SEB Bank - Green Bonds Framework by Mats Olausson at GIB Summit

Mats OlaussonSenior AdvisorSustainable Products

The Green Bonds Framework –where it comes from and where it is goingGlobal Infrastructure Basel Summit, 22 May 2014

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The Green Bond Story

History of the Green Bond market

� A concept developed by SEB and the World Bank in 2007/08

� Linking environmental and financial risks

� Linking short and long term perspectives

� Designed to encourage sustainable investments

2

Green Bonds – in response to investor demand

Increasing number of investors signing off on the 6 Principles for Responsible Investments (PRI) (1)

Source: Unpri.org(1) PRI is an investor driven initiative in partnership with UNEP Finance Initiative and the UN Global Compact(2) ESG=Environmental, Social & Governance

Growing demand for Green investment opportunities amongst global investors

�Incorporate ESG (2) into investment analysis and decision making proces s1

�Incorporate ESG into ownership policies and practic es2

�Seek appropriate disclosure on ESG by entities in w hich we invest3

�Promote acceptance and implementation of the Princi ples within the industry4

�Work together to enhance our effectiveness in imple menting the Principles5

�Report our activities and progress towards implemen ting the Principles6

6.510

13

1821

25

3432

-

200

400

600

800

1,000

1,200

1,400

Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13

0

5

10

15

20

25

30

35

Number of investor signatories

Assets under management, US$ trillion (right axis)

Market development

3

SupranationalsMunici-palities& Cities

Staterelated agencies

ProjectFinancing

Corporates

The Green Bond market

� Engage and educate mainstream stakeholders of the p otential effects climate change can have on financial assets

� To develop solutions that enable existing mainstrea m financial mandates to engage in climate finance

� To create a unified development of the Green Bond m arket

� Across the credit and yield curves with various typ es of issuers

Green Bond market development A fast growing market

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Top Green Bond underwriters 2007 – end of Q1 2014Select Green Bond issues

SEK 500m

2.750% fixed bond

September 2032

Joint Lead

SEK 2,100m

3.000% fixed bond

April 2019

Joint Lead

SEK 500m

2.915% fixed bond/ FRN

October 2019

Sole Lead

USD 500m

0.750% fixed bond

October 2016

Joint Lead

USD 300m

0.875% fixed bond

January 2017

Joint Lead

USD 250m

1.625% fixed bond

April 2018

Joint Lead

USD 1billion

0.625% fixed bond

November 2016

Joint Lead

USD 550m

0.375% fixed bond

Aug 2015

Joint Lead

EUR 250m (increase)

1.375%

Nov 2019

Joint Lead

SEK 1,575m

3.250% fixed bond

December 2017

Sole Lead

SEK 1,300m

1.774% / FRN

May 2016

Sole Lead

SEK 3,250m

3.500% fixed bond

November 2014

Sole Lead

USD 500m

1.750% fixed bond

February 2018

Joint Lead

USD 500m

0.750% fixed bond

Nov 2016

Joint Lead

SEB Green Bond placements

5

Source: Bloomberg and SEB

5 year SEK 1bn/500m

2.500% / FRN

April 2019

Sole Bookrunner

5 year SEK 850m

FRN

April 2019

Sole Bookrunner

SEB in the Green Bond market SEB is a pioneer and the Global leader within the field of Green Bonds

Source: Climate Bond Initiative

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

6

Green Bond issuers

SEB has worked with the following issuers developing their Green Bond frameworks

Issuer Issuer typeProgramme name Allocations

Earmarked a/c

CICERO Second opinion

Investor reporting

World Bank

(IBRD)Supranational Green Bond

� Mitigation

� AdaptationY Y Y

African Development Bank Supranational Green Bond� Mitigation

� AdaptationY Y Y

City of Gothenburg Municipality Green Bond

� Renewable Energy

� Energy Efficiency

� Water Management

Y Y Y

European Bank of Reconstruction and

DevelopmentSupranational Green Bond

� Mitigation

� AdaptationY Y Y

Export Development CanadaExport Import

AgencyGreen Bond

� Renewable Energy

� Energy Efficiency

� Water Management

Y Y Y

European Investment Bank SupranationalClimate

Awareness Bond

� Renewable Energy

� Energy EfficiencyY Y

International Finance Corporation

Supranational Green Bond� Mitigation

� AdaptationY Y Y

Kommunalbanken, Norway Municipality Green Bond� Renewable Energy

� Waste ManagementY Y Y

Korea Export Import BankExport Import

AgencyGreen Bond

� Renewable Energy

� Energy EfficiencyY Y Y

Svenska Cellulosa AB (SCA) Corporate Green Bond

� Sustainable Forestry

� Renewable Energy

� Energy Efficiency

Y Y Y

Skanska Corporate Green Bond� Sustainable

buildingsY Y Y

Vasakronan Corporate Green Bond� Sustainable

Buildings

� Renewable EnergyY Y Y

First Green Bond issuer

First municipalGreen Bond issuer

First non-supranationalGreen Bond issuer

First corporateGreen Bond issuer

First Nordic listedGreen Bond issuer

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The five pillars of the Green Bond framework

Simplicity – scalability1

Governance – selection process 2

Credibility – vetting of Green 3

Traceability – earmarked account4

Transparency – reporting 5

The Green Bond Principles

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� The Green Bond Principles (GBP) are a set of voluntary guidelines for:

- use of proceeds- process for project evaluation and selections

- management of proceeds and - reporting

� The purpose of the GBP is:

to encourage transparency, disclosure and integrity of the Green Bond market

� Signed by 13 + 12 banks

� ICMA Secretatiat:

- facilitate information exchange with issuers, investors, underwriters, and other stakeholders

- gather input for the annual update of the Green Bond Principles

Cautiously welcomed - with strings attached

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NGOs demand clarification:

� include real commitments by banks to ensure high standards of transparency and disclosure for bond issuances they underwrite;

� reference clear and science-based definitions and criteria of what constitutes “green” under the Principles; and

� commit unambiguously to third party, independent verification of the information on sustainability and use of proceeds reported by Green Bond issuers.

At the hart of it - Verification of Green

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1. World Bank2. AfDB3. EBRD4. IFC5. Kommunalbanken6. KEXIM7. EDC8. City of Gothenburg9. Vasakronan10. SCA11. Skanska12. Stockholm County

Council13. Rikshem

1. EDF2. Unibail-Rodamco3. Iberdrola4. Ile-de-France5. GDF Suez

1. Unilever2. Arise

1. Credit Agricole2. TD-Bank3. Toyota4. BAML5. Solar City6. Hannon Armstrong7. NRW Bank8. Landwirtsch

Rentenbank9. FMO10. Massachusetts11. Regency Centers LP12. Aligera Holding

No 2’nd opinion

No official comment:• EIB• NIB• ADB

Green Bonds Framework: where to from here?

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� Other potential providers of third party verification: MSCI, McKinsey, KPMG…?

� Uncertain outcome – a process involving various stakeholders

� Issue at stake: establishing a solid framework to permit the Green Bonds market to grow and make a difference

� Expanding the CICERO model – work in progress

� Purpose of the CICERO – SEB cooperation

- Establish a prudent framework

- Secure the dialogue between banks and academics

� ”Warehousing arrangement” until a prudent model is in place

� Objective to give equal access to all

� Network of environmental research institutes needed to meet demand

� Possible ways forward:

- Consultancy service – banks pay for vetting of green

- Green Bonds Platform (response to investor demand)

* Information services

* Second opinions

Thank you!