Financing & enabling the circular economy Armand Ferreira| ING - - PowerPoint PPT Presentation

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Financing & enabling the circular economy

Bratislava| 7 November 2017 Armand Ferreira| ING Sustainable Finance

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Circular economy: maximise use & retain value

ING & the Circular Economy

There is no world for unsustainable companies

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16.1 17.5

20,5 20,0 3.3 6.3 7,3 14,3

1.9 2.3 19.5 23.8 27,8 34,3

5 10 15 20 25 30 35 40

2012 2013 2014 2015 1H2016 YE2016

Sustainable clients Sustainable assets

Portfolio sustainable transitions financed – EUR 35bn

Our Operations Our Knowledge Our Innovation Our Clients Our Ecosystem Orange Circle

Orange Circle: collaboration across 5 themes

From thought leader to action leader

Successfull business models in the CE

9 Source: Accenture

5 circular business models prevent waste

Source: Accenture

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Circular Supplies

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Resource recovery

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Product life extension

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Sharing platforms

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Product as a service

Financing and supporting the CE

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Research and experiences: Key financial implications

Balance sheet extension Credit risk Sources of financing Cash flow Cost price calculation Valuation Reporting Working capital

Product as a Service financial impacts

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

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• Online platform aiming to

accelerate the funding of sustainability proposals

• Access to a range of capital

including debt, equity and/or

• mezzanine. Blended finance
• Open to corporations
• perating in Asia

Sustainable Finance Collective Asia (SFC Asia) Overview

Funding Panel members

The Funding Panel and the Expert Panel

Expert Panel members

Description

Please visit www.sfc-asia.com

Green Bonds in Automotive sector

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Zhejiang Geely Green Bond

Green bond management statement overview

$400m debut green bond Use of Proceeds Eligibility criteria

• 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 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

• r meet Euro 6 emissions standards
• Eligible Green Projects is defined as those projects that enable the

design, development and production of Clean Energy Vehicles

• Clean Energy Vehicles include Electric Vehicles (EV), Plug-in Hybrid

Electric Vehicles (PHEV), and Plug-in Range Extended Electric Vehicles (REEV)

• To finance the greening of London black cabs by its subsidiary London

Taxi Company

• LTC is one of 14 taxi companies that are in an initiative to introduce

more zero-emission capable vehicles in the market

• Deloitte has provided a second opinion

Project selection and evaluation process

Evaluate the materials and to approve documents of the proposed projects in accordance with the Company’s Eligible Green Projects

Highlights:

• Chinese issuance that will help lower London

emissions – a great example of cross-border green city bond work

• London's black cabs go green with made-in-

China electric power Financing Management Department collects the information of the potential green projects

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BAIC Motors Corporation Green Bond

RMB 2.5bn green bond Use of Proceeds Eligibility criteria

• 60% of the bond proceeds will fund the construction of facilities for

upgrading and manufacturing energy efficient cars and electric vehicles

• The remaining 40% of the proceeds (RMB 1bn) will be used as working

capital for R&D and the manufacturing of new energy cars

• Low carbon transport
• BAIC Motors Corporation issues the first RMB 2.5bn green bond from a

State-Owned Enterprise (SOE) in China, and is part of a larger RMB 4.8bn green bond quota approved for BAIC Motors

Considerations

• BAIC provides information on the fuel efficiency

and emission performance expected from their energy efficient cars, as it allows investors to better evaluate the climate credentials of their green bond

• The expected fuel efficiency of BAIC’s energy

efficiency cars is 5.3 litres of petrol per 100km, corresponding to a carbon emission intensity of around 122g CO2/km

• BAIC Motors did not seek a second party review
• r third party certification for their green bond

issuance, although the green credentials of green bonds from SOEs are reviewed by China Central Depository & Clearing Co, at the request

• f National Development and Reform

Commission (NDRC) before being approved

Robust procedures for management

• f proceeds

Key takeaways

Segregate the proceeds in a special account BAIC Motor’s general account Ring-fencing approach the proceeds are going to be used as outlined in the bond prospectus

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Toyota Financial Services Green Bond

$1.6bn Green Bond Use of Proceeds Loan eligibility criteria

• Proceeds of the Green Bond will finance new retail loan and lease contracts
• riginated by TMCC for Toyota and Lexus vehicle models that meet the

eligibility criteria outlined below

• Vehicles that are gasoline-electric hybrids or alternative fuel powertrain

vehicles;

• Minimum highway and city miles per gallon (MPG or MPG equivalent) of 35
• 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 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

• 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 Financial Services does not have any second reviewers

Highlights

• Toyota has securitised portfolios
• f general auto loans in 2014,

2015 and 2016 to raise a total of US$4.6bn under green bond principles to on-lend to customers wanting to buy its electric and hybrid models.

• TFS revolutionized the Green

Bond market by introducing the auto industry’s first-ever Asset- Backed Green Bond in 2014.

Management of Proceeds Key takeaways

Toyota Motor Credit Corporation New financings of Eligible Model vehicles by TMCC Swap Counterparty* Bond Proceeds Segregated Account(s) Underwriters Noteholders

Bond Proceeds Bond Proceeds Issued Notes Underwritten Notes

*If bond proceeds are in a currency other than USD, TMCC enters into a cross- currency swap on the settlement date. Eligible Models as of July 2017: Prius Family, LexusCT200h, Camry Hybrid, Avalon Hybrid, Laxus ES 300h, Mirai $

Thank you!

Armand.Ferreira@ing.nl