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Financing the change for the future
ZERO-konferansen
Gardermoen, November 19, 2012
Idar Kreutzer, CEO, Finance Norway
Business as usual is not an option
Today and BAU: The world is on an unsustainable track
Source: World Business Council for Sustainable Development, Vision 2050
Vision 2050: Around nine billion people live well, and within the limits of the planet
The pathway to Vision 2050
Significant needs for investments
Expected investment needs for
urban infrastructure up to 2030
(US$ billions)
Many opportunities...
Systems planning
Infrastruture
Water
Technology
Buildings
Finance
Source: Booz Allen Hamilton, 2007
A good match
Demand
Supply
Cumulative investment in green
infrastructure:
 $40 trillion between 2012 and 2030
 = approximately $2 trillion or 2% of
global GDP per year
 = a doubling from current levels
Importance of pension funds relative to the
size of the economy, 2010 (Assets under
Management % GDP)
Long term investments
Sustainable investments
Pension funds total:
$ 28 trillion in assets
Source: G20/OECD Policy Note on Pension Fund
Financing for Green Infrastructure and Initiatives
Barriers
Problems with
government support
for infrastructure
projects
•
•
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Lack of political commitment over the long term
Lack of infrastructure project pipeline
Fragmentation of the market among different levels of government
Regulatory instability
High bidding costs
Lack of investor
capability
•
•
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•
Lack of expertise in the infrastructure sector
Problem of scale of pension funds
Regulatory barriers
Short-termism of investors
Problems with
investment
conditions
• Negative perception of the value of infrastructure investments
• Lack of transparency in the infrastructure sector
• Misalignment of interests between infrastructure funds and pension
funds
• Shortage of data on infrastructure projects
Source: G20/OECD Policy Note on Pension Fund Financing for Green Infrastructure and Initiatives
Examples
South Africa:
The Government Employees
Pension Fund (GEPF)
 Africa’s largest pension fund
($138 bn AUM)
 Largest investor on JSE
5 % invested in developmental
projects, mostly infrastructure:
 Economic infrastructure
 Social infrastructure
 Economic growth and
transformation
 Environmental sustainability
ESG framework to measure impact
Peru:
 In 2009, the Pension Fund
Association created an
Infrastructure Investment Trust,
investing only in infrastructure
project debt
 Managed by a company
authorized by the supervisory
authority, with representatives of
the 4 PFAs on the investment
committee
 Structure believed to overcome
some of the difficulties pension
funds encounter in investing in
infrastructure projects
Source: G20/OECD Policy Note on Pension Fund Financing for Green Infrastructure and Initiatives
The financial hub of society
The financial industry plays a key role in our lives. It
paves the way for the growth and development
underlying our common welfare.
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The industry’s contribution:
Financing the change
Private Public Partnership – sustainable infrastructure
Responsible investments
Sharing of core competence ( i.e. understanding of risk
and losses caused by climate change)
Cooperating with governments and local authorities
Raising the awareness of customers
8
Strong growth in sustainable AuM
UN PRI
The 6 principles
35000
30000
1.
We will incorporate ESG issues into investment
analysis and decision-making processes.
2.
We will be active owners and incorporate ESG
issues into our ownership policies and
3.
We will seek appropriate disclosure on ESG
issues by the entities in which we invest.
4.
We will promote acceptance and
implementation of the Principles within the
investment industry.
5.
We will work together to enhance our
effectiveness in implementing the Principles.
6.
We will each report on our activities and
progress towards implementing the Principles.
25000
20000
15000
10000
5000
0
2006 2007 2008 2009 2010 2011
CSR/ESG in general corporate lending
Who’s responsibility?
 Role of creditor (credit) vs role of owner (equity)
Banks’ ”modus operandi” on CSR
 Hot topics:
 Human rights – because business is fundamentally about people
 Climate change – because financial institutions have an
increasing need to understand and manage climate changerelated risks in their portfolios
 Building competence and increase understanding
The Fornebu metro – a Norwegian test case
Today’s situation
«An environmental metro» to Fornebu
• 14.000 employees at Fornebu
• Plans to build a metro from Majorstuen
via Skøyen to Fornebu
• 50 busses per hour
• 6.000 residences after completion
• Large businesses: Aker Solutions,
Telenor, Statoil, Kværner, OBOS, KLP
Eiendom, Norwegian Property, ITFornebu, Aspelin-Ramm
Joint funding and public involvement
• 500 MNOK is missing
• The largest businesses will profit from a
metro to FoRnebu - are they able and do
they want to give something back?
• The municipality of Bærum may allow
increased density and the profit can form
an instructure fund
• Private vendors want to build, finance
and maintain the metro in a 30 year
period
• Private financial institutions can
finance the metro
…it is about leadership and culture
Active disengagement
Culture eats strategy for breakfast!
Leadership for sustainability
Sustainability is the single
biggest business opportunity
of the 21st century
Harold Lee Scott, Jr,
former CEO Wal-Mart
The most important thing I have
learned since becoming CEO is
context. It’s how your company
fits with the world and how you
respond to it.
Jeff Immelt, CEO The General
Electric Company