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Greenpeace East Asia Sustainable Finance Inititive

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. Policy Consultation Case. 2.

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Greenpeace East Asia Sustainable Finance Inititive

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  1. Greenpeace East AsiaSustainable 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

  2. Agenda 1 Sustainable Finance Introduction Policy Consultation Case 2 GAR Finance Campaign Case 3 The Forthcoming Climate Finance Program 4 Page 2

  3. Agenda 1 Sustainable Finance Introduction Policy Consultation Case 2 GAR Finance Campaign Case 3 The Forthcoming Climate Finance Program 4 Page 3

  4. The Framework of the Sustainable Finance Inititive Strategic & Regulatory Consultation Green Solutions Promotion Environmental Risk Disclosure • CSR, SRI , Climate Finance Standards and Principals (e.g. Carbon Disclosure, Equator Principals) • Green Finance Policies • etc. • Climate Change Risks • Energy Risks • Reputational Risks • Legal and Social Risks • etc. • Renewable Energy • Carbon Market Development • Clean Tech, Waste Management • Ecological Agriculture and Forestry • etc. Page 4

  5. Return Risk The Foundamentals of the Finance Sector and How we work accordingly Provide Scenarios & Outlooks Visionary Long Term vs. Short Term Change Risk Perception Promote New Opportunities Solid Research with Financial Partners Analytical Model and Data Based Page 5

  6. 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 S&P 500 Index May 24:The U.S. government piled pressure on BP Plc to clean up a "massive environmental mess" in the gulf of Mexico 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 May Jun Page 6 Source: Reuters

  7. 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 Jul 19 Source: Reuters

  8. How should We Send the Risk Information to the Financial Sector? NGO Voice Environmental & Social Risk Analysis (ESRA) Financial Sector Interest • 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. • 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. ? Page 8

  9. 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

  10. 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 Jan 2010 Feb 2010 Source: Google Finance, as of 28 February 2011 Page 10

  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 Page 11

  12. Agenda 1 Sustainable Finance Introduction Policy Consultation Case 2 GAR Finance Campaign Case 3 The Forthcoming Climate Finance Program 4 Page 12

  13. Global Sustainable Stock Exchange Development lead by Emerging Market Exchanges (S. Africa, Singapore, Malaysia, China, etc.) Page 13 Page 13

  14. The Role and Influence of the Stock Exchanges Source: BM&FBOVESPA Page 14 Page 14

  15. Paticipated 2 Consultations on Environmental Information DisclosureChinese MEP 2010-09 Singapore Exchange 2010-10 Page 15 Page 15

  16. Our Demands on Sustainability Reporting Mandatory Reporting Regulation by Stock Exchanges Integrated Sustainability Reporting with Financial Reporting High Sustainability Impact Sector Classification Sector Specific Reporting Criteria and Guideline Supply Chain Sustainability Disclosure and Management Financial and Regulatory Penalties for False and Misleading Disclosures Page 16 Page 16

  17. Agenda 1 Sustainable Finance Introduction Policy Consultation Case 2 GAR Finance Campaign Case 3 The Forthcoming Climate Finance Program 4 Page 17

  18. The Worst of the Worsts: Sinar Mas Group – A WIDJAJA Family Controlled Empire GAR and APP – the Key Corporate Campaign Targets Page 18

  19. Sinar Mas Finance AnalysisEquity Finance of GAR and the potential IPO of GEP are the Tipping Points Source: Profundo 2008 Page 19

  20. Foundamental Financial Reserchfrom Databases such as Thomson-Reuters, Bloomberg, etc. Page 20

  21. Stakeholder Analysis – Equity FinanceRegulator, Index Maker and Equity Analyst are the Tipping Points Tipping Points high Convience, Lobby Hardly Manage, Align Closely Index Makers Regulators Equity Analyst • Listed Companies Size and Amount - small - median - big Shareholders Financial Research Firms Underwriter Financial Media Stock Exchange Power median Monitor (Minimum Effort) Mobilize, Keep Informed NGOs low negative positive neutral Interest Page 21

  22. Targeted Index Maker and Equity Analyst for Golden Agri-Resources Ltd Index • 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. Example Equity Research Report on GAR by OCBC: Equity Analyst • 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 Page 22

  23. Stakeholder Analysis – Debt FinanceRegulator, Rating Agency and Underwriter are the Tipping Points high Convience, Lobby Hardly Manage, Align Closely Bank Lender Tipping Points Regulator Rating Agencies Size and Amount - small - median - big Underwriter Fixed Income Analysts Financial Reserch Firms Bondholder Financial Media Power median Monitor (Minimum Effort) Mobilize, Keep Informed NGOs low negative positive neutral Interest Page 23

  24. Rating Record for Golden East Paper Report: Fitch Ratings Global Corporate Finance 1990-2005 Transition and Default Study Page 24

  25. Campaign Leverage Points: Risks, Standards and Policies Financial Market L. Points Financial Institution Leverage Points 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》 Page 25

  26. Actitivies and Achivements of the GAR Finance Campaign Financial Institution • HSBC, BNP Paribas Divestment and Business Suspension • Credit Suisse, UBS Business Suspension Transaction Cancellation • Consultation of World Bank / IFC Palm Oil Policy • Palm Oil Policy Establishment of HSBC, Credit Suisse, BNP Paribas Policy/Standard Improvement Financial Market • Consultation of the Sustainability Reporting of SGX on Environmental Information Disclosure of Palm Oil Sector Regulatory Claim • Influence on Environmental and Social Performance Rating (Responsible Research, Sustainalytics, MSCI ESG Research) • Lobbied Equity Analysts and key shareholders Market Influence Page 26 Page 26

  27. The Result of the GAR Corporate & Finance Campaign Page 27 Page 27

  28. Agenda 1 Sustainable Finance Introduction Policy Consultation Case 2 GAR Finance Campaign Case 3 The Forthcoming Climate Finance Program 4 Page 28

  29. 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 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 Market & Financial Mechanisms Set-up With high carbon price, advocate renewable and clean tech as better alternative, as well as reduction in carbon intensive industries e.g. coal Green Tech Deployment & Carbon Emission Reduction Page 29

  30. The Forthcoming GPEA Climate Finance Program 2011-2013 Research on Price on Carbon and its Mechanisms: Tax & Trade Carbon Pricing 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 Low Carbon Finance Policy Lobby, Ranking & Advisory on Low Carbon Banking Clean Energy Technologies Promotion to PE/VC Clean Energy Investment Clean Energy Projects Show-case to PE/VC Financial and Economic Case for Clean Energy vs. Fossil Fuel Page 30

  31. Thank You!

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