E N E R G Y & S U S T A I N A B I L I T Y S U M M I T June 2014
E N E R G Y & S U S T A I N A B I L I T Y S U M M I T Agenda Page Green Bonds 1 Conservation Finance 5 Energy Efficiency Financing Concepts 8 1
G R E E N B O N D S Growth of Green Bond Market November 2007 Onward (in $mm) Most issuance to date has been Supranational and Agency issuers. The Commonwealth of Massachusetts G.O. issued the first municipal Green Bond in 2013, and corporates represent over 50% of the issuance YTD in 2014. The forecast for 2014 includes additional expectations of Muni issuers as well as Corporate issuers *** FY 2014 estimate: 35,000 *** 15,859 10,421 2,131 3,965 1,124 1,155 Pre 2010 2010 2011 2012 2013 2014 YTD Source: J.P. Morgan as of May 15, 2014 *Includes use of proceeds Green Bonds as well as the Toyota ABS 2
G R E E N B O N D S Green Investor Landscape Pure Green Investors Socially Responsible Investors Asset Managers Corporates Green investing mandate is a growing market but currently very limited assets under management Established socially responsible mandate but not necessarily required to buy bonds designated as green Asset Managers have been Corporate governance reporting a positive impact guidelines moving towards on franchise value for green socially responsible investments investing 3
G R E E N B O N D S Green Bond Principles (GBP) Green Bond Principles Recommended Process Stage 1: Use of Proceeds Sustainability Framework Definition Declare the eligible Green Project categories (including indirectly through financial intermediaries) in the Use of Proceeds section of the legal documentation for the security Recommended that all designated categories provide clear environmental benefits that can be described, quantified and assessed, where feasible Stage 2: Process for Project Evaluation and Selection Outline the investment decision-making process to be followed in determining the eligibility of an individual investment using Green Bond proceeds If possible, work to establish impact objectives from the projects selected Stage 3: Management of Proceeds Proceeds should be moved to a sub-portfolio or otherwise tracked by the issuer and attested to by a formal internal process While bonds are outstanding, balance should be periodically reduced by amounts of investments made during period Recommend to make known the intended types of eligible instruments for the balance of unallocated proceeds Stage 4: Reporting Report at least annually on the specific investments made from the Green Bond proceeds (in addition to disclosure of Use of Proceeds and the eligible investments for unallocated proceeds) Report on quantitative and/or qualitative performance indicators metrics, where feasible, to measure the impact of the investments 4
E N E R G Y & S U S T A I N A B I L I T Y S U M M I T Agenda Page Green Bonds 1 Conservation Finance 5 Energy Efficiency Financing Concepts 8 5
C O N S E R V A T I O N F I N A N C E Building the Market for Conservation Finance: NatureVest 6
C O N S E R V A T I O N F I N A N C E Conservation Finance Capital Structure Virtually unlimited capital availability for investment-grade credits Easily scalable Traditional Investors (public debt) Mission-Aligned Funding (concessionary capital) Market-driven pricing and terms Concessionary pricing driven by alignment with mission objectives Capital commitments can be custom-tailored to suit individual donor/investor needs Limited capital available Difficult to scale 7
E N E R G Y & S U S T A I N A B I L I T Y S U M M I T Agenda Page Green Bonds 1 Conservation Finance 5 Energy Efficiency Financing Concepts 8 8
E N E R G Y E F F I C I E N C Y F I N A N C I N G C O N C E P T S Applying the Social Impact Bond or Pay for Success model to energy efficiency financing for a Corporate Client Creating an investment contract where repayment and returns are linked to realizing cost savings and reduced greenhouse gas emissions from energy efficiency projects [1] Investment contract + upfront capital [6] Returns Investors [5] Report savings Corporate Client [3] Energy efficiency projects Cost savings [2] Guarantee (if applicable) Third party assessor [4] Base-line measurements and realized savings Energy Efficiency Projects Guarantor 9
Contact us Matt Arnold Managing Director (212) 270-5052 or (202) 585-1270 matthew.arnold@jpmchase.com 10
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