Greenpeace East AsiaSustainable Finance Inititive
Overview, Framework and Case Studies
Philip B. WeiSenior Sustainable Finance AdvisorGreenpeace East [email protected]
April 2, 2011 in Beijing
Agenda
3 GAR Finance Campaign Case
1 Sustainable Finance Introduction
Page 2
2 Policy Consultation Case
4 The Forthcoming Climate Finance Program
Agenda
1 Sustainable Finance Introduction
Page 3
3 GAR Finance Campaign Case
2 Policy Consultation Case
4 The Forthcoming Climate Finance Program
Renewable Energy Carbon Market Development Clean Tech, Waste Management Ecological Agriculture and Forestry etc.
Climate Change Risks Energy Risks Reputational Risks Legal and Social Risks etc.
CSR, SRI , Climate Finance Standards and Principals (e.g. Carbon Disclosure, Equator Principals)
Green Finance Policies etc.
Strategic & RegulatoryConsultation
Green Solutions Promotion
Environmental Risk Disclosure
Page 4
The Framework of the Sustainable Finance Inititive
Page 5
Return
Risk
AnalyticalModel and Data Based
Visionary
Long Term vs. Short Term
Promote New Opportunities
Change Risk Perception
The Foundamentals of the Finance Sector and How we work accordingly
Solid Research with Financial Partners
Provide Scenarios & Outlooks
May JunApr
S&P 500 Index
Apr.20:Rig sinks in Gulf of Mexico, oil spill risk looms
Jun 18:credit rating agency cut BP’s rating
Moody’s: Aa2 —A2
S&P: AAˉ —A
Fitch: AA—BBB
Jun 1/9:U.S. government has launched a criminal probe
May 31:BP removed from Dow Jones sustainability index
May 24:The U.S. government piled pressure on BP Plc to
clean up a "massive environmental mess" in the
gulf of Mexico
59.48 USD
26.75 USD
Source: Reuters
On the Risk Side: Environmental Disaster = Economic Disaster? Stock Price of BP (NYSE) After the Oil Spill
Page 6
HENG SENG Index
Jul 19 Jul 13
Jul 12:Zijin's copper mine sewage contaminates river.
The Same in China?Stock Price of Zijin Mining Group (HKSE) After Pollution Affair
5.58 HKD
4.47 HKD
Source: Reuters
?
How should We Send the Risk Information to the Financial Sector?
Page 8
NGO Voice Environmental & SocialRisk Analysis (ESRA) Financial Sector Interest
• 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 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.
• 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.
Page 9
Source: Dow Jones Sustainability World Index Factsheet, July 2010
Overall Index Performance
-> Mixed Performence
In the Economic Upturn
-> Outperform
In the Economic Downturn
-> Underperform
On the Return Side: Sustainable = Profitable?Performance of Dow Jones Sustainability World Index (DJSI World)
Source: Google Finance, as of 28 February 2011
In China, the SSE Social Responsibility Index (000048) is not able to significantly outperform the Shanghai Composite Index either
Page 10
Social Responsibility Index
Shanghai Composite Index
Dec 2010 Jan 2010 Feb 2010
Page 11
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
Agenda
1 Sustainable Finance Introduction
Page 12
3 GAR Finance Campaign Case
2 Policy Consultation Case
4 The Forthcoming Climate Finance Program
Page 13
Global Sustainable Stock Exchange Development lead by Emerging Market Exchanges (S. Africa, Singapore, Malaysia, China, etc.)
Page 13
Page 14
The Role and Influence of the Stock Exchanges
Page 14Source: BM&FBOVESPA
Page 15
Paticipated 2 Consultations on Environmental Information Disclosure Chinese MEP 2010-09 Singapore Exchange 2010-10
Page 15
Page 16
Our Demands on Sustainability Reporting
Page 16
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
Agenda
1 Sustainable Finance Introduction
Page 17
3 GAR Finance Campaign Case
2 Policy Consultation Case
4 The Forthcoming Climate Finance Program
The Worst of the Worsts: Sinar Mas Group – A WIDJAJA Family Controlled Empire
Page 18
GAR and APP – the Key Corporate
Campaign Targets
Page 19
Sinar Mas Finance AnalysisEquity Finance of GAR and the potential IPO of GEP are the Tipping Points
Source: Profundo 2008
Vol ume Proport- i on Vol ume Propor-
ti on Vol ume Proport- i on
Gol den Agri -resources Ltd. Si ngapore (GARPF. PK) USD 4, 482
mi l l i on 65% N/ A N/ A USD 5, 633mi l l i on 8%
PT Si nar MasAgro Resourcesand Technol ogyTbk
J akarta (SMAR. J K) Rp 3, 528bi l l i on 44% N/ A N/ A Rp 1, 388
bi l l i on 17%
Gol den EastPaper ( J i angsu)Co. , Ltd
Potent i al I PO i nShanghai / Hong Kong N/ A N/ A N/ A N/ A CNY 4, 813
mi l l i on N/ A
PT I ndah Ki atpul p&paper Tbk J akarta ( I NKP. J K) USD 2, 186
mi l l i on 36% USD 2, 062 mi l l i on 34% USD 1, 045mi l l i on 17%
PT. Pabri kKertas Tj i wiKi mi a, Tbk.
J akarta (TKI M. J K) USD 624 mi l l i on 27% USD 953 mi l l i on 41% USD 409 mi l l i on 18%
Bond LoanDebt Fi nanci ng (2008)
Palm
Oil
Equi ty Fi nanci ng (2008)
Pulp
& P
aper
Bi zSector Subsi di ary
Stock MarketStock
Foundamental Financial Reserchfrom Databases such as Thomson-Reuters, Bloomberg, etc.
Page 20
Resarch Areas Item # Research Items Priority Due DateFM-1 Share Price Medium bi-weeklyFM-2 Share Issuance High bi-weeklyFM-3 Bond Price Medium bi-weeklyFM-4 Bond Issuance High bi-weeklyFM-5 Mergers & Acquisitions High bi-weekly
FM-6 Key Business Operation eg. Market Entrance, Capacity Expansion High bi-weekly
ER-1 Equity Research Reports (GAR, PT SMART) Medium bi-monthly
ER-2 Equity Analyst List (GAR, PT SMART) High 30-Jul-10
ER-3 Stock Market Indicies List (GAR, PT SMART) High 30-Jul-10
ER-4 Shareholder List (GAR, PT SMART) Medium 30-Jul-10
ER-5 Share Underwriter (Investment Banks) List (GAR, PT SMART) High 31-Aug-10
ER-6 Financial Advisor (Consulting, Law, Accounting Firms) List Low 31-Aug-10
DR-1 Credit Rating Reports (GAR, PT SMART, Golden East Paper) Medium quartlyDR-2 Credit Rating Analyst List (GAR, PT SMART, Golden East Paper) Medium 30-Jul-10
DR-3 Loan Lender (GAR, PT SMART, Golden East Paper) High 31-Jul-10DR-4 Bondholder List (GAR, PT SMART, Golden East Paper) Medium 30-Jul-10
DR-5 Bond Underwriter (Investment Banks) List (GAR, PT SMART, Golden East Paper) High 30-Jul-10
DR-6 Financial Advisors (Consulting, Law, Accounting Firms) List Low 31-Aug-10
FI-1 HSBC
FI-2 Credit Suisse High 15-Aug-10
FI-3 UBS High 31-Oct-10FI-4 Citi GroupFI-5 BNP ParibasFI-6 Other Financial Institutions
Debt Finance Research
Key Financial Institutions'
Transaction with Sinar Mas
Financial Monitoring
Equity Finance Research
Page 21
Convience, Lobby Hardly Manage, Align Closely
Mobilize, Keep InformedMonitor(Minimum Effort)
Interest
negative positive
Power
low
highRegulators
NGOs
Financial Media
Listed Companies
Index Makers
Equity Analyst
Shareholders Financial Research Firms
Stock Exchange
neutral
median
Underwriter
Tipping Points
Stakeholder Analysis – Equity FinanceRegulator, Index Maker and Equity Analyst are the Tipping Points
Size and Amount
- small
- median
- big
Page 22
Targeted Index Maker and Equity Analyst for Golden Agri-Resources Ltd
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.
BNP Paribas Michael Greenall CIMB Ivy Ng Lee Fang CLSA Wilianto Ie Daiwa Institute of Research Chris Sanda Deutsche Bank Niklas Olausson JP Morgan Chang Ying Jian Morgan Stanley Koh Miang Chuen Nomura Securities Ken Arieff Wong OCBC Carey Wong OSK Alvin Tai Phillip Securities Research Team Standard Chartered Adrian Foulger etc.
Source: Golden Agri-Resources Ltd Annual Report 2009
Example Equity Research Report on GAR by OCBC:
Adobe Acrobat Document
Page 23
Convience, Lobby Hardly Manage, Align Closely
Mobilize, Keep InformedMonitor(Minimum Effort)
Interest
negative positive
Power
low
high
Regulator
Bondholder
Bank Lender
Rating Agencies
neutral
median
Underwriter
NGOs
Financial Media
Financial Reserch Firms
Tipping Points
Fixed Income Analysts
Stakeholder Analysis – Debt FinanceRegulator, Rating Agency and Underwriter are the Tipping Points
Size and Amount
- small
- median
- big
Page 24
Rating Record for Golden East Paper
Agency Year Rating Report Contact
2007 A
郭冰[email protected]曹红丽[email protected]孙蕴[email protected]:010-66428877 Fax:010-66426100
2007-06 A-1 王丽丽[email protected]:021-54252513
A-1
A+A-1A-1
A+
安博尔ABE
CreditRating
2008-11 AAA 安博尔 [email protected]
中诚信Moody'sChina
2008-05 郭冰[email protected] 孙蕴[email protected]
2009-01 李燕 [email protected]栾淑伟[email protected]
2007金东纸业短期. pdf融资分析报告
2007 3金东纸业 年08. 3 . pdf月短期融资券跟踪评级报告( )
2008金东纸业 年. pdf度第一期短期融资券信用评级报告
2008金东纸业 年09. 1 . pdf度第一期短期融资券跟踪评级报告( )
安博尔中诚信中国0812 - . doc信用网联合公告 号 金东纸业评级
2007年金东纸业. pdf(江苏)有限公司信用评级报告 Report: Fitch
Ratings Global Corporate Finance 1990-2005 Transition and Default Study
Adobe Acrobat Document
Page 25
Campaign Leverage Points: Risks, Standards and Policies
“Green Credit” Policy《关于落实环保政策法规防范信贷风险的意见》 “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》
United Nations Global Compact Initiative Equator Principles UNEP Financial Initiative UN Principles for Responsible Investments Climate Principles Global Reporting Initiative etc.
International Sustainable Finance Standard Country Level Policies in China
Policy and Regulatory Change in IndonesianPolicy and Regulatory Change in other import and production countriesCustomer Resistance through NGO AttackBusiness Partner ResistanceMoney Laudring by Sinar MasCurruption in IndonesianIncrease of Carbon Tax, Carbon PriceCommodity Price of Palm Oil and Timber (further analysis needed)Contract cancellation by large buyers and distributors (e.g. Unilever, Tesco)Retail Customer Resistance
Political Risks
Fraud Risks
Market Risks
Reputational Risks
Revenue Risks
Page 26
Actitivies and Achivements of the GAR Finance Campaign
Transaction Cancellation
Policy/Standard Improvement
HSBC, BNP Paribas Divestment and Business Suspension Credit Suisse, UBS Business Suspension
Consultation of World Bank / IFC Palm Oil Policy Palm Oil Policy Establishment of HSBC, Credit Suisse, BNP
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
Page 27
The Result of the GAR Corporate & Finance Campaign
Page 27
Agenda
1 Sustainable Finance Introduction
Page 28
3 GAR Finance Campaign Case
2 Policy Consultation Case
4 The Forthcoming Climate Finance Program
The Overall Strategy on Climate Change Mitigation & Adaptation
ClimateLegislation
Market & Financial Market & Financial Mechanisms Set-upMechanisms Set-up
Green Tech Deployment & Carbon Emission Reduction
With high carbon price, advocate renewable and clean tech as better alternative, as well as reduction in carbon intensive industries e.g. coal
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
Lobby the government to actively participate in global treaty and set promising carbon mitigation and renewable energy target and the climate change legislation
Page 29
Page 30
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
Thank You!