Financing & enabling the circular economy Armand Ferreira| ING Sustainable Finance Bratislava| 7 November 2017 1
Circular economy: maximise use & retain value 2
ING & the Circular Economy
There is no world for unsustainable companies
Portfolio sustainable transitions financed – EUR 35bn 40 34,3 35 27,8 30 14,3 23.8 25 7,3 19.5 6.3 20 3.3 15 10 20,5 20,0 17.5 16.1 5 2.3 1.9 0 2012 2013 2014 2015 1H2016 YE2016 Sustainable clients Sustainable assets 5
Orange Circle: collaboration across 5 themes Our Our Knowledge Operations Orange Circle Our Our Innovation Ecosystem Our Clients
From thought leader to action leader
Successfull business models in the CE
5 circular business models prevent waste Source: Accenture 9 Source : Accenture
Circular Supplies 10
Resource recovery 11
Product life extension 12
Sharing platforms 13
Product as a service 14
Financing and supporting the CE
Product as a Service Research and experiences: Key financial implications financial impacts Balance sheet Sources of Credit risk Reporting extension financing Working Cost price Cash flow Valuation capital calculation 16
Underutilised assets will be a thing of the past
The circular economy will create stranded assets and obsolete companies
Asset ownership will become a new industry
The circular economy will need new infrastructure
Data is the currency of tomorrow
Online platform
Sustainable Finance Collective Asia (SFC Asia) Overview Description The Funding Panel and the Expert Panel Funding Panel • Online platform aiming to members accelerate the funding of sustainability proposals • Access to a range of capital including debt, equity and/or mezzanine. Blended finance Expert Panel members • Open to corporations operating in Asia Please visit www.sfc-asia.com 23
Green Bonds in Automotive sector
Zhejiang Geely Green Bond Green bond management statement overview Highlights: • To finance the greening of London black cabs by its subsidiary London Chinese issuance that will help lower London • Taxi Company emissions – a great example of cross-border $400m debut • LTC is one of 14 taxi companies that are in an initiative to introduce green city bond work green bond more zero-emission capable vehicles in the market London's black cabs go green with made-in- • • Deloitte has provided a second opinion China electric power • The proceeds will be used to finance the development of the TX5, a hybrid battery-powered version of the classic 1958 FX4 black cab. TX5 is Use of Proceeds intended to comply with new regulations for London taxis which require all vehicles licensed for the first time after 1 Jan 2018 to be petrol-hybrid or meet Euro 6 emissions standards • Eligible Green Projects is defined as those projects that enable the design, development and production of Clean Energy Vehicles Eligibility • Clean Energy Vehicles include Electric Vehicles (EV), Plug-in Hybrid criteria Electric Vehicles (PHEV), and Plug-in Range Extended Electric Vehicles (REEV) Evaluate the materials and Financing to approve Project Management documents of the proposed selection and Department collects projects in accordance with the information of the evaluation the Company’s Eligible potential green projects process Green Projects 43
BAIC Motors Corporation Green Bond Considerations • BAIC Motors Corporation issues the first RMB 2.5bn green bond from a • BAIC provides information on the fuel efficiency State-Owned Enterprise (SOE) in China, and is part of a larger RMB RMB 2.5bn and emission performance expected from their 4.8bn green bond quota approved for BAIC Motors green bond energy efficient cars, as it allows investors to better evaluate the climate credentials of their green bond Key takeaways • The expected fuel efficiency of BAIC’s energy • 60% of the bond proceeds will fund the construction of facilities for efficiency cars is 5.3 litres of petrol per 100km, upgrading and manufacturing energy efficient cars and electric corresponding to a carbon emission intensity of vehicles Use of Proceeds around 122g CO2/km • The remaining 40% of the proceeds (RMB 1bn) will be used as working • BAIC Motors did not seek a second party review capital for R&D and the manufacturing of new energy cars or third party certification for their green bond issuance, although the green credentials of green bonds from SOEs are reviewed by China Eligibility Central Depository & Clearing Co, at the request • Low carbon transport of National Development and Reform criteria Commission (NDRC) before being approved Ring-fencing approach Robust BAIC Segregate the procedures for Motor’s proceeds in a management general special account account of proceeds the proceeds are going to be used as outlined in the bond prospectus 26
Toyota Financial Services Green Bond • Toyota Financial Services, the subsidiary of Toyota Motor Corp offers financial services that include auto sales financing, credit cards, retail sales of corporate bonds and investments trusts and insurance $1.6bn Green Highlights Bond • Toyota is working to reduce the carbon footprint of its products and activities and is engaging with stakeholders to build a low carbon future. Toyota has securitised portfolios • of general auto loans in 2014, • Toyota Financial Services does not have any second reviewers 2015 and 2016 to raise a total of Key takeaways US$4.6bn under green bond principles to on-lend to • Proceeds of the Green Bond will finance new retail loan and lease contracts customers wanting to buy its originated by TMCC for Toyota and Lexus vehicle models that meet the Use of Proceeds electric and hybrid models. eligibility criteria outlined below TFS revolutionized the Green • Bond market by introducing the auto industry’s first -ever Asset- • Vehicles that are gasoline-electric hybrids or alternative fuel powertrain Backed Green Bond in 2014. vehicles; Loan eligibility • Minimum highway and city miles per gallon (MPG or MPG equivalent) of 35 criteria • A United States Environmental Protection Agency (“EPA”) Smog Rating of 8 or better (where 10 is the cleanest), as determined by the EPA for the purchase of a vehicle in California Toyota Motor Bond Proceeds Credit Segregated Account(s) Swap Counterparty* Corporation $ Bond Issued Proceeds Notes Management of Proceeds New financings of Eligible Underwriters Model vehicles by TMCC *If bond proceeds are in a Bond Underwritten currency other than USD, Proceeds Notes Eligible Models as of July 2017: TMCC enters into a cross- Prius Family, LexusCT200h, Camry Hybrid, currency swap on the Noteholders Avalon Hybrid, Laxus ES 300h, Mirai settlement date. 27
Thank you! Armand.Ferreira@ing.nl
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