Toward a Regional Action Agenda

Climate Week

countries in Asia Pacific face climate change impacts
Floods
Droughts
Rising sea levels
Deforestation
Extreme

temperatures
Resources are scarce in these countries
Investment opportunities exist
Public funds alone are not sufficient
Global capital is abundant

Need to urgently find solutions to bring
global capital to the investment
opportunities

of concept
Phase 2: Bilateral loans
Supranational entities
Low return / Uncertainty
Phase 3:

Syndicated loans
Consortium of banks
More established projects
Phase 4: Bonds
Global markets
Mature opportunities

low
Economic Constraints
Undiversified economies
Reliance on few industries
Low level of listing of

companies
Limited public budgets
Dependence on foreign revenues
Political Barriers
Maturing regimes
Geopolitical influences
Geographical constraints
Remoteness

(2015)
Bond Coupon: 6.625%
Bond Maturity: 2020
Asia-based investors: 55% - Europe:

18% - US: 27% (2015, Bloomberg)
Pension Funds: 45% / Asset Managers: 46% / Banks: 3% / Private Banks: 6% (2015, Bloomberg)

Comparison: Unsecured Term Loan due 2028: Libor+60bps (Asian Development Bank)

GOVERNMENT OF THE MALDIVES (B2/B+)

Bond Size: $200 million (Jun-2017) + Tap of $50 million (Nov-2017)
Bond Coupon: 7%
Bond Maturity: 2022
Asia-based investors: 83% - Europe: 17% (2017, Bloomberg)
Asset Managers: 85% / Banks: 10% / Private Banks: 5% (2017, Bloomberg)

maturity from the start
Foreign or Local currency
Coupon
Defined parameters (covenants)
Difference
Use of

Proceeds must be “green”
Additional reporting requirements
Third-party certification

mandates
Ethical investing
Private Investors
Sovereign Wealth Funds
High Net Worth Individuals

Lack of diversification

opportunities for global fixed income investors

at issuance
Pricing in line
Buy and Hold investors
New market segment

Brown bonds

will trade at a discount over time, as seen as more “risky”

Volumes expected to grow strongly in the years to come

take advantage of the global surge in Green Bond issuance
Broad

appeal: Green Bonds are not so different from regular bonds
Maturation process: global investors are just waking up to this new asset class
In Asia, China and India are issuing record amounts, but dedicated ESG/Climate funds will be looking for diversification
Market mechanism is already in place
It is a good time to get on the bandwagon

FJD 100 million = USD 50 million (2017)
Bond Coupon: 4%

(5 year) and 6.3% (13 year)
Bond Maturity: 2022 and 2030
Technical assistance from the World Bank and IFC
Third Party certification

AP Renewables

Bond Size: PHP 10.7 billion = USD 225 million (2016)
Bond Coupon: 7% - Bond Maturity: 2026
Tiwi-MakBan geothermal project
75% guarantee from the Asian Development Bank
Private placement to BPI (sale to insurance companies)
Third Party certification

market standard
Investors need to be comforted that this is not

just marketing
They focus on 4 pillars:
1. Use of Proceeds
2. Process for Project Evaluation and Selection
3. Management of Proceeds
4. Reporting
Self-regulation
Weak Link: supervision during the life of the bonds, reporting

A regional action is needed to ensure consistency, adherence to the principles and financial support

countries
Regional principles must be adhered to at the local level
Suggestion:

creation of Green Bond Committees at the local level
Transfer of expertise, capacity building, project pipeline

Regional action is needed to ensure that the market knowledge is properly transferred from the regional to the local level and the requisite capacity is built through workshops, regional experts to assist local teams, help from regional banks, technical experts, etc.

imbalance in favor of more green projects
Need to ensure the

financial viability of green projects
New technologies bring new investment opportunities
Solar Energy
Wind Power
Biomass
Water Treatment
Clean Transportation

A transparent, easy-to-access pipeline of green investment projects must be developed, alongside the tools for reporting on Green Bonds

Principles at the domestic level
Establish local Green Bond Market Committees
Reduce

the barriers of local capital markets
Reduce disclosure costs and offer tax breaks
Encourage adequate disclosure on green impact
Build analytical capabilities for bond tracking
Standardize bond/loan documentation

Priority list of green projects
Set parameters for financial viability
Ensure transparency of pipeline
Establish a collaborative platform
Strategic issuance by public entities
Review mechanism in the region
Credit Enhancement techniques
Create a data warehouse

Reduce investment costs
Public issuance: Signaling effect
Global investor targeting
Market-led initiatives
Workshops
Educational material
Capacity building
Bond Documentation fast tracking

1. Regional Green Bonds standards
2. Regional Issuance
3. Domestic network
4. International networking

Improve Market Structure for Green Bonds

Pipeline of Green projects

Develop Demand for Green Bonds

Collaboration

How to support the emergence of Green Bonds?

Bond documentation costs
Other issuance costs (e.g. roadshows, investor meetings, etc…)
Post-issuance

use of proceeds monitoring and reporting
First-loss guarantee for securitized instruments (e.g. SMEs)

Financial support for Green Bonds will reinforce the development of the local capital markets and the population of bond issuers will rise

Issuer-level guarantee
Project-level guarantee
Credit Rating subsidy
Subsidize issuance costs
First-loss guarantee for securitized transactions (e.g. SMEs)

Grant Facility for Green Bonds

Capital for new investment opportunities
Develop “green” investments in all countries
Respond

to market inefficiencies through a targeted programme
Impact/Cost Ratio is highly favourable
Build on the successes of the large countries
Regional cooperation will bring benefits to all stakeholders