Moving on from symbolic financing of business as usual projects

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Presentation transcript:

Moving on from symbolic financing of business as usual projects Asia Pacific Carbon Forum, 7th September 2016 Jay Mariyappan

Green bonds today Small segment of the capital markets (USD 34.6bn issued half year 2016) Primarily financing activities that would have normally been financed Is not providing cheaper capital for climate finance (pricing same as ordinary bonds) – same yield & ratings as comparable investment products Mainly provided by high investment grade issuers with ample access to finance Climate Bonds Initiative 2016

Climate-aligned bonds (which make up the majority of issuance) State of the Climate Bonds Market 2016 – Climate Bonds Initiative

Strictly Private and Confidential Transport segment State of the Climate Bonds Market 2016 – Climate Bonds Initiative

Strictly Private and Confidential Energy segment State of the Climate Bonds Market 2016 – Climate Bonds Initiative

Why only business as usual projects? Bonds are usually used to refinance existing assets and recycle into new projects Still relatively risk averse with regards to maturity of technologies, project size and geography Still being provided by mainstream (high investment grade) issuers Climate Bonds Initiative 2016

What do we need to move towards green bonds playing a key role in mitigating climate change? Should be mainstream rather than a small segment of capital markets Bigger questions around vanilla bonds and the impact of the use of bonds proceeds At least USD 1 trillion per year by 2020 (Climate Bonds Initiative) as a contribution to the USD 2-3 trillion needed to combat climate change Domestic green bond issuance in emerging markets (requires domestic capital as well as international) Regulatory changes to allow for capital inflows in emerging market countries Lower cost of capital for issuers – investors would have to sacrifice returns Pureplay borrowers who can funnel bond proceeds to smaller, riskier projects Government action to derisk projects (e.g. regulation guarantees and long term contracts) Climate Bonds Initiative 2016

Jay Mariyappan Managing Director, Delivery Sindicatum Sustainable Resources Group 80 Anson Rd, #28-02, Fuji Xerox Towers Singapore 079907 Email: jay.mariyappan@sindicatum.com Tel: +65 6578 9285 or +65 97110002 www.sindicatum.com