1. Green Finance for Green Growth ~ Public Private Financial Partnership ~ 17 November 2010 Takashi Hongo Special Advisor and Head of Environment Finance Engineering Department Japan Bank for International Cooperation

2. 11 Green Finance for Green Growth

3. 2 Financial Crisis Environment Constraint Energy Constraint Green Stimulus Green Growth Economic Growth of Asia Technology Driven Private Driven Market-base Mechanism Level Playing Fields Access to Clean Energy Triple Threats

4. 3 Demand and Supply of Additional Investment

5. 44 Source: UNFCCC  Keep the increase in global temperature below 2 degrees.  Emissions targets of Annex I Parties for 2020 are to be submitted by 31 January 2010.  Nationally appropriate mitigation actions (NAMAs) by Non-Annex I Parties are to be communicated every two years. NAMAs seeking international support are to be recorded in a registry.  Crucial role of REDD-plus  Additional funding to developing countries: USD 30 billion (2010-2012) Mobilizing USD 100 billion a year by 2020 (public & private, bilateral & multilateral) Copenhagen Green Climate Fund  Technology mechanism to accelerate technology development and transfer  Assessment of the implementation of this Accord is to be completed by 2015. Copenhagen Accord

6. 5 Green Banking/Green Financing Greening of Operation Greening of Finance Contribution for New Mechanism Minimum Requirement Proactive Financing 3R, Low Carbon Operation Environment Guideline - Commercially Viable BAT -Measurement of CO2 Reduction (MRV) Voluntary actions -Carbon Offset -Sustainable Forest Rating -Weather Index Insurance for Agriculture CSR to New Business Model

7. 66 JBIC’s Green Finance

8. 7 JBIC Negative impact Positive contribution Finance Consideration of future system Consideration of future system Project Finance Environment Guideline (Avoid, minimize ) Organizational Operation Organizational Operation ・ 3R ・ CO2 reduction plan ・ Study ・ Proposal Environment Finance ( LIFE, GREEN) Knowledge contribution JBIC for Environment and Bio Diversity (4 arrows approach)

9. “LIFE” (Leading Investment to Future Environment) Initiative by JBIC ● LIFE will … ・ support both public and private sectors, ・ cooperate with multilateral development banks (MDBs) and mobilize private financing. ●JBIC’s financial support under the Initiative will be around 5 billion USD for the next 2 years. Four main targeted sectors of the Initiative are... ・ Clean power generation - Solar, geothermal, wind power, clean coal power plant, etc ・ Energy efficiency improvement - Upgrading of existing transmissions and distributions, modernization and heat recovery of steel furnaces and cement kilns, ESCO (energy service companies), etc. ・ Water - Water purification and supply, sewage system, wastewater treatment, desalination and water processing, etc ・ Urban transportation - Modal shift in densely populated areas, etc Cooperation (Co-finance, information sharing, etc) Loans / Loans, etc Catalytic role Loans, etc MDBs (ADB, World Bank Group, etc) Private financial institutions J B I C Equity Investment

10. 9 JBIC “GREEN” Future carbon market Finance J-MRV Commercially viable BAT (best available technology) Deployment Possibility ・ Industries ・ Carbon Players ・ Host Government Dialogue Share GHG emission reduction projects GHG emission reductions JBIC will review the followings 1. Climate change policy of the host country 2. Technology to be used 3. Reduction amount by J-MRV J-MRV ・ Scaling up low carbon investment ・ “simple, practical and internationally acceptable” guideline ・ Following investor’s decision making process (MRV: Measurement, reporting and verification) Reduction amount Ownership New Financial Program (GREEN) and J-MRV (Global action for reconciling economic growth and environmental preservation)

11. ・ Scaling up low carbon investment ・ “simple, practical and internationally acceptable” guideline ・ Following investor’s decision making process Baseline amounts = Emissions in the case without investment Option of Baseline a/ Actual emissions before investment, b/ Emissions from similar installations in operation in the country or in the region c/ Emissions from similar installations recently invested in the country or in the region Reduction amounts = Baseline emissions - Emissions from projects Taking into account of ・ investment climate such as economy, energy, technology, regulation. ・ availability and reliability of data Sampling and theoretical value may be applicable http://www.jbic.go.jp/en/about/news/2010/0730-01/100730_mrv_guideline.pdf J-MRV

12. 11 Source: IEEJ CO 2 emission reduction potential by using Japanese BAT (‘000 ton/Y ) Reduction Potential of Proven Technology

13. 12 Energy saving and CO2 reduction 18,410Kwh 120,000 ton/y (China, 5000ton X2 units) Cooling Tower PH Boiler Demineralizer building AQC Boiler Turbine / Generator Building Source Kawasaki Heat Recovery System of Cement Plant

14. 13 Environment Guideline JBIC’s Environment Guideline ・ Pollution control, Natural Environment, Social Environment ・ Risk Analysis Department and Independent Third Party ・ ECA Common Approach ・ Alliance with more than 20 institutions ・ Sustainability of Projects (Risk Mitigation) ・ Responsibility of Financial Sector ・ International Standard and Custom Local Regulation Equator Principle ・ Project Finance in developing countries ・ Around 60 institutions

15. 14 Innovative Instrument for Green Finance

16. 15 Stock Market Network Rating Evaluation Advisory The Good Bankers Fund Manager Investment Fund Institutional and Individual Investors Rating System Forest-friendly Assets Investment Advisory Board Financial Review Investment Reviewing Forest Friendly Activities of companies Businesses Finances Academia Policies Citizens Forest Eco Fund 190 items reviewed Service Contract Management Contract Source : The Good Bankers Co., Ltd. Forest Eco Fund

17. 16 FarmersBAAC JBIC Sonpo Japan Study （２００８） Premium Payment Development of] WIIA MOU Host Participation Weather Index Insurance for Agriculture (WIIA) Rain Fall Minimum Rain Fall (Contract) Rain Fall No Insurance Payment Insurance Payment (Compensation of drop of income) Monitoring Period month

18. We enjoy biodiversity services. We need to maintain biodiversity for future generations. ・ Many medicines originate through or were developed by studying biodiversity services. ・ Fishing and agriculture depend on biodiversity services. Today we enjoy biodiversity freely because of its externalities, but without sustainable usage it would be exhausted. Biodiversity must be internalized to the economy ・ They will need to use biodiversity services just as now, such as genetic businesses developed through science and technology. Value of biodiversity

19. 18 Financial risk Financial losses realized on projects because of inadequate management of biodiversity-related risk Financial losses realized on projects because of inadequate management of biodiversity-related risk Reputation and funding risk Mission risk Loss of reputation and financial strength through improper management of biodiversity-related risk Failure to realize sustainable growth through project financing Failure to realize sustainable growth through project financing Short term risk Short term risk Long term risk Long term risk Environmental due diligence including biodiversity Proactive finance for projects with biodiversity components CSR activities for biodiversity components Contribute to mechanism for BES Risk Mitigation Biodiversity-Related Risk for Financial Institutions

20. 19 Estimation of precipitation by the integrated satellite monitoring system Can we use this system for dam operation or weather derivative? New Technology and Finance

21. 20 Biomass stock monitoring system Can we use this for forest management and forest credit system? New Technology and Finance

22. 21 Green Finance Proposal

23. 22 Awareness of Environment Constraint Review of environment impact Green Finance Alliance (consideration and proposal) Climate Finance (with MRV) Water Finance Environment Guideline (safe guard) ・ Pollution control ・ Natural environment ・ Social environment Proactive ActionRisk Mitigation System for the future Creating new market (Forest, Biodiversity etc) Green Finance

24. 23 Public Sector (Improvement of investment climate) Private Sector (Driving force) Financial Sector (Push last one mile) Capacity of Our Planet Change of Lifestyle Better investment climate, More investment Use of Technology Public Private Financial Partnership