Green Bond Framework Investor Presentation
Santander Consumer Bank AS
February 2020
Green Bond Framework Investor Presentation Santander Consumer Bank - - PowerPoint PPT Presentation
Green Bond Framework Investor Presentation Santander Consumer Bank AS February 2020 01 Who we are Santander Consumer Bank AS is a Nordic bank with more than 1,500 colleagues in Sweden, Norway, Denmark and Finland, with a long history in the
February 2020
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We are one of the largest Nordic banks providing loans and credits, credit cards, deposits and insurance to private customers. We work with the best people in an engaged, challenging and passionate organization, which provides great opportunities for professional growth. Santander Consumer Bank AS is a Nordic bank with more than 1,500 colleagues in Sweden, Norway, Denmark and Finland, with a long history in the Nordics, and with global strength by being a part
SCB AS is regulated by the Norwegian FSA
Santander Consumer Finance S.A. Fitch/Moody’s/S&P A-/A2/A-
Santander Consumer Bank AS Fitch/Moody’s A-/A3 Santander Consumer Bank Denmark (Branch) Santander Consumer Finance Finland (Subsidiary) Santander Consumer Bank Sweden (Branch)
Banco Santander S.A. Fitch/Moody’s/S&P A-/A2/A
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Portfolio and results by region
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Source: SCB Group Q3 2019 Report (All figures in NOK)
Norway
20%
Denmark
23%
Sweden
22%
Finland
% of Gross Outstanding Loans
Gross Outstanding
Profit Before Tax
Auto Loans Unsecured Loans Profit Before Tax
32.3 Bn 3.6 Bn 442 MM Sweden
Auto Loans Unsecured Loans Profit Before Tax
22.8 Bn 14.7 Bn 516 MM Denmark
Auto Loans
Auto Loans Unsecured Loans Profit Before Tax
48.6 Bn 10.4 Bn 1,267 MM
Unsecured Loans Profit Before Tax
Position and market share in the Nordics
Source Norway: Internal calculations based on data from Finansieringsselskapenes Forening as per YTD Q3 2019 Source Finland: Internal calculations based on data from Finnish Transportation Safety Agency (Trafi) as per YTD Q3 2019 Source Denmark: Internal calculations based on data from Finans og Leasing as per YTD Q2 2019 Source Sweden: Internal calculations based on data from Finansbolagens Förening as YTD Q3 2019
Auto Loans & Hire Purchase
Loans and financial services provided to private customers, SMEs and car dealers
Customers
Distribution
dealers and importers
Auto Leasing
Customers
Distribution
Stock & Demo Financing
Customers
dealers Distribution
agreements
dealers
Auto & Leisure
market share
23%
market share
34%
market share
9%
market share
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4.5 4.4 4.7 5.3 4.9 4.6
2014 2015 2016 2017 2018 Q3 2019
41 44 50 38 40 44
2014 2015 2016 2017 2018 Q3 2019
2.5 1.7 1.8 2.7 3.0 2.8
2014 2015 2016 2017 2018 Q3 2019
Per cent
Per cent
Per cent
Source: SCB Annual Reports (2013 – 2018) and Q3 2019 report 1) ROA = PBT (annualized) / ANEA 2) NII Ratio = Net Interest Income (annualized) / ANEA 3) Cost/Income Ratio = OPEX / Gross Margin (OPEX: Total Operating Costs)
Normalised KPIs as a results of higher growth in Auto portfolio
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We embrace Banco Santander’s Responsible Business Strategy, while focusing on achieving sustainable value in the Nordics
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SCB AS acts in alignment with Banco Santander’s values: Simple, Personal and Fair, while contributing to value creation and supporting sustainable mobility in the communities in which it operates
Our Purpose Our Priorities
To help people and business prosper To be the best open financial services platform, by acting responsibly and earning the loyalty of our stakeholders New Business Environment Inclusive and Sustainable Growth
commercialization of products & services
business decision
Banco Santander Responsible Business Strategy SCB AS: Contributing to value creation in the Nordics
Sustainable Mobility Supporting local communities Strong retail focus Donations & Partnerships Our Aim Our Challenges
External recognition of Banco Santander’s sustainability efforts
Included in the Dow Jones Sustainability Index since 2000 and world leader in 2019 Listed in FTSE4Good since 2003 Signatory since 2007 World leader in the Bloomberg Gender Equality Index (GEI) Rating above industry average by the main ESG firms Top Employer in Europe 2019
Ensuring we have the right ght cult lture re, skills ills, gov
ernan ance, digit gital al and busine iness prac actic ices Supporting to creat reate e new jobs bs and helping people acces ess finan nance, supporting the financing
rbon
sus ustaina inable ble cons
ption ion
Responsible procurement Stakeholder value Risk focus Responsible business practices Strong corporate culture Talented and motivated team
SUSTAINABLE GROWTH INCLUSIVE GROWTH
Creation of a holistic bank culture centered on responsible banking principles
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SCB AS contributes to development in the Nordics via its lending activity, which gives opportunity to advance clean transport
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Via its core lending activity, SCB AS directly advances UN SDG 11 (Sustainable Cities and Communities)
SCB AS strategic positioning
Objective: Make cities and human settlement inclusive, safe and sustainable Target 11.2: Provide access to affordable, accessible and sustainable transport
SCB AS core lending activity
access to a car with all services included, and with a short binding term.
product is a key driver for changing consumers buying behavior.
emissions
Overview of other highly relevant SDGs for SCB AS:
11 GOAL 4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
that protects, educates and empowers children to rise above adversity using the power of play
health & well being, child protection and peaceful communities
contributing financially. We actively participate involving employees and partners contributing
GOAL 3: Ensure healthy lives and promote well-being for all
physical activity:
for children with critical illnesses
Society
tournaments – an inclusive sports variety where every team member is part of the active play and gets equal playing time
GOAL 7: Ensure access to affordable, reliable, sustainable and modern energy
friendly mobility solutions, and we add the commercial strength to bring them to the market
speeding up renewal of one of the oldest car parks in Europe
Nissan Leaf - helping it to be last year's single most sold car model in Norway
GOAL 13: Take action to combat climate change and its impacts by regulating emissions and promoting developments in renewable energy
retiring carbon credits and a platform for climate action, battling the issue of emissions from big polluters
we are compliant with all requirements regarding health, environment and safety, procurement, transportation, waste handling and energy consumption
Through its general business activity and its community work, SCB AS directly contributes to the achievement of UN SDG 3, 4, 7, 13
Defining an ambitious Framework, in line with best practices and standards
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Use of Proceeds
Rationale for issuing Green Bond Following best practice and latest market developments SCB AS Green Bond Framework description
Project Evaluation and Selection Management
Reporting External Review
loan and lease contracts for electric passenger vehicles (EVs only) SCB AS Green Bond Framework:
Principles 2018
Taxonomy and of CBI Low Carbon Transport Standards
good practices, such as the EU Green Bond Standard SCB AS intends to:
strategy
financial market, while playing a key role in the transition to a low carbon economy
green investors, while fostering the relationship with existing investors
1 2 3 4 5
by the Green Bond Working Group (‘GBWG’)
approach
expert consultant Multiconsult
upcoming transaction
SCB AS Green Bond Framework is aligned with ICMA GBP 2018 and Eligibility Criteria comply with the recommendation of the draft Technical Expert Group (TEG) report on the EU Taxonomy
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any bonds issued under this framework to a loan portfolio (‘Eligible Green Loan Portfolio’) of new and existing retail loan and lease contracts (‘Eligible Green Loans’) for electric power train vehicles
ICMA GBP Category Eligible Green Loans Direct contribution to UN SDG EU Taxonomy Environmental Objectives Clean Transportation New and existing retail loans and lease contracts to electric powertrain vehicles
(1): Climate Change Mitigation
to Climate Change mitigation (c): Increasing clean or climate-neutral mobility
Applying strict Eligibility Criteria to ensure full compliance with the latest market standards
Target 11.2: By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons
ICMA Green Bond Principles 2018 Draft TEG report on the EU Taxonomy CBI Low Carbon Transport Standards and
Certification
UN Sustainable Development Goals (UN SDGs) Strict Eligibility Criteria complying with: Environmental Exclusions such as: × Internal Combustion Engine (ICE) × Hybrid Electric and Plug-in Hybrid Electric
Vehicles (PHEVs)
× Liquefied Petroleum Gas (LPC) × Compressed Natural Gas (CNG) × Ethanol × Biofuel Sustainalytics considers that the financing or refinancing of electric vehicles will lead to positive environmental impacts and directly contributes to advance UN SDG 11 – Sustainable Cities and Communities
Indirect Contribution to UN SDGs
SCB AS Eligible Green Loan Portfolio includes EVs only and excludes any other low-carbon emission transport vehicles
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The SCB AS’ Eligible Green Project Portfolio is composed of Eligible Loans for the acquisition of 25,787 electric vehicles which corresponds to a portfolio volume of 5,822,150,521 NOK
Eligible Green Loan Portfolio Reporting date 31 July 2019 Volume 5,822,150,521 NOK Number of contracts 25,787 Sum km/yr 283 mill. Sum person km/yr 167 mill.
2 510 440 081 2 988 027 973 3 428 625 077 4 084 798 254 5 124 850 601 5 822 150 521
0,0 1 000 000 000,0 2 000 000 000,0 3 000 000 000,0 4 000 000 000,0 5 000 000 000,0 6 000 000 000,0 7 000 000 000,0
jan.17 jul.17 jan.18 jul.18 jan.19 jul.19
NOK
Figure 1: EVs Portfolio Volume: 2017 - 2019
17 181 23 245 25 787 2017 2018 2019 H1
Figure 2: Number of EVs Contracts
SCB AS’ Eligible Electric Vehicles portfolio overview
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Setting a clear decisional process to select and evaluate Eligible Loans, ensuring compliance with the Eligibility Criteria
SCB AS Green Bond Framework SCB AS Green Bond Working Group (‘GBWG’)
Legal, Financial Management, Market Risk, Communication Approved by:
Green Bonds
Eligible Loans financed / refinanced
Eligible Green Loans
allocated to Green Bonds Limited assurance on allocation report
SCB AS and Santander Group Sustainability Policies and Guidelines
Meets at least on an annual basis
The Green Bond Working Group selects Eligible Loans from the green register and monitors the Eligible Green Loan Portfolio on an
Internal policies and external regulations mitigates risks associated with Eligible Loans Norwegian and EU Regulation, Directives and Agreements
Managing the Green Bond proceeds in accordance with the portfolio approach
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SCB AS Green Portfolio approach
Green Bond Portfolio Green Bond Outstanding
Based on the commitment to a portfolio approach, and ongoing review to ensure compliance, Sustainalytics considers this process to be aligned with market practice
are allocated to an Eligible Green Loan Portfolio
allocation rules: Level
allocation for the Green Eligible Portfolio which matches or exceeds the balance of net proceeds from the outstanding Green Bonds
Inclusion of existing and new Green Loans Deletion of ineligible or amortising Green Loans
Allocation and impact reporting in accordance with the recommendation of the ICMA Green Bond Principles 2018
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Green Bond reporting provided annually and until full allocation. Pre-issuance impact report prepared in accordance with the ICMA Harmonized Framework for Impact Reporting (June 2019)
Allocation Reporting Impact Reporting
In accordance with the ICMA GBP 2018, SCB AS intends to report to investors within one year from the date of a Green Bond transaction and annually thereafter, until the proceeds have been fully allocated. Impact report is already available.
specialized consultant Multiconsult Tailpipe emissions (Scope 1): Direct GHG emissions avoided (vs baseline): 28,600 tons CO2/year Indirect emissions, power consumption only (Scope 2): Indirect GHG emissions avoided vs baseline: -13,600 tons CO2/year Volume of gasoline saved per year (in liters): 12 million liter gasoline per yr
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SCB AS Green Bond Framework has been reviewed positively by expert ESG party Sustainalytics and the inaugural Green Bond has
Focus on pre-issuance and post-issuance verification
Post-issuance verification Pre-issuance verification: Second Party Opinion by Sustainalytics and CBI Certfication
1 2 3 4
Use of Proceeds Project Evaluation and Selection Management
Reporting
evaluate loans is considered to be in line with market practice
approach, and ongoing review, Sustainalytics considers this process to be aligned with market practice
by an external specialized party is aligned with best practice Sustainalytics sees the SCB AS Green Bond Framework as credible, impactful and aligned with the GBP 2018
environmentally beneficial lower emissions vehicles from an emissions perspective
Climate Bond Initiative Certification
Standard Board approved the certification of the proposed inaugural SCB AS Green Bond transaction
Auditor’s limited assurance report
allocation, a limited assurance report
proceeds to Eligible Green Loan Portfolio will be provided by an external auditor
SCB AS
Green Bond Allocation Reporting
CICERO Shades of Green methodology (EVs only)
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Issuer Santander Consumer Bank AS Expected issue ratings A3 / A- by Moody’s / Fitch Maturity 3Y – 5Y long Currency SEK Size Benchmark Issue Type Green Bond to be issued within Santander Consumer Bank’s Green Bond Framework* Interest Rate [●] % paid quarterly FRN Format / Denomination / Listing RegS Bearer / SEK 2,000,000 + SEK 1,000,000 / Euronext Dublin Governing Law English law, except for the write-down or conversion of the Notes that is subject to Norwegian law Documentation Under the Issuer’s EMTN Programme Base Prospectus dated 27 June 2019 Use of Proceeds An amount equivalent to the net proceeds of the Green Bonds issuances (“the net proceeds”) will be exclusively used to finance and/or refinance, in whole or in part Santander Consumer Bank’s Eligible Loan Portfolio Green Bond Structuring Advisor ING Joint Bookrunners Santander, ING and SEB
*For more details, please see Santander Consumer Bank Green Bond Framework available on: https://www.santanderconsumer.no/om-oss/investor-relations/green-bonds/
CET1 ratio of 16.1%
IFRS9 capital impact when calculating capital ratios
2019 using transitional rules for IFRS9. The CET1-ratio is 200 bps higher than the regulatory requirement
11.92%
Hybrid loan of NOK 2.25 billion and replaced it with three new Hybrid loans of NOK 750 million each
billion to its parent
Per cent
Source: SCB Group Q3 2019 Report The capital ratios include half year capital profits, based on a 50% payout ratio
15.3 15.1 15.5 15.7 16.1 17.8 17.4 17.5 17.6 17.9 19.1 18.7 19.1 19.0 19.3 11.4 11.5 12.0 12.0 11.9 2015 2016 2017 2018 Q3 2019
CET 1 Tier 1 Tier 2 Leverage ratio
22
Three pillars approach provides funding flexibility
2011 2012 2013 2014 2015 2016 2017 2018 Q3 2019
Unsecured Bonds Deposits Securitization Parent funding
22% 28% 50% 62% 70% 70% 77% 73% 75%
2011 2012 2013 2014 2015 2016 2017 2018 Q3 2019
Funding Composition1 Self-funding ratio
25% 25% 43% 7% Source: SCB Group Q3 2019 Report 1) Outstanding amounts/transactions as per Q3 2019
million
Sweden and Denmark
Deposits
including NOK 900 million in Commercial Paper
market including SEK 1,720 million in Commercial Paper
transactions
Unsecured
Securitization
23
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Maturity profile Q3 2019 – 2024 for Senior Unsecured and Commercial Paper
Total Maturity
(EUR MM)
66 237 136 293 81 262 128 210 103 117 93 500 500 500 500 67 100
2019 2020 2021 2022 2023 2024 2025
DKK EUR SEK NOK
500 500 500 500
2019 2020 2021 2022 2023 2024 2025
2 350 1 350 2 900 800 650
2019 2020 2021 2022 2023 2024 2025
Commercial Paper Senior
2 250 1 105 1 250 1000 2 800 1 370
2019 2020 2021 2022 2023 2024 2025
Commercial Paper Senior
NOK million SEK million EUR million
Source: Bloomberg, Management Figures (outstanding amounts as per Q3 2019) FX: EURNOK 9.8953 | EURSEK 10.6958 | EURDKK 7.4662
500 750
2019 2020 2021 2022 2023 2024 2025
DKK million Total Maturity (EUR million)
Our purpose is to help people and business prosper. Our culture is based on believing that everything we do should be:
Nordics
The third-party expert consultant Multiconsult has developed a methodology for impact estimation (Scope 1 & Scope 2)
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SCB AS’ portfolio is assessed regarding direct emissions (Scope 1) and indirect emissions related to electric power production (Scope 2)
Assumptions
a) Direct emissions, tailpipe (Scope 1) Ebaseline = cweighted average*dy*ntotal = Eavoided
The estimation of the baseline is performed through the following steps: 1. Estimating the gross CO2-emission per km (c) from the average car that is being substituted by the zero emission car 2. Multiplied by the number of km (d) the car is estimated to travel 3. Multiplied by the number (n) of cars substituting fossil cars in the portfolio Table 2: The portfolio’s estimated impact on GHG-emissions in rounded numbers Eligible passenger vehicles plants in portfolio Reduced CO2-emissions compared to baseline Direct emissions only (Scope 1) 28,600 tons CO2/year Indirect emissions EV’s only (Scope 2)
Direct and indirect emissions in total 15,000 tons CO2/year Table 1: Number of eligible passenger vehicles and expected yearly mileage
Number vehicles Sum km/yr Sum person km/yr
Eligible passenger vehicles in SCB portfolio 25,787 283 mill. 167 mill.
Portfolio analysis and impact assessment
Impact assessment: CO2-emissions compared to baseline for the eligible assets in the portfolio in an average year in the lifetime of the vehicles in the portfolio presented as:
Methodology overview
Table 3: GHG emission factors (CO2- equivalents), direct emissions in 2027 Direct emissions fossil car- 2027 Direct emissions EV Emissions per passenger km 60 gCO2/pkm 0 gCO2/pkm Emissions per km 101 gCO2/km 0 gCO2/km Emissions per car and year 1108 kgCO2 0 kgCO2
The third-party expert consultant Multiconsult has developed a methodology for impact estimation (Scope 1 & Scope 2)
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Total direct and indirect emissions for the whole portfolio corresponds to 15,000 tons CO2/year avoided compared to the baseline
b) Indirect emissions, Power consumption only (Scope 2)
Table 4: Electricity consumption greenhouse gas factors (CO2 equivalents) for two scenarios Scenario CO2- factor (g/kWh) European (EU28+ Norway) production mix (year 2027) 275 Norwegian consumption mix 11 Table 5: Electricity consumption greenhouse gas factors (CO2 equivalents) Indirect emissions fossil car*
Indirect emissions EV- 2027
Emissions per passenger km, indirect emissions from power production 0 gCO2/pkm 28 gCO2/pkm Emissions per km, indirect emissions from power production 0 gCO2/km 48 gCO2/km
Electricity production mix
In 2018, the Norwegian power production was 98% renewable (NVE16). As shown in figure 3, the Norwegian production mix in 2018 (95 % hydropower) results in emissions of 11 gCO2/kWh
CO2 emissions related to electricity demand
Direct GWP in European electricity production mix, trajectory from 2018 to a zero target in 2040 (EU18, Multiconsult, European Residual Mixes 2018, Association of Issuing Bodies): *Note that there are indirect emissions related fossil fuel as well but that are scope 3 emissions and not included in this analysis.
Indirect emissions calculation: Indirect emissions are calculated by multiplying distant travelled by the 25,787 cars in the portfolio in a year by the specific emission factor [CO2/km]