Mobilising finance for integrated landscape initiatives three scalable financial instruments

08/05/2015 European Investment Bank Group

Global Landscapes Forum

Mobilising Finance for Integrated Landscape Initiatives:Three Scalable Financial Instruments

Paris, 6 December 2015James RANAIVOSON

European Investment Bank Group 206/12/2015

European Investment Bank Group 3

EIB at a glance

2014 Highlights : EIB loan/investment signatures: EUR 77.0bn; EIF signatures : EUR 3.3bn EIB Loan/Investment volume: (i) Innovation & Skills: EUR 14.7bn; (ii) Smaller

Enterprises: EUR 25.5bn; (iii) Strategic Infrastructure: EUR 20.6bn; (iv) Climate Action: EUR 19.1bn; (v) Outside EU: EUR 7.9bn ( overlap in these figures)

Borrowing volume in international capital markets: EUR 61.6bn including Green Bonds issuance (Climate Awareness Bond-CAB programme): EUR 4.3bn

Own funds: EUR 60.6bn; Basel III capital adequacy ratio of 23.7%

The European Investment Bank (EIB) is the European Union’s bank. Owned by the 28 EU Member States, the EIB provides finance and expertise for sound and sustainable investment projects in over 160 countries. It is the world’s largest multilateral borrower and lender by volume.

06/12/2015

2015? Lending target: EUR 71bn +/-10% Borrowing programme: EUR 60bn with authorisation up to EUR 65bn Balance-sheet of EUR 574bn mid-2015 However, implementing agent of the European Fund for Strategic Investments

(EFSI)-Juncker Plan: mobilise EUR 315bn for 2015-2017 in order to address the EU’s low economic growth and challenges in terms of competitiveness and high unemployment, with EUR 49bn from EIB and EUR 12bn from EIF.


EIB Climate Action Signed Operations

2008 2009 2010 2011 2012 2013 20140

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

Renewable Energy Energy efficiency RD & I Transport Other & miscellaneous** Adaptation

EUR

m

2008 2009 2010 2011 2012 2013 2014

Total* 9,771 16,691 20,513 18,496 13,284 18,982 19,125

*2008-2011 EIB + other funds - from 2012 only EIB resources**including Afforestation, Forest Management, Waste and Wastewater

Climate action is a key priority for the EIB with a minimum 25% of total lending dedicated for per year.

Not taken in account in these figures: EIB lends roughly EUR 1 bn p.a. for sustainable agriculture projects and EUR 4 bn p.a. for water projects

06/12/2015

.Sustainable agriculture, livestock, aquaculture

Management of Ecosystem Services: Fire Prevention, Erosion Control, Air Control, Noise Regulation, Endangered Species, Pollination, Water Purification, Soil nutrients etc.

.Sustainable Forest Plantation

.Afforestation/Reforestation

.Agroforestry, farming conservationwith nature-based actions

.Pro-Biodiversity Businesses inc. “Green” Production, Ecotourism, Research

.Forest Conservation, .Restoration of Natural Assets on Private or Public Lands

Public goods Private assets

Land use asset classes

Nature of outputs

Available Financing InstrumentsDirect Equity/”Pari passu” Equity Funds.Senior or Mezz Loans

.Equity/VC or Seed Funds

.Secured Loans

.Layered Equity/Debt Funds

.Loans to Public Sector

.Interest Rate Blending

.Grants

An EIB Perspective for Landscape Initiative / Land Use Projects

<------------------------------------------------------------- Green Bonds? --------------------------------------------------------->

.”Pari passu” or Layered Equity/Debt Funds with or without activation of revenues (carbon, PES, offsets…)

European Investment BankEuropean Investment Bank Group

.Green Infrastructure

Investors or “providers” of finance GovernmentsPrivate funds, Institutional & Impact Investors, Banks, VC Funds, Industrial Investors, Donors-Philanthropists

< ---------------------------------------- EIB & other DFIs, Some Impact Investors -------------------------------- >

506/12/2015

EIB Financing Instruments The EIB has, to its disposal, an extensive range of instruments to finance

public and private sectors at investment and sub-investment grades of risk

EIB lending instrument for Investment Grade operations

Special Activities for low and sub investment Grade operations

Financing projects with corporate loans

Project

Project finance with direct project risk

First-loss featuresallowing EIB to

undertaking higher (equity or debt) risk

Equity through Funds

Intermediated LoansBanks

Public Sector Financing

European Investment Bank Group 6European Investment Bank Group 606/12/2015

06/12/2015 European Investment Bank Group 7

Climate Finance Products (1)

“Pari passu” investments in Infrastructure Funds: EIB focuses on funds privileging “greenfield” assets instead of “operating”

assets EOY 2014: 34 investments (29 inside EU, 5 outside) – EOY 2015? > 40

Sectors: renewable energy, energy efficiency, PPP transport & communication and social infrastructure, forestry (plantation, conservation), land decontamination and regeneration, pro-biodiversity businesses

EUR 1.1bn of EIB commitment participations for funds targeting EUR 11.3bn aggregate commitments from all investors

(Co-investment) catalytic effect = 6x ; (Project costs) multiplier effect = 20x

EIB is/will be invested in: Dasos Timberland funds, Eco-Enterprises II, Althelia, Ginkgo funds,

Brownfields Regeneration, African Sustainable Fund, Arbaro Althelia: activation of revenues with REDD+ carbon credits + partial

guarantee from USAID to offset the forest carbon price risk

Climate Finance Products (2)

Funds of funds: Global Energy Efficiency and Renewable Energy Fund (GEEREF):

EUR 112m seed funding from EU, Germany and Norway in 2008 that assume a first-loss layer…

…allowing to leverage some EUR 110m from private investors; up to date invested in a total of 20+ funds investing in small projects in

Africa, Caribbean and Pacific, Latin America and non-EU Eastern Europe.


Layered-risk funds: Green for Growth Fund (GGF) European Energy Efficiency Fund

(EEEF) Global Climate Partnership Fund

(GCPF) eco.business Fund?


Climate Finance Products (3) EU-EIB Joint Facility Initiatives with EC LIFE budget:

Private Finance for Energy Efficiency investments (PF4EE): PF4EE – one segment of the EIB’s wider “DEEP Green” initiative for

energy efficiency credit risk protection by EU budget (EUR 80m leveraging project

costs of EUR 500m);

Natural Capital Financing Facility (NCFF) : EU-28 pipeline of projects, testing financing options (direct loans,

intermediated loans, investments through private equity funds) for projects in:

• nature-based climate adaptation • green infrastructure• payment for ecosystem services • biodiversity offsets / compensation • pro-biodiversity businesses

The Natural Capital Financing Facility (NCFF)


DIRECT INVESTMENTS INPROJECTS

INTERMEDIATED INVESTMENTS:Private Equity Funds, Credit Lines to Banks

FINANCIAL INSTRUMENTS

EUR 100-125m EUR 50m First Loss for EIB

TECHNICAL ASSISTANCE

EUR 10m

NATURAL CAPITAL FINANCING FACILITY

LIFEEnvironment / Climate

Project level

Co-investorsprivate and/or

public

Investments

EIB

06/12/2015


Climate Finance Products (4) EIB investing in bonds or guaranteeing bond/securitisation structures:

Project Bond Initiative (PBI) providing partial credit enhancement to large EU-28 infrastructure projects – transport, energy so far - in order to attract capital market investors, with EIB investing in subordinated tranches or enhance the credit quality of senior or subordinated tranches

Project Bonds

PBCE up to 20% of total Project

Bond issue

Infrastructure Project

Company(eg. PPP/PFI)

Equity

Project Bond

Investors

PBCE

http://picses.eu/image/52063880/






Climate Finance Products (5) EIB investing in mini-bonds structure (for water infrastructure in Veneto-

Italy): No access to capital markets Difficult to access bank financing for long maturities No access to EIB direct lending given the small size and low rating Complements EIB’s product portfolio by adding a new instrument to finance small and medium

size utilities Can be replicated for other regions, different countries or other sectors (e.g. waste) Catalytic effect: interesting product for institutional investors

HYDRO SPV 130/99

Issuer 1

Issuer 2

……….

Issuer 9

Issuance of Bonds

Subscription price

Remuneration and repayment of Bonds

Issuance of Notes

Subscription price

Interest and principal on the Notes

Liquidity and credit support on the Notes

EIB +

Investors

Cash reserve (20%) Veneto

Sviluppo Liquidity and credit

support on the Notes

13

Green Bond Issuance

Outstanding environmental bondsissued by MDBs (size > USD 100m)^

^Source: market data collected by Credit Agricole CIB; as of 27 April 2015

ADB4% AFDB

4%EBRD

1%

EIB45%

IBRD26%

IFC15%

NIB5%

The Climate Awareness Bond (CAB) Programme so far allocates its proceeds to fund Renewable Energy and Energy Efficiency projects.

CAB issuance to date: > EUR 10bn equivalent in 11 currencies EUR CAB due 11/2019 : largest green bond in the market at EUR 3bn

EIB CAB issuance by currency*

EUR54%GBP

14%

SEK11%

USD9%

ZAR3%

CHF3%

AUD2%

BRL2%

TRY1%

JPY0.4%

*As of 23 April 2015

European Investment Bank Group06/12/2015


Thank you for your attention!For further details or information kindly contact:

Christopher KNOWLES [email protected] Cyrille ARNOULD (GEEREF) [email protected] Enrico CANU (Funds/Mini-bonds Structure) [email protected] Manuel DUENAS (PF4EE) [email protected] Katarina MALMNAS (NCFF) [email protected] Cormac MURPHY (PBI) [email protected] James RANAIVOSON (Funds/NCFF/Bonds) [email protected]

Peter MUNRO (CAB) [email protected] General queries on EIB issuance [email protected]

mailto:[email protected]









Disclaimer

This presentation has been prepared by the European Investment Bank (the “Bank” or “EIB”) for information purposes only and should not be taken as investment advice. Certain sections of this presentation contain forward-looking statements that are based on expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in such forward-looking statements. The Bank does not undertake any obligation to update or publicly release any revisions to this presentation to reflect events, circumstances or changes in expectations after the date of this presentation.

The Bank specifically does not make any representation, warranty or assurance of any kind, expressed or implied, or assumes any liability regarding the accuracy, completeness and up-to-dateness of any of the information contained in this presentation. The Bank accepts no responsibility for any consequences of the use of the information provided in this presentation.

This presentation constitutes neither an offer to sell nor an invitation to purchase securities, nor is it intended to serve as a basis for any kind of obligation, contractual or otherwise. Securities of the Bank may not be offered or sold in the United States nor to U.S. persons outside the United States unless the offering or sale is registered under US securities laws. Similar restrictions may apply in other countries.
