Transcript Outline of DBJ Services Promoting Foreign Direct

Innovative Financing Efforts for
Sustainability
by Development Bank of Japan (DBJ)
Atsuhito Kurozumi ([email protected])
Development Bank of Japan
36th Meeting of the General Assembly of the ALIDE
Havana, Cuba
25-26 May, 2006
This material is distributed on behalf of the Development Bank of Japan (DBJ), Tokyo, Japan.
DBJ programs are based on a Japanese governmental financial policy whose principal purpose is to encourage Japanese
Economy and Industry. This material is intended to provide general information to promote that objective, not to solicit
clients for loans or other financing programs.
1
DBJ and its Mission
DBJ: Policy-based financial institution owned by the
Japanese government
Mission: to revitalize the economy and to promote sustainable
development mainly through long-term financing
Three Focused Areas:
(1) Environmental Conservation and Sustainable Societies
(2) Community Development
(3) Creation of New Technology and Industries
2
Outline
1. Trends in DBJ’s Efforts for Sustainability
2. New Program 1:
Loans for Environmentally Conscious Management
3. New Program 2:
Coestablishment of Japan Carbon Finance Ltd
[Appendix] Some details on the two programs
3
Outline
1. Trends in DBJ’s Efforts for
Sustainability
2. New Program 1:
Loans for Environmentally Conscious Management
3. New Program 2:
Coestablishment of Japan Carbon Finance Ltd
[Appendix] Some details on the two programs
4
Trends in DBJ’ Efforts for Sustainability
1960-1980’s: “End of Pipe” Solution
Loans for Anti-Pollution Investment (water pollution control,
smoke and soot control, waste disposal, noise reduction, energy
saving etc.)
1980’s-: Process Improvement
Loans for Reduce-Reuse-Recycle, Life Cycle Assessment,
ISO14001, Renewable Energy, etc
2000’s-:
Promoting Environmental Management and CSR
Loans for Environmentally Conscious Management
(the World’s First Loans using Environmental Ratings)
Mitigating Climate Change
Establishment of Japan Carbon Finance Ltd to promote CDM/JI5
Example 1: Eco Cement (Recycling)


Key equipment of Eco Town plan of Chiba
prefecture (finalized in 2001)
Production of cement based on ash (90,000 t
annually) from metropolitan waste
Source: Eco-cement homepage.
6
Example 2: Wind Power Plant (Renewable Energy)
Eco Power (Yamagata Prefecture)
3,200kw
Eurus Energy Tomamae
(Hokkaido) 20,000kw
Source: Annual Report of the Development Bank of Japan.
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Outline
1. Trends in DBJ’s Efforts for Sustainability
2. New Program 1:
Loans for Environmentally Conscious
Management
3. New Program 2:
Coestablishment of Japan Carbon Finance Ltd
[Appendix] Some details on the two programs
8
Loans for Promoting
Environmentally Conscious Management
Loans for environmentally conscious activities by
companies whose management is environmentally
conscious
→ using 2-step environmental rating
① Qualitative Evaluation（Governance,Environment
Management System, Partnership, Disclosure, etc）
② Quantitative Evaluation
（Environmentally Efficient: CO2, Waste, etc）
Monitoring companies’ activities after loans
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Loans for promoting environmentally conscious management
Environmental screening
Companies
Application
Firms proved to have highly go-ahead attitude
toward environment-friendly activity
<A>
Loan
Policy interest rate III
Firms proved to have go-ahead attitude toward
environment-friendly activity
<B>
Policy interest rate II
Firms proved to have sufficiently positive attitude
toward environment-friendly activity
<C>
Policy interest rate I
(unqualified)
Monitoring, duty of disclosure
Guarantee on privately placed bonds
10
Outline of Screening Evaluation
(Details) Evaluation Items and Criteria
① General management (41 items, 80 points)
② Business activities (27 items, 64 points)
③ Environmental performance (58 items, 106 points)
※ A total of 126 evaluation items for 250 points have been set up.
Applicants achieving120 points or more are accepted.
Successful applicants are further classified into three ranks
(A, B & C) for different interest rates.
(Features)
(1) Screening items and criteria are mostly made public.
(2) Screening is based on the “Guidelines for Environmental
Performance Indicators” by the Ministry of the Environment.
(3) Special consideration is given to SMEs.
(4) Special items have been set up for different types of
manufacturing and non-manufacturing industries.
(5) Additional items are available to give special points for
excellent business activities.
Outline of Evaluation Items
Example for Manufacturing Industry (processing/assembly)
Common/additional
Items for environmental
performance
Common/additional
Items for business
activities
Common/additional
Items for general
management
A. Corporate governance
B. Compliance
C. Risk management
D. Partnership
E. Employees
F. Disclosure of information
G. Equipment Investment
H. Development of products and services
I. Environment-friendly considerations in supply chain
J. Recycling of used products
K. Measures against global warming
L. Measures for effective use of resources
M. Measures for water resources
N. Management of chemical substances
O. Other measures for environmental loads
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The Current Status of the Loan
and Benefits to Borrowers
Loan Provision: 32 companies, $ 370 million boosting $ 1.9
billion investment (as of March ‘05)
Benefits to clients and society:
1. Low interest rates improve
a. the financial competitiveness of the company
b. the status of the environmental section within each company.
2. Help raise reputation among consumers and investors.
3. Help raise awareness among
a. employees (especially in SMEs whose in-house education may not
sufficient).
b. general public
13
Outline
1. Trends in DBJ’s Efforts for Sustainability
2. New Program 1:
Loans for Environmentally Conscious Management
3. New Program 2:
Coestablishment of Japan Carbon
Finance Ltd
[Appendix] Some details on the two programs
14
Japan Carbon Finance Ltd.
(JCF)
Main Business Objective:
To Purchase Carbon Credits (CERs and ERUs）
issued until 2012 from CDM/JI Projects
with Assistance to Development of CDM/JI Projects
Committed Fund Amount:
Approx. US$ 140 million
from fund pool called “Japan GHG Reduction Fund (JGRF)”
Establishment:
December, 2004
Location:
Tokyo, Japan
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Fund Providers:
Two Policy-based lenders (Governmental Banks)
& 31 Major Japanese Private Enterprises
Sector
Policy-lending
Institution
Utility
Oil &
Manufacturing
Trading
Engineering
Fund Providers
Japan Bank for International Cooperation (JBIC)
Development Bank of Japan (DBJ)
Tokyo Electric Power Co., Inc.
Kansai Electric Power Co., Ltd.
Chubu Electric Power Co., Inc.
Tohoku Electric Power Co., Inc.
Hokkaido Electric Power Co.,
Inc.
Hokuriku Electric Company
Nippon Oil Corp.
Idemitsu Kosan Co. Ltd.
Japan Energy Corp.
Kyushu Oil Corp.
Sony Corp.
Toshiba Corp.
The Chugoku Electric Power Co., Inc.
Shikoku Electric Power Co., Inc.
Kyushu Electric Co., Inc.
The Okinawa Electric Power Co., Inc.
Electric Power Development Co., Ltd. (JPower)
Tokyo Gas Co., Ltd.
Sharp Corp.
Fuji Xerox Co., Ltd.
The Japan Iron and Steel Federation
Taiheiyo Cement Corp.
Toyota Motor Corp.
Terumo Corp.
Mitsubishi Corp.
Mitsui & Co., Ltd.
Sumitomo Corp.
Itochu Corp.
Marubeni Corp.
Sojitz Corp.
10 Major Powers &
the Largest Gas Firms
Major Companies in
Oil,
IT,
Steel, Cement,
Automobile &
Medical Equipment
fields
6 Major Investing
&
Trading Companies
JGC Corp.
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Services
(1) Financial Assistance for Project Development:
 PDD Preparation
 Validation
 Initial Verification
(2) Purchase of Carbon Credits (CERs, ERUs, AAUs):
JCF commits purchase of carbon credits under ERPA (Emission
Reduction Purchase Agreement) (at a fixed price).
* Payment on Delivery in principle
* Purchase Price: to be decided on project-by-project basis
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Benefits for Projects
(1) To get Additional Cash Flow:
 Improvement of Project Viability
･with additional Cash Inflow by selling CERs in US$
･Cash Inflow depends on Type of Project
 Securing Stable Profitability
by getting commitment for purchase of CERs
(2) To get Assistance in Development:
 Saving Development Costs
(PDD, Validation, Initial Verification etc.)
 Getting Assistance and Orientation
for development of CDM projects
(3)To have possibility to get Financing from JBIC:
A) Export Loan
B) Overseas Investment Loan
C) Untied Loan
D) ODA Loan, etc.
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Assistance in Development
Even in the case of shortage of Carbon Credits
in spite of best endeavors by Project Participants:
Project Participants are NOT required:
• to make up for the shortage
(with Credits from other projects or sellers); and
• to pay any penalty to JCF.
unless the delivery failure is caused by their willful
misconduct. (e.g. Sale of Carbon Credits to some third party)
Project Participants do not have to suffer from
unpredictable financial risks in future.
19
Key Criteria at Screening of
PINs/PDDs

Fulfillment of Kyoto Rules:
 Additionality, Methodology etc.
Environmental & Social Safeguard Requirements
 Project Feasibility
 Purchase Conditions

 Price: to be decided on a project-by-project basis
at a fair & reasonable price
 Volume: More than 50,000t-CO2e/year is preferable.
 Delivery Schedule: Early commissioning project is preferable.
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Key Criteria at Screening of
PINs/PDDs
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Benefits to Project Participants (including
development banks who have eligible projects)
JCF helps improve the project cash flow.
JCF assists development of CDM Projects.
JCF bears development costs, for not only PDD preparation and
Validation but also Initial Verification.
JCF takes delivery risks.
JCF will not require any penalty or replacement of CERs in
principle.
Contacting JCF in the early stages is highly recommended.
(Send PINs!)
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Thank you
[email protected]
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