL, Rewiring the Economy

6. To get to 2D (450 scenario), we'd need to invest $53trl rather than $48trl
Source: OECD/IEA 2014

7. On Energy Efficiency - additional investments of $5
On Energy Efficiency  - additional investments of $5.5tn are offset by fuel savings $6.5tn
Source: OECD/IEA 2014

8. Financing costs are critical
Source: UNDP, De-risking Renewable Energy Investment (2013).

9. 2. How to realign financial flows - Translation

10. ESG Investing
Source: MSCI

11. Stranded Assets
Source: Carbon Tracker

12. Tragedy of horizons
Mark Carney, Governor of Bank of England, London - Sep 2015

13. Tragedy of horizons
Source: 2 Degrees Investing Initiative, 2017

14. Macro-prudential regulation

15. UNEP Inquiry: The Financial System We Need
IMF/WORLD BANK ANNUAL MEETINGS, LIMA - OCT 2015
Mark Carney, Governor, Bank of England
Atiur Rahman, Governor, Bangladesh Bank
Yi Gang, Deputy Governor, People`s Bank of China
“Green finance cannot be a niche”
“Developing economy central banks have been trying to address the risks of instabilities and imbalances at source, by promoting sustainable financing”
“China will advance green finance during its presidency of the G20 in 2016”
Source: UNEP Inquiry

16. Governments pledge to pursue 1.5C growth path
Paris Agreement, Art. 2 Par 1 c): “Making financial flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development”
12 December 2015

17. 2. How to realign financial flows - Momentum building

18. www.giicoalition.org // @giicoalition
Investors are calling on governments to act
// @giicoalition

19. History of bond financing for transitions
Funding the North’s army in the US Civil War
Building the sewers of London
Creating the US and Italian
highways networks
Bond has a long history to support various assets and projects. US civil war – 1860s
Housing mortgages:
an unemployment solution

20. It’s about convincing decision makers…
“It’s nothing to do with the science – it’s irrelevant what I believe.”
“If markets believe it, if customers believe it, if investors believe it, if government is making policy, then what I have is a significant risk in my portfolio that I have to mitigate.”
Andrew Vesey, CEO, AGL Ltd,
Guardian Australia, 24 Feb

21. Green as a bonus feature
Issuers
Investor diversification
Market positioning
Pricing advantage
Investors
Client narrative
Easy identification green
Secondary market value
Governments
Source of financing for NDC
Private sector support
International ‘Leadership’
What are the key features of green bonds. External review & reporting to show that the proceeds go to green assets/projects. For issuers – green label for marketing, diversification, pricing benefits. For investors – green label easy to identify, it builds up their reputation by showing they are provide support to address climate change issues, secondary market. Therefore, actually green bond markets is growing rapidly since the market is more diversified with more investors including… estimation in 2017 – moody’s 200

22. Green Bond Market Size (another perspective)

23. The Climate Bonds Initiative
We are an investor-focused NGO mobilising debt capital markets for climate solutions
Outreach to inform and stimulate the market
Market data and analysis
Climate Bonds Standard & Certification Scheme

24. Climate Bonds Taxonomy

25. China’s green bond market

26. Thank you. Questions? aneil@climatebonds.net www.climatebonds.net

27. Climate Bonds Standard Certification Scheme

28. How do you know it is green – external review?
Majority have independent review
Green Bond Principles create a basis
Climate Bonds Standard & Certification Scheme supports scalability and consistency via a standards-based approach

29. Energy, transport, water – infrastructure

30. A global phenomena Netherlands $14bn Germany $15bn Supra-nationals
France $19bn
Sweden $6bn
Canada $3bn
USA $35bn
China $36bn
Mexico $2.6bn
India $3bn
> $10bn outstanding
$1bn - 10bn outstanding
< $1bn outstanding