1. CP: a successful strategy towards sustainable banking
This session provides an introduction and overview to project funding, as a lead-in to the following session where participants will share their own experiences. The main points are:-
- the relevant factors in the firm’s financial environment
- the main sources of finance
- the factors relevant to the firm in choosing between these sources
- post-funding management and control of projects.
This session is designed to provide at this stage of the course only a brief overview of these topics - they will all be addressed in later sessions of the course in more detail.

2. Economy is a sub-system of ecology

3. Towards a Sustainable Economy
Growth Eco-efficiency Sustainability
Yesterday Today Tomorrow
Flora & fauna
Mining
Oil&Gas
Industry
Trade-Serv
Agriculture $
clean
polluting

4. The tools for the sustainable banker of the 21st century
Economic: IRR, NPV, Ratio-Analysis, balance sheets, cash flows, guarantees, etc….
Environmental: Cleaner Production, Environmental Management Systems, Environmental Management Accounting, Eco-labelling, environmental risks analysis and classification, Life-Cycle Analysis, eco-balance, environmental reporting,etc….
Commercial information, public image, etc

5. A two-way bridge between two worlds
Financial world
Environmental world CP
Common language
Eco-risks
Eco-dividends
businesses

6. Current trends in commercial banking
Financial institutions are becoming
increasingly similar
Commercial banks’ activities are
expanding in developing countries
and countries with economies in
transition
Increasing interest in sustainable
banking
There are a number of trends in commercial banking that may help firms wishing to raise finance for cleaner production investments.
These are expanded on, in more detail, in following slides.

7. Types of financial institutions (FIs)
commercial banks
savings and loan associations
life insurance firms
state and local government pension
funds
sales and consumer finance companies
mutual funds
insurance companies; credit unions
This slide lists the main different types of financial institutions (FIs); the next slide considers the implications of this, for firms.

8. Financial institutions - increasing similarity
Traditionally, different types of FI
specialised narrowly in their own
areas
Still true to some extent, but less so
Many FI’s are expanding their
product-ranges into others’ areas
Traditionally, different types of FI have tended to specialise in different sections of the market, and have offered distinctly different products. However, in recent years there has been a trend for them to broaden their product ranges and to offer products that previously were offered by other types of FI.
For firms wanting to borrow this means that there is a wider range of potential sources of finance, and firms should be ready to approach several different FIs, of different types, in order to raise finance on the most attractive terms.

9. Sustainable banking - (1)
banks and other FI’s are becoming
more aware of their environmental
responsibilities - both in banks’ own
operations, and in lending
1992 Earth Summit: “UNEP
Financial Initiative on the
Environment and Sustainable
Development”
The trend to ‘sustainable banking’ is still very new, and mainly limited to banks in developed countries who wish to appeal to environmentally-conscious customers. However, it is possible that this could provide a further source of finance, on attractive terms, for firms wishing to finance cleaner production investments.
This slide defines sustainable banking and refers to the landmark UNEP declaration that over a hundred banks have voluntarily signed, to recognise their responsibility to contribute to sustainable development and express a commitment to this.

10. UNEP Finance Initiatives (UNEP FI)
Conceived at the 1992 Rio Earth Summit, UNEP FI has grown from from 6 banks to some 270 financial institutions by 2001.
The UNEP FI is a voluntary pact between UNEP and some 270 financial institutions globally
UNEP FI promotes sustainability excellence across the finance sector
UNEP FI builds the business case for Financial Institutions and Insurers to become sustainability leaders
The trend to ‘sustainable banking’ is still very new, and mainly limited to banks in developed countries who wish to appeal to environmentally-conscious customers. However, it is possible that this could provide a further source of finance, on attractive terms, for firms wishing to finance cleaner production investments.
This slide defines sustainable banking and refers to the landmark UNEP declaration that over a hundred banks have voluntarily signed, to recognise their responsibility to contribute to sustainable development and express a commitment to this.

11. Sustainable banking - (2)
Some banks are moving from a traditional defensive position:
- non-active
- deny banks’ responsibilities for
environmental impacts
- resist environmental legislation
towards …..
A progression can be defined, from the traditional attitude of banks to the environment, to more progressive attitudes.
The traditional attitude can be described as ‘defensive’, with a reluctance to accept responsibility, and a tendency to react to possible new environmental legislation by lobbying against it. This attitude is probably still typical of a lot of the banking sector, but a number of banks are moving towards a more progressive approach [  next slide].

12. Sustainable Banking - (3)
- Proactively seek environmental cost savings
- Recognize possible environmental effects
on project’s and firm’s risks
- Set up special environmental funds
‘Sustainable Banking’ is an ideal, rather than something which any existing bank can be claimed to have fully achieved. This recognises that banks have a considerable potential to impact the environment, not only through their own banking operations but even more through their influence on the firms to whom they lend.
This is recognised to be not only environmentally responsible but also good banking practice, since environmentally responsible investments such as Cleaner Production projects are likely to carry lower risks than other projects. For example, it is less likely that a project will have to be abandoned before the end of its full economic life due to tighter environmental legislation and regulation.
One feature of this is that some ‘ethical’ banks from developed countries have set up funds specifically to provide finance for CP and other environmental projects in developing countries. These funds are usually accessible through local banks in the developing countries.

13. Opportunities for the clients and FI
Business’ derived
CP opportunities
for client
environmental
liabilities and risks é
IMPACT ON FI
Capital Costs é
efficiency é é
Operating
costs
Financial ê
costs ê
Market share ê
Repayment é u
Asset value
Reduced
New market u
New business
opportunities
assets value
Legal liability
Inherent
preventive
approach
Potential legal u
Fines
liability u
Clean up
Long term
pollution liabilities ê
Damaged
Better ê
reputation
REPUTATION é
reputation