Engaging Banks in Green Finance-January 2011


Engaging Banks in Green Finance-January 2011

« Engaging partner banksin green finance »Laurent DuriezIstanbul, 131January 2011

1. AFD at a glanceEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 2

AFD at a glance AFD: main French instrument for international development aid AFD (AAA rated, not for profit bank & development agency) PROPARCO: private sector subsidiary (funding at market rates) FFEM (the French GEF) Strategy focusing on sustainable development Reducing poverty in developing countries (water, health, education, rural andproductive sector) Supporting economic growth (developing private and financial sectors, infrastructure) Sharing global challenges in emerging countries (clean energy, environmentalprotection, global warming, biodiversity) Total commitment in 2009: € 6.2 billionEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 3

AFD Countries of operation Presence in 60+ countries, (historical Mediterranean presence)TraditionalregionsRelatively newregions (in Turkeysince 2005)French overseasterritoriesEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 4

Wide range of clients & products AFD Group provides funding/support to: Governments Publics enterprises & entities Local governments Commercial or state owned banks Private enterprises & projects Wide range of financing tools Non-sovereign loans (concessional or market conditions) Sovereign loans (from very concessional to market conditions) Guarantees on loans in foreign or local currency Credit enhancement of bond issues Equity investment & quasi equity instruments Grants (projects, study, FFEM)Engaging Banks towards Energy Efficiency for SMEs 13 January 2011 5

Environmental / Climate Change (CC) commitmentson the rise Integration of environmental & climate change challenges into AFD’s strategy:supporting low carbon investments French Contribution to international commitments on climate change agenda CC Cumulative commitments in 2009: € 2.4 billion euros (+93% increase inone year, representing 40% of AFD’s global commitments) Sectors: renewable energies, energy efficiency, carbon sequestrationprojects in sustainable forest management and agroecology Impacts: projects have saved 4.88 million tons of CO2eq (compared to 3.3million tons of CO2eq the previous year).Engaging Banks towards Energy Efficiency for SMEs 13 January 2011 6

2. AFD in TurkeyEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 7

AFD in Turkey AFD supports the priority targets set by Turkey in order to promotesustainable growth: promoting environmentally respectful development with low greenhousegas emissions fostering socially and environmentally responsible practices contributing to a well balanced regional development Total commitments over the 5 past years: € 1 billion (incl. € 500 million on theClimate Change agenda: renewable energies, energy efficiency, publictransport, etc.); banking sector representing 75% of total commitmentsEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 8

What/who do we support? Reduction of green house gas emissions and pollution abatementprojects (RE&EE) Municipal investments in infrastructures and local public services Support to SMEs : Corporate social responsability, down-scaling, micro& mesofinanceEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 9

3. Engaging partner banks in“green finance”Engaging Banks towards Energy Efficiency for SMEs 13 January 2011 10

Banks’ typical stages in integrating thesustainability agenda1. Defensive reaction Delaying or opposing environmental aspects as funding criteria (environment =potential dealbreaker)Underestimating the market potential of green finance(too complicated, less profitable than traditional business)>> Market study: « Engaging Turkish banks in Scaling-up investment on Climate Change in Turkey »,20082. Reactive bankingInclusion of environmental aspects into internal activities (CSR)Reduction of credit risk by integrating environmental issues in the credit riskassessment processes3. Active sustainable bankingProactive, full integration of environmental & social risk management in lending cycle,Continuous search for and promoting of “green” financing solutions,Active promotion of CSR throughout client baseEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 11

AFD’s approach in engaging partner banks Promoting sound E&S risk management Appraisal of E&S risks inherent in bank portfolio and assessment of existing E&S riskmanagement practices If needed, stimulate progress through an E&S upgrade plan (financial and technicalsupport, result monitoring) Helping banks in taking an active stance in “green finance” Engaging senior bank management Studying market potential for green finance solutions Stimulating action (green financial product design, roll-out strategies, partnerships) Providing adequate funding (concessional/market rates, maturity) Sharing risk (such as ARIZ partial risk guarantee scheme) Helping to join up with government initiatives Ensuring measurable results and leveraging carbon financeEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 12

Challenge of EE for SMEs The weight of SMEs in the Turkish economy Industrial and service SMEs account for a major share of the economy: constitute99.5% of the companies, 77% of total employment and 26.5% of investments The sectoral distribution of SMEs in Turkey is: 46% trade, 14% manufacturing sector,14% transportation, 9% hotels and restaurants EE can be a key factor of competitiveness SME energy consumption at 14.4 Mtoe account for around 46% of total industry energyconsumption and 19% of Total Final Consumption (TFC) Basic energy management procedures and low cost energy efficiency investments canprovide significant savings, increasing productivity and thus competitiveness. SME estimated energy efficiency potential is sizeable at 1 Mtoe per year or 7% of totalSMEs’ energy consumption Climate Change : Significant impact on carbon emissions reductionEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 13

AFD’s support to EE projects of Turkish SMEs Institutional support for KOSGEB in the framework of Government policies Contribute to reinforce KOSGEB capacities in its new EE mandate Contribute to develop effective energy efficiency services by KOSGEB and otherstakeholders EE Credit Lines dedicated to Turkish SMEs through partner banks AFD/TEB partnership AFD/Halkbank partnership Specific contents Technical assistance programs : awareness raising, tools for better decision-making,assistance in making project ideas bankable, building-up management capacity, resultmonitoring, free energy audits … Tools designed by AFD : EE assessment tool, Carbon footprint toolEngaging Banks towards Energy Efficiency for SMEs 13 January 2011 14

Thank you for your attention.Documentation available online:“AFD Group and CSR in the banking sector”“AFD and Climate Change”Background paper “Banks for sustainable Development: Promotingthe Competitiveness of SMEs through CSR”, 2009Working parer: “Corporate Social Responsibility in Turkey:Overview & perspectives”, 2007Market study: « Engaging Turkish banks in Scaling-up investmenton Climate Change in Turkey », 2008

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