Green Bond Strategy May 2015

Transcription

1 Green Bond Strategy May 2015 For investment professionals only

2 Mirova overview by numbers Capitalizing on 30 years of experience in Responsible Investing within Natixis AM Own brand launched in % subsidiary of Natixis Asset Management since multi-disciplinary experts 5.2 billion in assets under management 5 capabilities around Responsible Investing Equities Fixed Income Infrastructure Impact Investing Voting & Engagement 3,1 billion 1,3 billion 569 million 116 million 42,9 billion 2 Mirova is a subsidiary of Natixis Asset Management. Data source: Natixis Asset Management Mirova as of 03/31/2015

3 Mirova, a pioneer in the green bond market As an asset management company dedicated to responsible investment, Mirova is a pioneer leading the way in developing the green bond markets through: Active participation from 2012 in the 1st wave of green bond issues with investment of >$300M (EIB, IFC, AFDB ) A Responsible Investment Research team of 11 analysts wholly dedicated to ESG Analysis A process designed especially for the analysis of green bonds An active presence with major professional bodies relating to green bonds. We are members of the Green Bond Principles An experienced team of senior managers with expertise in the areas of environmental investment and specifically green bonds. 3

4 1. Development: new challenges ahead 4

5 Financing green projects It is essential that we fight climate change and global warming. This requires substantial investments in for example: - Low-carbon energy: $147 billion per year of additional investment in renewable energy. 1 - Energy efficiency in building, transport and industry: $336 billion per year until To finance these projects, we need to draw on private investment green bonds offer an innovative way to combine a market return with an answer to environmental challenges Governments are committed to reduce emissions and have sign an agreement ( The climate energy package 2030 in Europe, the agreement between China and the USA ): COP 21 International Summit in Paris in October Source IPCC (Intergovernmental Panel on Climate Change)

6 A solution: changing the energy mix Evolution of the energy mix in different IEA scenarios : Other Renewables Mton Mtoe Bioenery Hydro Nuclear 0 Current policies (>4 C) New policies (+3.5 C) 450 (2 C) Gas Oil Coal Green Bonds assign funds to environmental projects 6

7 Green bonds: environmental and financial returns for double impact A Green bond provides finance for a specific project or programme of projects, which have a positive impact on the environment, to which it remains linked for its entire life A Green Bond: Finances energy and ecological transition Is transparent and has impact Offers a market return as conventional bonds Green bond can be issued by: A government agency, supranational organization or a development bank A corporate, bank or municipal Market development has accelerated in 2014 New issuers : Transport for London, Export-Import Bank of India Additional issuance from existing issuers : KFW (AUS $), Unibail Issuers with a broader spectrum of credit ratings (AAA to BBB) Covered green bonds 7

8 2. The Green Bond market 8

9 A market experiencing rapid growth and diversification in terms of issuers Green bonds market size since Annual issuance of new green bonds 1 Amount outstanding (in USD BN) Amount issued per year Cumulative amount ex-current Number of green bonds issued Number of issues In USD Bn Government related Local authorities Supranational Corporate 2,5 5,4 1,9 8, ,6 6,0 2,6 0,8 2,4 1,1 0, Source : Mirova March 2015 Including issues of $200M or higher 9

10 as well as geographic location, currency Geographical breakdown (>200mUSD) Currency breakdown (>200mUSD) Europe; 45% Global Supra; 42% Euro; 43% USD; 42% Asia; 5% North America; 8% Others; 1% SEK; 2% GBP; 6% CAD; 6% 1 Source : Merrill Lynch & MSCI March

11 Examples of green bonds issued Issuer Name Coupon Maturity Composite Rating Currency Country Sector Level Amount Outstanding in local currency Weight in the MSCI Barclays Global Green Bond index (%) EUROPEAN INVESTMENT BANK /11 AAA EUR SUPRANATIONAL SUPRANATIONAL % ELECTRICITE DE FRANCE SA /04 A+ EUR FRANCE UTILITY % KFW /07 AAA EUR GERMANY AGENCIES % GDF SUEZ /05 A EUR FRANCE UTILITY % KFW /10 AAA USD GERMANY AGENCIES % EUROPEAN INVESTMENT BANK /03 AAA EUR SUPRANATIONAL SUPRANATIONAL % EUROPEAN INVESTMENT BANK /11 AAA EUR SUPRANATIONAL SUPRANATIONAL % GDF SUEZ /05 A EUR FRANCE UTILITY % SOLAR STAR FUNDING LLC /06 BBB USD US UTILITY % AGENCE FRANCAISE DEVELOP /09 AA EUR FRANCE AGENCIES % EUROPEAN INVESTMENT BANK /10 AAA USD SUPRANATIONAL SUPRANATIONAL % INTL FINANCE CORP /11 AAA USD SUPRANATIONAL SUPRANATIONAL % INTL FINANCE CORP /05 AAA USD SUPRANATIONAL SUPRANATIONAL % TOPAZ SOLAR FARMS LLC /09 BBB USD US UTILITY % UNIBAIL RODAMCO SE /02 A EUR FRANCE FINANCIAL INSTITUTIONS % REGION OF ILE DE FRANCE /04 AA EUR FRANCE LOCAL AUTHORITIES % AE ROTOR HOLDING BV /03 BBB USD NETHERLANDS FINANCIALINSTITUTIONS % INTL BK RECON & DEVELOP /03 AAA USD SUPRANATIONAL SUPRANATIONAL % HERA SPA /07 BBB EUR ITALY UTILITY % INTL BK RECON & DEVELOP /03 AAA EUR SUPRANATIONAL SUPRANATIONAL % INTL BK RECON & DEVELOP /08 AAA USD SUPRANATIONAL SUPRANATIONAL % NEDER FINANCIERINGS MAAT /11 AA+ EUR NETHERLANDS AGENCIES % NORDIC INVESTMENT BANK /09 AAA USD SUPRANATIONAL SUPRANATIONAL % NEDER WATERSCHAPSBANK /07 AA+ EUR NETHERLANDS AGENCIES % ASIAN DEVELOPMENT BANK /03 AAA USD SUPRANATIONAL SUPRANATIONAL % NRW.BANK /11 AA EUR GERMANY FINANCIAL INSTITUTIONS % KOMMUNALBANKEN AS /02 AAA USD NORWAY AGENCIES % 11 Source : Mirova & MSCI March 2015

12 3. Mirova s Green Bond analysis 12

13 Green bond analysis Risk of low quality issuance: Weak environmental projects Poor transparency Low level impact Loose interpretation of Green Bonds Principles A Green Bond requires two distinct levels of analysis: 1. A carefully designed process for analysing its environmental profile (including project and impact) 2. The financial profile analysis (maturity, credit profile, yield, etc) 13

14 Mirova green bond Evaluation To prevent those risks Mirova carries it s own methodology, based on 3 aspects: 1. The Green-Bond structure 2. Green-programme content including impact 3. Green-programme framework Mirova does not exclude any green bond for any one particular aspect, but rather score the green bond in its entirety. 14

15 Mirova green bond Evaluation The analysis is based on : 1. Program content Environmental projects e.g. Renewable energy, energy efficiency, water infrastructure, green transport Environmental and social impacts e.g. Reduction in GHG, reduction in water loss, job creation 2. Program structure: Green Pack Verification Annual monitoring Reporting, etc 15

16 Example of green bond specific report: the EIB The EIB launched its Climate Awareness Bonds in 2007, however, the first "liquid " bonds came to market in The program s goal is to allocate funds to projects in the area of energy efficiency and renewable energy: Renewable energy (windpower production, hydroelectric, solar and geothermic power) Energy efficiency: urban heating, cogeneration, building insulation, reduction of energy losses during energy transport. Examples of projects financed by the Climate Awareness Bonds program: London Array offshore windfarm, World s largest offshore wind farm Enel Greenpower Energie Ronnivabili II, Capacity of 840MW 16 Source: EIB

17 Mirova s environmental impact classification Exposure by issue Climate change - High : Contribution to energy transition - Significant : Significant reduction of CO2 emissions - Low or no : Reduction in line with the sector practices - Negative : Project that have a negative impact in terms of CO2 emissions Resource - High : Circular economy, recycling, avoid resources use - Significant : Reduce resources use - Low or no : Reduction in line with the sector practices (BAU) - Negative : Project that have a negative impact in terms of rare resource use Pollution Biodiversity - High : Above the standards + best available technology - Significant : BAU (given that standards are often non achieved) - Low or no : Non respect of standards - Negative : Significant deterioration in terms of pollution - High : Strengthen the biodiversity, repopulation of endemic species - Significant : Biodiversity offsets - Low or no : Respect of standards (BAU) - Negative : Significant deterioration of biodiversity (degradation of habitats and natural ecosystem ) 17

18 Mirova supporting the development of the market In addition to a full analysis of the issuer, each green bond is analysed in its own right. We base our definition of a green bond on the Green Bond Principles, but we have additional requirements: 1. Use of proceeds All green bonds should outline how the funds raised would be applied in the use of proceeds section of their relevant prospectuses. 2. Finance Issuers should provide information regarding the percentage of bond proceeds being used for new project funding versus refinancing. 3. Interim finance Green bond proceeds should be applied to eligible projects within a reasonable period of time after issuance, appropriate to the maturity of the bond. 4. Management of proceeds Funds raised but temporarily unapplied, should be held in segregated or ring-fenced account and if placed on deposit, to be consistent, should be placed with a counterparty with high environmental and social standards. 18

19 Investment process Security selection focus benchmark aware and not benchmark constrained Universe of global Green Bonds Universe Identification Full Green Bond analysis including project and impact Our in-house Responsible Research Team, composed of 11 people, analyses the projects financed by the green bond In-depth Fundamental Research Value Screening Portfolio Construction Seeking issuers with good sustainable profiles for the long term with a good or improving financial profile. Financial analysis issued by: Credit analysis issued by Natixis AM s Credit Research team composed of 21 people Three-person management team comprising at least 2 senior managers Active management Monitoring 19

20 Breakdown of the environmental projects of the green bond Climate change adaptation 4% Diversified 14% Sustainable water management (including clean water) 1% Renewable Energy 42% Clean transportation 15% Biodiversity conservation 0% Sustainable land use 1% Sustainable waste management 2% Energy efficiency 21% 20 Source: Mirova April 2015

21 ESG Dashboard For illustrative purposes only Examples: Title ESG Recommendation E Recommendation S Recommendation G Recommendation Agency/ Supra AFRICAN DEV BANK.750% Committed Positive Positive Positive TRANSPORT FOR LONDON 2.125% Committed Positive Positive Positive EIB 1.375% Committed Positive Positive Positive INTL FIN CORP.625% Committed Positive Positive Positive KFW 0.375% Committed Positive Positive Positive Corporates ELEC DE FRANCE 2.250% Committed Positive Positive Positive GDF SUEZ 2.375% Committed Positive Positive Positive HERA SPA 2.375% Committed Positive Positive Positive UNIBAIL-RODAMCO 2.500% Committed Positive Positive Positive EXPORT- IMPORT BANK OF INDIA 2.75% Committed Positive Positive Positive Source : Mirova For Illustrative purposes only. 21 * ESG: Environment, Social/Societal and Governance

22 Appendices 22

23 Example: KFW (XS ) For illustrative purposes only Description of the bond Issue date: 22/07/2014 Maturity (years): 10 Amount (USD m) : 996 Currency: EUR Type of bond: Green bond Project(s) phase: New and existing projects Main type of benefit(s): GREEN Purpose: Renewable energy projects Compliance Information Eligibility criteria YES - GHG emissions avoided - Jobs created - Fossil fuel imports avoided Second opinion YES CICERO Account YES Separated internal account for the Green Bond Reporting YES Annually Third Opinion YES ZSW This bond contributes to finance energy transition and does not pose environmental or social risks. COMMITTED ( 10) Sustainability opinion (High) The "Renewable Energy" programme contributes to energy transition. KFW provides financings for facilities to generate energy from solar, wind, hydropower and biomass sources. In 2013, the "Renewable energies" program had a volume of EUR 4.7 bn. With this program, KFW addresses three issues: climate change, resource depletion and development with creation of jobs. Since 2010, KFW disclose figures concerning benefits provided by this program: jobs created and securized, reduction in GHG emissions, fossil fuel imports avoided. Risks review (Positive) Project(s) underlying of this bond do not pose major environmental or social risks. Even though no information concerning specific risk management deployed for these projects is disclosed, KFW is a German development bank with a risk review ranking at positive. To obtain support of KFW, each project is stringently evaluated. In terms of governance of the bond, KFW annually reports on environmental and social benefits. This reporting is verified by an external auditor, ZSW. In addition, CICERO reviewed and evaluated KfW s green-bond-concept through a second opinion. 23

24 Key investment risks Credit risk: credit risk arises from the risk of impairment of the quality of an issuer and/or an issue, which may entail a reduction in the value of the security. It may also arise from default at maturity by an issuer in the portfolio. Changing interest rates risk: Interest rates typically vary from one country to the next, and may change for a number of reasons. Those reasons include rapid expansions or contractions of a country s money supply, changes in demand by business and consumers to borrow money and actual or anticipated changes in the rate of inflation Inflation risk: The strategy may invest in inflation-linked debt securities. The value of such securities fluctuates with the inflation rate of the corresponding geographical area. Capital loss: Principal value and returns fluctuate over time. There is no guarantee that the capital invested will be returned to the investor in full. Emerging Markets Risk: Investments in foreign securities may be subject to greater political, economic, environmental, credit and information risks. Foreign securities may be subject to higher volatility than non-emerging markets securities, due to varying degrees of regulation and limited liquidity. 24

25 Legal information MIROVA Limited liability company - Share capital , 50 Regulated by AMF under n GP RCS Paris n Registered Office: 21 quai d Austerlitz Paris Mirova is a subsidiary of Natixis Asset Management. NATIXIS ASSET MANAGEMENT Limited liability company - Share capital ,76 Regulated by AMF under n GP RCS Paris n Registered Office: 21 quai d Austerlitz Paris Cedex 13 Legal information This information purpose only document is a non-contractual document intended only for professional clients in accordance with MIFID. It may not be used for any purpose other than that for which it was conceived and may not be copied, distributed or communicated to third parties, in part or in whole, without the prior written consent of Mirova. No information contained in this document may be interpreted as being contractual in any way. This document has been produced purely for informational purposes. Mirova reserves the right to modify any information contained in this document at any time without notice, including any reference to management process which do not constitute an undertaking from Mirova. This document consists of a presentation created and prepared by Mirova based on sources it considers to be reliable. However, Mirova does not guarantee the accuracy, adequacy or completeness of information obtained from external sources included in this document. Mirova will not be held liable for any decision taken or not taken on the basis of the information disclosed in this document, nor for any use that a third party might make of this information. Figures contained in this document refer to previous years. Past performance and simulations of past and future performances are not a reliable indicator and therefore do not anticipate future results. Reference to a ranking, a rating or an award does not anticipate the future performance of this strategy or the manager. 25

26 Additional Notes This material has been provided for information purposes only to investment service providers or other Professional Clients or Qualified Investors and, when required by local regulation, only at their written request. It is the responsibility of each investment service provider to ensure that the offering or sale of fund shares or third party investment services to its clients complies with the relevant national law. In Spain and Portugal Provided by NGAM S.A. or its branch office NGAM, Sucursal en España. NGAM S.A. is a Luxembourg management company that is authorized by the Commission de Surveillance du Secteur Financier (CSSF) and is incorporated under Luxembourg laws and registered under n. B NGAM, Sucursal en España is authorised and supervised by the Comisión Nacional del Mercado de Valores (CNMV) in relation to its activities in Spain, and by the Comissão do Mercado de Valores Mobiliários (CMVM) in relation to its activities in Portugal. Registered office of NGAM S.A.: 2 rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg. Registered office of NGAM, Sucursal en España: Torre Colon II - Plaza Colon, Madrid, Spain. The above referenced entities are business development units of Natixis Global Asset Management, the holding company of a diverse line-up of specialised investment management and distribution entities worldwide. The investment management subsidiaries of Natixis Global Asset Management conduct any regulated activities only in and from the jurisdictions in which they are licensed or authorized. Their services and the products they manage are not available to all investors in all jurisdictions. Although Natixis Global Asset Management believes the information provided in this material to be reliable, it does not guarantee the accuracy, adequacy, or completeness of such information. The provision of this material and/or reference to specific securities, sectors, or markets within this material does not constitute investment advice, or a recommendation or an offer to buy or to sell any security, or an offer of services. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. The analyses, opinions, and certain of the investment themes and processes referenced herein represent the views of the portfolio manager(s) as of the date indicated. These, as well as the portfolio holdings and characteristics shown, are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material. This material may not be distributed, published, or reproduced, in whole or in part. All amounts shown are expressed in USD unless otherwise indicated.