financing
sustainable
development
Association of Development Financing Institutions in Asia and the Pacific
The Asia-Pacific Finance & Development Forum
“Fiscal and Financial Policies for Low-carbon Economic
Development”
The Role of Development Finance Institutions in
Green Governance & Finance: The ADFIAP
Experience
Octavio B. Peralta
Secretary General, ADFIAP
www.adfiap.org
AGENDA
ADFIAP and its Mission
The Need for and Role of DFIs
The Business Case for Green Governance
ADFIAP & DFIs: Case Studies on Green Finance
Green Governance Initiative
Concluding Remarks
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Introducing…ADFIAP
Asso. of Development Financing Institutions in Asia & the Pacific
120 member-institutions in 43 countries & territories
Founded in 1976 during the 6th ADB conference for DFIs
Founding member & Secretariat of the World Federation of DFIs
An NGO in consultative status with the UN ECOSOC
Member, UNEP Finance Initiative Asia-Pacific Task Force
EU-Asia Pro Eco Programme grantee on Environmental Governance
2008 Winner of ASAE’s Associations Make a Better World Award
Permanent secretariat is in Manila, Philippines
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
ADFIAP’s Mission & Focus Areas
“Financing Sustainable Development”
•MSMEs
•Trade
•Agriculture
•Industry
•Technology
•Infrastructure
•Services
•Financial Inclusion
•Social Housing
•Education & Health
Economic
Social
Governance
•Climate change
•Environment finance
•CDM
•Carbon finance
•Others
Environment
•Corporate Governance
•Institutional Integrity
Mission & Focused Areas
ADFIAP’s Sustainable Development Pillars
Sustainable Development
Good Governance
Environmental Finance
SME Finance
Social Finance
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
DFI vis-à-vis DB
A Development Financing Institution (DFI)
connotes a broader term since not all DFIs
are “banks” per se. However, alternatively
and for ease of terminology, it can also be
referred to as a “development bank.”
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
The Need for Development Banks
1 Need for an “special purpose institution” 2 Need to provide financing to the
to accelerate long-term investments to
create employment and achieve rapid
national growth.
“engines of growth” to achieve a higher
degree of productivity and efficiency in the
economy.
3 Commercial banks are usually contented 4 A case of “market failure” requiring
with short-term banking activities and are
reluctant or are not in a position to support
national priorities of long-term investment in
the real sectors.
national governments to intervene in the
financial markets.
The underlying principle is that long-term resource allocation should be done by businessoriented financial institutions vis-à-vis direct allocation by the government.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Roles of a Development Bank
Initiator
Plays a “supplyleading” role (in
anticipation of
future demand)
e.g., technology
transfer,
strategic
industries,
environmental
projects
InstitutionBuilder
Develops new
methodologies &
systems in
raising capital &
increasing
investments
through nontraditional areas,
e.g., financing
large projects via
BOT, BOL, BOO,
etc.; capital
market;
microfinance
Catalyst
Takes a lead role
in creating new
financial
packages with
involvement of
banks & other
financial
institutions, e.g.,
loan syndication
of large projects;
guarantee
schemes for
industry sectors
Development
Advocate
Bank of Last
Resort
Promotes the
‘business’ of
development
such as job
generation,
domestic
resource
mobilization,
country-side
development,
MSMEs
Assists projects
that no other
financial
institution will
fund, thus
promoting new &
innovative
economic
activities, e.g.,
funding for
inventors,
cooperatives and
high-risk
investments
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Institutional Linkages of a
Development Bank
Regulatory
Body
• Capital
• Enabling policy
Institutional
Strengthening
Loan
T.A.
Project
Proponent
Government
F/S
Repay
• Dividend
• Development advice
Repayment
DEVELOPMENT
BANK
IFIs
Funds
Capital Markets
Loan
• job creation
• earnings
• technology transfer
• other economic benefits
• Repayment
• Participant
• Wholesale Loans
• Syndication
Commercial Banks
Info/
support
Project Ideas
Public /
Private Sector
Financial Institutions
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
General Types of Development Banks Today
 policy banks – directly support the national
government’s economic policy plans & directions. Ex.
China, Malaysia, etc.
 special-purpose DBs – support focused sectors of the
economy. Ex. SME Bank Thailand, Agro Bank
Malaysia, Housing Bank India, etc.
 multi-purpose DBs – also called “universal banks” –
support both development projects as well as
commercial businesses. Ex. Philippines, India, Sri
Lanka, etc.
 commercially-oriented DBs – support development
through commercial banking services. Ex. Singapore
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
The Business Case for Green Governance
Climate change effects on business organizations
As early as 2006, a report analysing greenhouse gas emissions of the 500 world’s
largest publicly-traded companies found that businesses will not be immune to the
predicted changes and may experience disturbance to their operations and
profitability.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
The Business Case for Green Governance
Climate change effects on business organizations
it makes good business sense for business
organizations to start accounting for their own
greenhouse gas emissions, according to a report
issued by the World Resources Institute.
The benefits include:
- identifying reduction & subsequent money-saving
opportunities;
- cutting the company’s regulatory risks that may result
from more stringent regional, national, or
international efforts to curb global warming; and
- enhancing reputational status in the eyes of the
consumers and other stakeholders.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
The Business Case for Green Governance
Direct financial gains
• cost savings (in energy/water use, paper, etc.)
• cost-consciousness among employees
• lower future compliance costs
Reputational/Image benefits
• attract & retain customers
• attract & retain good employees
• better recognition in society & public in general
Work place benefits
• proper facility management
• accident-free environment
• healthier working environment
Environmental/Ecological Gains
• clean environmental services & access to natural resources
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
The Business Case for Green Governance
Being a value-driven company
Tangible value drivers:
Profitability
reductions in resource use,
health and safety
excellence, responsibility
beyond compliance,
environmental performance
measurement,
sustainability
communication
Asset utilization
Service quality
Shareholder
value creation
Intangible value drivers:
Customer relationships
Brand equity & reputation
Stakeholder interests on the
company‘s products &
services
Alliances
Source: GEMI
Technology
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Starting from within:
The Environmental Governance Project
www.egs-asia.com
The issue of environmental
governance has been and will
always be in the forefront of
ADFIAP’s activities.
ADFIAP’s “Greening of DFIs”
Project is its collective and
responsive effort to pursue
sustainable development through
its adherence to the principles of a
safe and clean environment, not
only as part of good corporate
citizenship, but more importantly,
as an integral part of sound
business practice.
- ADFIAP Board of Directors
•About 300 CEOs and senior staff were involved in the project in ADFIAP
regional, sub-regional and national meetings & conferences;
•A new ADFIAP publication, Greenbank, was developed and produced
for dissemination to members and other networks; and
•An Environmental Category has since been included in the annual
ADFIAP Awards program for outstanding achievements of member
banks.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Starting from within:
The “Greening of DFIs” Project
Sustainability Report 2009
Water Financing
Carbon Offset
Certificate
Green Banking Book Launch
Project Partners
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
www.devbankphil.com.ph
DBP Forest: Greening the countryside
Clean Development Mechanism* (CDM):
The CDM is an arrangement under the Kyoto Protocol
which allows industrialized countries with a
greenhouse gas reduction commitment to invest in
initiatives that lessen emissions in developing
countries as an alternative to more costly emission
reduction measures.
Environmental Development Project* (EDP)
Local government units, government-owned and
controlled corporations, cooperatives, water districts,
private corporations and private water service
providers can access long-term funds through DBP
and its participating financial institutions to mobilize,
encourage, and support activities and investments in
environment-friendly projects.
* With the Japan Bank for International Cooperation (JBIC)
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
www.dfccbank.com
Renewable Energy for Rural Economic
Development (RERED) Project
Cumulative Approvals &
Disbursements of Credit under
RERED & RERED-Additional
Financing as at 30 Sept. 2008
To expand the commercial provision and utilization of
renewable energy resources and improve the quality
of life in rural areas in Sri Lanka.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
www.bpmb.com.my
Biofuel Financing Scheme
Financing to all biofuel-related activities including processing of biofuel produced from
agricultural products such as palm oil, rapeseeds, soybeans, linseed, jatropha,
coconut oil and mustard seeds, or from waste cooking oils and other organic
products.
Renewable Energy & Energy Efficiency Scheme
Supports government efforts in developing and enhancing the RE & EE projects that
have an environmental benefits from the renewable-related projects.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
www.sidbi.in
Financing Scheme for Energy-saving projects in the MSME Sector – encourage MSMEs
to undertake energy-saving investments in production facilities to reduce energy consumption, enhance
energy efficiency, reduce CO2 emissions, use alternative and renewable energy sources, etc.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
www.cdb.com.cn
CDB’s initiatives:
controlling loans to industries with high
energy consumption and high pollution.
expediting the upgrade of outdated
production methods.
financing industrial pollution treatment and
ecological environment protection projects.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Green Finance of other ADFIAP Members
SME Development Bank of Thailand – provides loans for hire-purchase of
natural gas vehicles
Bank of Khyber – assists small entrepreneurs to finance purchase of /conversion to
natural gas auto rickshaw
Lankaputhra Development Bank – to open avenues for small farmers to move
towards new technology, techniques and market opportunities
Land Bank of the Philippines – provides financing for bio-fuel projects sourced
from a kind of plant called jatropha curcas
Bank of Maharastra – provides loans for adoption of renewable energy
practices and use of solar home systems
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Green Finance of other ADFIAP Members
Weather-Indexed Insurance for Agriculture in Developing Countries
A Market Mechanism for Climate Adaptation
aimed at alleviating the negative impacts of extreme weather on farming households and
village economies by compensating part of the damage caused to farming products
pilot project is a scheme whereby insurance premiums are paid by industrial countries and
climate disaster compensation payouts are received by developing country
governments or local governments.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Green Governance Initiative
Driving the initiative
Regulatory
Bodies:
Business
Sector:
Central Bank
Securities Com.
Stock Exchange
Banks
Corporations
Listed Cos.
•Regulations
•Directives
•Policies
•Practices
Green
Governance
•Board structure
•Board policy
•“Scorecard”
Low Carbon
Economy
Sustainable
Development
& Growth
•Renewable Energy
•Clean Technology
•Others
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Green Governance Initiative
Corporate Governance
Green Governance
1. Independent directors/fit & proper rule
1. At least one director knowledgeable on climate
change/environmental issues
2. Board committees
2. A separate environment committee or as part of
the risk management committee; an
environmental management unit under the Board
3. Corporate governance code
3. Environmental governance code or policy
approved by the Board; environmental risk
management integrated in operational decisions
4. Reporting and disclosure
4. Issuance of an integrated annual and
sustainability report or a standalone sustainability
report
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Concluding Remarks
Currently, climate change and environmental issues
are not merely discussed in boardrooms or part of
company CSR, they are being imbedded as part of
new a business model and future sustainability.
A “green governance” initiative can be built in into
existing corporate governance policies and practices.
One organization like ADFIAP can only do so much to
advocate green governance and finance. It takes other
like-minded institutions and partners to make it work.
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China
Thank you for your kind attention!
Let’s all help save our one Earth!
Image: Miguel Villagran/Getty
Asia-Pacific Finance & Development Forum, November 26, 2010, Shanghai, China