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Keynote Address bySOMAK GHOSHPresident Corporate Finance & Development Banking YES BANK Ltd.given at the TBLI CONFERENCE ASIA 2008.
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Sustainable Finance
Converting Risks in to
Opportunities
Keynote Address by
SOMAK GHOSHPresident
Corporate Finance & Development Banking YES BANK Ltd.
Paradigm Shift – Periphery to Mainstream
From the intellectual labyrinth to day-to-day lexicon
of global businesses and core business strategy
Current thinking in Sustainability
Aligned to core strategy
Helps businesses understand and respond to changing
social and environmental pressures/realities
Enables innovation in process and products
Helps identify new potential markets
Lends competitive advantage
Long-held beliefs…. “Business of business is business ”
As a ‘an artificial person’ a corporation does not have responsibilities
Profits the only responsibility of business as long as it stays within the rules of the game
Realisation that businesses do not operate in a vacuum; taking cognisance of changing market realities and mainstreaming sustainability Goal of business is to deliver long term value
Focus on short-term profits, ignoring long-term sustainable growth detrimental for business
Accounting for and using resources efficiently and responding to needs of society is the RESPONSIBILITY of business
Paradigm Shift – Periphery to Mainstream
Business Case for Sustainability – Drivers for Sustainability
Rapid Globalisation – increasing integration; what happens in one part of the world affects the rest
Changing Ecosystem – rising temperatures, melting glaciers, finite natural resources, significant demand-supply mismatch pushing up cost of resources
Consumer Preference – increasing awareness of and sensitivity to clean and green issues pushing up demand for clean products & services
Regulation – in 2000 Brazilian state-owned company Petrobras fined $ 28 million and $ 118 million for two oil spills, highest fines ever in Latin America
Stakeholders for Sustainability
GE - to invest $1.5 billion a year in clean tech R&D by 2010, part of Ecomagination strategy
BP – alternative energy unit spending $8 billion over 10 years for solar, wind and hydrogen
Toyota – $ 8 billion for its hybrid and fuel-cell development in 2006
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Goldman Sachs – clean energy investments of $2 billion in companies such as First Solar, GridPoint, Iogen and SunEdison
Kleiner Perkins Caufield & Byers (investor in in Amazon.com, Google & Netscape) created $ 200 million Greentech investment fund
Vinod Khosla, Founding CEO of Sun Microsystems, picked up a 15% stake in a leading Indian microfinance institution, SKS Microfinance
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Japan - 10 year programme in 1990s to fund growth of solar PV industry; today flourishing without significant subsidies
Germany – significant investment in solar and biodiesel industries
China – committed to investing $180 billion over 15 yrs for clean energy
India – government to deliver electricity to 56% of 700 million rural residents lacking access to electric power by 2012 – 50% from renewable resources
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Banks & Sustainability
A bank transforms money in to place, term, size and risk in an economyand, as such, it affects economic development. This influence is not onlyquantitative but can be qualitative since banks can influence the nature
ofeconomic growth (Marcel Jeucken)
Source: “Sustainable Finance: Strategy Options for Development Financing Institutions,” Gilbert Heim and Oliver Zenklusen (Sept, 2005)
Banks & Sustainability
Equipped to weigh risks, can attach prices to risks and use price differentiation to foster sustainability
Can use carrot & stick approach – lend at higher rate to environmental laggards and lower rate to environmental front-runners
Sustainability – Risk Mitigant for Banks
Source: “ Just a Fad?”, Oliver Zenklusen and Gilbert Heim, Ecofact AG, Zurich (2005)
Sustainability @ YES BANK
Cognizant of responsibility as a Public Trust Institution to mainstream sustainability within the Indian context
Vision to create a commercially viable financial institution that incorporates sustainability in core business focus through
Fourth Generation Sustainability not Philanthropy
Identifying and fostering sustainable businesses in sunrise sectors including
Infrastructure Information Technology Bio-tech and Pharma Agriculture Social Infrastructure Sustainable Livelihoods
SUSTAINABILITY @ YES BANK
Deal Generator
Deal Generator
SUSTAINABILITY in ACTION
Deal Generator
Not for profits
Microenterprises
Responsible Banking (CSR & Sustainability
Initiatives)
Agri & Rural Banking (ARB)
Sustainable InvestmentBank (SIB)
Idea Formation“development
finance in thought”
Projects
Microfinance
InvestmentBanking
Rural Lending
Alternative Energy &
Environment
CarbonFinance
SocialEnterprises
Microfinance Institutions Group (MIG)
YES SAMPANN: Direct Lending
ThoughtLeadership /
AdvisoryLending Lending
Advisory /Private Equity /
Funding
SUSTAINABILITY in THOUGHT
Sustainability Financing – Suzlon
Suzlon Energy Ltd – ‘house banker’ to Suzlon, among
worlds top 5 wind turbine manufacturer Managed IPO in 2005
Sole Strategic & Financial Advisor to raise USD 25 mn. growth
capital in 2004 (entry at a business valuation of USD 120
mm approx, grown to USD 3 bn. appx)
Sole Advisor on key acquisitions Hansen Transmission ( USD
565 mn) 2006 & RE Power Systems ( USD 1.2 Bn) 2007
Advisory Date: Over 2004-2007Bank’s Exposure to Company: USD 25-30 milRegion/Sector: South Asia / Wind Energy
Honey Beekeeping – structured trade transaction solutions to augment sustainable livelihoods of over 2000 honey beekeepers winning the EUROMONEY Deal of the Year
Paramparik Karigar – structured trade facility to Paramparik Karigar, NGO of Indian craftsmen, enabling 27 craftsmen to exhibit indigenous Indian handicrafts at “ Gateway of India Exhibition” held in New York, March 2007
Sustainability Financing – Select Initiatives
YES BANK - Bank of Choice for Business of the Future
YES BANK – Future of Alternative Investments
THANK YOU
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