Greenpeace East Asia
Sustainable Finance Inititive
Overview, Framework and Case Studies
Philip B. Wei
Senior Sustainable Finance Advisor
Greenpeace East Asia
philip.wei@greenpeace.org
April 2, 2011 in Beijing
Agenda
1
Sustainable Finance Introduction
2
Policy Consultation Case
3
GAR Finance Campaign Case
4
The Forthcoming Climate Finance Program
Page 2
Agenda
1
Sustainable Finance Introduction
2
Policy Consultation Case
3
GAR Finance Campaign Case
4
The Forthcoming Climate Finance Program
Page 3
The Framework of the Sustainable Finance Inititive
Strategic & Regulatory
Consultation
 CSR, SRI , Climate Finance
Standards and Principals
(e.g. Carbon Disclosure,
Equator Principals)
 Green Finance Policies
 etc.
Environmental Risk
Disclosure
Green Solutions
Promotion
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Renewable Energy
Carbon Market Development
Clean Tech, Waste Management
Ecological Agriculture and Forestry
etc.
Page 4
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Climate Change Risks
Energy Risks
Reputational Risks
Legal and Social Risks
etc.
The Foundamentals of the Finance Sector and How we work
accordingly
Provide Scenarios & Outlooks
Risk
Promote New Opportunities
Change Risk Perception
Return
Analytical
Model and Data Based
Page 5
Solid Research with Financial Partners
On the Risk Side: Environmental Disaster = Economic Disaster?
Stock Price of BP (NYSE) After the Oil Spill
Apr.20:Rig sinks in Gulf of
Mexico, oil spill risk looms
59.48 USD
May 24:The U.S. government
piled pressure on BP Plc to
clean up a "massive
environmental mess" in the
gulf of Mexico
S&P 500 Index
May 31:BP removed from Dow
Jones sustainability index
Jun 1/9:U.S. government has
launched a criminal probe
Jun 18:credit rating
agency cut BP’s rating
Moody’s: Aa2 —A2
S&P: AAˉ —A
Fitch: AA—BBB
26.75 USD
Apr
Source: Reuters
May
Jun
Page 6
The Same in China?
Stock Price of Zijin Mining Group (HKSE) After Pollution Affair
HENG SENG Index
Jul 12:Zijin's copper mine
sewage contaminates river.
5.58 HKD
4.47 HKD
Jul 13
Source: Reuters
Jul 19
How should We Send the Risk Information to the Financial Sector?
NGO Voice
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Biodiversity Issues
Climate Change Issues
Deforestation Issue
Food & Agriculture Issues
Toxic Issues
Pollution Issues
Health Issues
Community Issues
Globalization Issues
Labor Issues
Social Issues
Human Rights Issues
Poverty Issues
Development Issues
Etc.
Environmental & Social
Risk Analysis (ESRA)
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Environmental Risks
Political Risks
Biodiversity Risks
Climate Change Risks
Social Risks
Etc.
?
ESRA Institutions
• MSCI ESG Research
• TruCost
• Systainalytics
• Muddy Waters
Research
• EIRIS
• ERM
• CERES
• Etc.
Page 8
Financial Sector Interest
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•
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•
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Economic Trend
Policy Trend
Market Trend
Industrial Trend
Company Profitability
Management Quality
Innovation, IP
Product Development
Supply Chain
Business Expansion
Mergers & Acquisitions
Market Entrance
Price per Share
Return on Investment
Etc.
On the Return Side: Sustainable = Profitable?
Performance of Dow Jones Sustainability World Index (DJSI World)
Overall Index Performance
-> Mixed Performence
In the Economic Upturn
-> Outperform
In the Economic Downturn
-> Underperform
Source: Dow Jones Sustainability World Index Factsheet, July 2010
Page 9
In China, the SSE Social Responsibility Index (000048) is not able
to significantly outperform the Shanghai Composite Index either
Shanghai Composite Index
Social Responsibility Index
Dec 2010
Source: Google Finance, as of 28 February 2011
Jan 2010
Page 10
Feb 2010
Despite the stimulus, clean energy stocks are less favorable for
investors, underperforming the S&P by over 20%, the oil sector by
over 40%
WilderHill New Energy(NEX) Global Innovation Index 2010
Source: Bloomberg New Energy Finance 2010
Page 11
Agenda
1
Sustainable Finance Introduction
2
Policy Consultation Case
3
GAR Finance Campaign Case
4
The Forthcoming Climate Finance Program
Page 12
Global Sustainable Stock Exchange Development lead by Emerging
Market Exchanges (S. Africa, Singapore, Malaysia, China, etc.)
Page 13
The Role and Influence of the Stock Exchanges
Source: BM&FBOVESPA
Page 14
Paticipated 2 Consultations on Environmental Information Disclosure
Chinese MEP 2010-09
Singapore Exchange 2010-10
Page 15
Our Demands on Sustainability Reporting
1. Mandatory Reporting Regulation by Stock Exchanges
2. Integrated Sustainability Reporting with Financial Reporting
3. High Sustainability Impact Sector Classification
4. Sector Specific Reporting Criteria and Guideline
5. Supply Chain Sustainability Disclosure and Management
6. Financial and Regulatory Penalties for False and Misleading Disclosures
Page 16
Agenda
1
Sustainable Finance Introduction
2
Policy Consultation Case
3
GAR Finance Campaign Case
4
The Forthcoming Climate Finance Program
Page 17
The Worst of the Worsts: Sinar Mas Group – A WIDJAJA Family
Controlled Empire
GAR and APP – the
Key Corporate
Campaign Targets
Page 18
Sinar Mas Finance Analysis
Equity Finance of GAR and the potential IPO of GEP are the Tipping Points
Equity Financing (2008)
Pulp & Paper
Palm Oil
Biz
Sector
Debt Financing (2008)
Stock
Subsidiary
Stock Market
Bond
Loan
Volume
Proport
-ion
Volume
Proportion
Volume
Proport
-ion
Golden Agriresources Ltd.
Singapore (GARPF.PK)
USD 4,482
million
65%
N/A
N/A
USD 5,633
million
8%
PT Sinar Mas
Agro Resources
and Technology
Tbk
Jakarta (SMAR.JK)
Rp 3,528
billion
44%
N/A
N/A
Rp 1,388
billion
17%
Golden East
Paper (Jiangsu)
Co.,Ltd
Potential IPO in
Shanghai / Hong Kong
N/A
N/A
N/A
N/A
CNY 4,813
million
N/A
PT Indah Kiat
pulp&paper Tbk
Jakarta (INKP.JK)
USD 2,186
million
36%
USD 2,062 million
34%
USD 1,045
million
17%
PT. Pabrik
Kertas Tjiwi
Kimia, Tbk.
Jakarta (TKIM.JK)
USD 624 million
27%
USD 953 million
41%
USD 409 million
18%
Source: Profundo 2008
Page 19
Foundamental Financial Reserch
from Databases such as Thomson-Reuters, Bloomberg, etc.
Resarch Areas
Item #
FM-1
FM-2
Financial
FM-3
FM-4
Monitoring
FM-5
FM-6
ER-1
ER-2
Equity Finance ER-3
Research
ER-4
ER-5
ER-6
DR-1
DR-2
Debt Finance
Research
Research Items
Share Price
Share Issuance
Bond Price
Bond Issuance
Mergers & Acquisitions
Key Business Operation eg. Market Entrance, Capacity Expansion
Equity Research Reports (GAR, PT SMART)
Equity Analyst List (GAR, PT SMART)
Stock Market Indicies List (GAR, PT SMART)
Shareholder List (GAR, PT SMART)
Share Underwriter (Investment Banks) List (GAR, PT SMART)
Financial Advisor (Consulting, Law, Accounting Firms) List
Credit Rating Reports (GAR, PT SMART, Golden East Paper)
Credit Rating Analyst List (GAR, PT SMART, Golden East Paper)
DR-3
Loan Lender (GAR, PT SMART, Golden East Paper)
DR-4
DR-5
DR-6
FI-1
Bondholder List (GAR, PT SMART, Golden East Paper)
Bond Underwriter (Investment Banks) List (GAR, PT SMART, Golden East Paper)
Financial Advisors (Consulting, Law, Accounting Firms) List
HSBC
FI-2
Key Financial
Institutions'
FI-3
Transaction with
FI-4
Sinar Mas
FI-5
FI-6
Credit Suisse
UBS
Citi Group
BNP Paribas
Other Financial Institutions
Page 20
Priority
Medium
High
Medium
High
High
High
Medium
High
High
Medium
High
Low
Medium
Medium
b
b
b
b
b
b
b
3
3
3
3
3
q
3
High
Medium
High
Low
3
3
3
3
High
1
High
3
Stakeholder Analysis – Equity Finance
Regulator, Index Maker and Equity Analyst are the Tipping Points
high
Tipping
Index Makers
Regulators
Points
Equity Analyst
Listed Companies
Size and Amount
Convience, Lobby Hardly
Manage, Align Closely
Shareholders
Financial Research Firms
Underwriter
Stock Exchange
Financial Media
- small
- median
Power median
- big
Monitor
(Minimum Effort)
NGOs
Mobilize, Keep Informed
low
negative
neutral
Interest
Page 21
positive
Targeted Index Maker and Equity Analyst for Golden AgriResources Ltd
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MSCI AC Far Est ex-Japan Index
MSCI Singapore Free Index
Strait Time Index
Dow Jones Singapore Titans 30 Index
Rogers-Van Eck Index
etc.
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BNP Paribas
CIMB
CLSA
Daiwa Institute of Research
Deutsche Bank
JP Morgan
Morgan Stanley
Nomura Securities
OCBC
OSK
Phillip Securities
Standard Chartered
etc.
Source: Golden Agri-Resources Ltd Annual Report 2009
Michael Greenall
Ivy Ng Lee Fang
Wilianto Ie
Chris Sanda
Niklas Olausson
Chang Ying Jian
Koh Miang Chuen
Ken Arieff Wong
Carey Wong
Alvin Tai
Research Team
Adrian Foulger
Page 22
Example Equity
Research Report
on GAR by
OCBC:
Stakeholder Analysis – Debt Finance
Regulator, Rating Agency and Underwriter are the Tipping Points
high
Bank Lender
Regulator
Tipping
Rating Agencies
Points
Underwriter
Size and Amount
Convience, Lobby Hardly
Manage, Align Closely
Fixed Income Analysts
Financial Reserch Firms
Bondholder
Financial Media
- small
- median
Power median
- big
Monitor
(Minimum Effort)
NGOs
Mobilize, Keep Informed
low
negative
neutral
Interest
Page 23
positive
Rating Record for Golden East Paper
Agency
Year
2007
2007-06
中诚信
Moody's
China
Rating
A
A-1
A-1
2008-05
A+
Report
Contact
郭冰bguo@ccxi.com.cn
曹红丽hlcao@ccxi.com.cn
孙蕴ysun@ccxi.com.cn
Tel:010-66428877 Fax:010-66426100
王丽丽wanglili@tpbond.com
Tel:021-54252513
郭冰bguo@ccxi.com.cn 孙蕴
ysun@ccxi.com.cn
A-1
A-1
2009-01
安博尔
ABE
2008-11
Credit
Rating
A+
AAA
李燕 yli@ccxi.com.cn
栾淑伟shwluan@ccxi.com.cn
安博尔 0571-85104798
abe@ccn86.com
Page 24
Report: Fitch
Ratings Global
Corporate Finance
1990-2005
Transition and
Default Study
Policy and Regulatory Change in Indonesian
Policy and Regulatory Change in other import and production countries
Customer Resistance through NGO Attack
Reputational Risks
Business Partner Resistance
Money Laudring by Sinar Mas
Fraud Risks
Curruption in Indonesian
Increase of Carbon Tax, Carbon Price
Market Risks
Commodity Price of Palm Oil and Timber (further analysis needed)
Contract cancellation by large buyers and distributors (e.g. Unilever, Tesco)
Revenue Risks
Retail Customer Resistance
Financial Market L. Points
Financial Institution Leverage Points
Campaign Leverage Points: Risks, Standards and Policies
Political Risks
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International Sustainable Finance Standard
Country Level Policies in China
United Nations Global Compact Initiative
Equator Principles
UNEP Financial Initiative
UN Principles for Responsible Investments
Climate Principles
Global Reporting Initiative
etc.
 “Green Credit” Policy《关于落实环保政策法规防
Page 25
范信贷风险的意见》
 “Credit Blacklist” by Minister of Environmental
Protection (MEP)
 “Green Securities” Policy《关于进一步规范重污
染行业生产经营公司申请上市或再融资环境保护核
查工作的通知》
 “Green Insurance” Policy《关于环境污染责任保
险的指导意见》
Financial
Market
Financial
Institution
Actitivies and Achivements of the GAR Finance Campaign
Transaction
Cancellation
 HSBC, BNP Paribas Divestment and Business Suspension
 Credit Suisse, UBS Business Suspension
 Consultation of World Bank / IFC Palm Oil Policy
Policy/Standard
 Palm Oil Policy Establishment of HSBC, Credit Suisse, BNP
Improvement
Paribas
Regulatory
Claim
Market
Influence
 Consultation of the Sustainability Reporting of SGX on
Environmental Information Disclosure of Palm Oil Sector
 Influence on Environmental and Social Performance Rating
(Responsible Research, Sustainalytics, MSCI ESG Research)
 Lobbied Equity Analysts and key shareholders
Page 26
The Result of the GAR Corporate & Finance Campaign
Page 27
Agenda
1
Sustainable Finance Introduction
2
Policy Consultation Case
3
GAR Finance Campaign Case
4
The Forthcoming Climate Finance Program
Page 28
The Overall Strategy on Climate Change Mitigation & Adaptation
Lobby the government to actively participate in
global treaty and set promising carbon
mitigation and renewable energy target and the
climate change legislation
Climate
Legislation
Market & Financial
Mechanisms Set-up
Green Tech Deployment &
Carbon Emission Reduction
Page 29
Advise government setting up carbon tax and
carbon market based on historical and
international experiences, make it feasible and
functional; boost the Low Carbon Investment
and Banking
With high carbon price, advocate
renewable and clean tech as better
alternative, as well as reduction in
carbon intensive industries e.g. coal
The Forthcoming GPEA Climate Finance Program 2011-2013
Research on Price on Carbon and its Mechanisms: Tax & Trade
Policy Lobby & Advocacy on Voluntary & Internal Trading
Policy Lobby & Advocacy on Cap-and-Trade for the Energy Sector
Policy Lobby & Advocacy on Low Carbon Investment
Policy Lobby, Ranking & Advisory on Low Carbon Banking
Clean Energy Technologies Promotion to PE/VC
Clean Energy Projects Show-case to PE/VC
Financial and Economic Case for Clean Energy vs. Fossil Fuel
Page 30
Thank You!