November 1, 2011

Green Investment Corporation

Gerard van BaarManaging DirectorFinance & Sustainability

Holland Financial Centre

Public private foundation representing the financial industry including government• banks, brokers, pension funds and asset managers, consultants,

accountancy and legal firms, the Dutch government, the Authority for the Financial Markets (AFM), the Dutch central bank (DNB), and the city of Amsterdam.

• 70 participants per 2010

Objective• to develop initiatives aimed at preserving a strong, open,

internationally competitive financial industry in the Netherlands

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Holland Financial Centre

HFC focuses its attention to four priority areas, based on the areas of expertise in the Netherlands

• Finance & Sustainability• Retirement Management• Financial Logistics• Trading Venue

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Finance & SustainabilityTrack record− ABN AMRO -> equator principles – project finance− PGGM / APG -> Responsible Investment− Triodos -> business model− SNS -> micro finance− Robeco -> integrated sustainability, clean tech− SAM / Robeco-> Dow Jones Sustainability Index− Rabobank -> Food & Agribusiness principles− Alpinvest -> clean tech private equity− Fortis/ABN AMRO -> innovator in carbon trading− Carbon policy -> high profile within UN− Princess Amalia -> first project finance off-shore wind park− Pension model -> highly capitalized (EUR 800 billion) and sustainable asset

management− Global Reporting Initiative (GRI) -> based in Amsterdam− Sustainalytics -> Amsterdam

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But the track goes back to the origin of HollandYou can’t go lower…

Schiphol Airport 13 meters below sea level

But still dry, because of ‘polder’

Mills were not for touristsbut to make ‘polders’ dry

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With financial innovations still used…Oldest share in the worldVereenigde OostindischeCompagnie - VOC

So you need a stock exchange

Which also allowed you tofinance polders

Such as De Beemster

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That’s the crux of Finance & SustainabilityThe real ‘poldering’ of Holland only took off after a financial innovation: the share.

Technical innovation (the mill) alone is not enough.

Holland Financial Centre for Finance & Sustainabilityis the knowledge centre for financing the necessary transition to a sustainable future

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Centre for Finance & Sustainability

Clusters:

− Responsible Investment− Sustainable Finance− Transition to sustainable energy including clean tech− Carbon trade and finance

Objective:Transfer knowledge & initiate Financial innovation

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Knowledge transfer

− Duisenberg School of Finance− Master program Finance & Sustainability− Executive program

− Global webportal with Dutch Universities, Berkeley, Singapore (NUS), Mistra (Sweden) and soon also China www.fsinsight.org , start January by Vice Prime Minister

− Publish research papers

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Innovation: Green Investment Corporation• HFC initiates & coordinates. Working with 17 participants

who sponsor the Dutch initiative• Triggered by several international initiatives (UK, Korea)• Focused on transition towards a low carbon economy,

especially sustainable energy and energy efficiency• Transition is going too slow• Calculated investment need for the Netherlands is € 100

billion up till 2020 (based on European targets)• While market now picks up at a rate of € 10 – 20 billion till

2020• At least extra € 80 billion needed

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Investments needed for the Netherlands up to 2020

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Green Investment Corporation

• Initiatives in other countries are public, and based on policy

• In the Netherlands GIC will be public/private and based on market:

• There needs to be proof of market need• not competitive with existing activities and regulations

(both private and public!)

Important to note:• It is not about just another bank: it is about a catalyst• GIC is not the object. • The object is to accelerate the transition to clean energy• BUT ALL THE TIME: NEEDS TO GENERATE RETURN

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Time frame

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Fact finding

Nov 2010

Feasibility

May 2011

Proposal to Invest

Sept 2011

Implementation

Febr 2012 Dec 2012

• UK Visit• Ecofys report• Teaser ECF• BCG report• Initial support: > Government > Financial sector

• Broadbased

support• Theoretical framework• Pipeline of

Cases• Conclusion:

- Feasible- Added value- Green Deal

• Legal structure • Roles & products • Capitalisation and funding• Governance and operations

• Depending on the

proposal to invest

Go/No Go

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>15%0%

Subsidies(public)

Not succesfullin acquiring

Funding

Commercial(private)

The Green InvestmentCorporation

Return on Equity

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>15%0%

Subsidies(public)

GIC(public/private)

Commercial(private)

The Green InvestmentCorporation

Return on Equity

Looked from a different angle

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Figuur: Speelveld GIM in termen van risico/rendement

Risk

Ret

urn

Risks too high

Return too low

NO GO

Feasibility study: Why is the market not there? Risks becoming BarriersSustainable energy projects are typical in the sense that they have certain common characteristics which make it difficult to get them financed. Certain risks become barriers for them, effectively blocking funding:

1. Information barrier: New techniques are accompanied by new regulations, legal constructions, and complex proposals.

2. Scale Often too small to make up for the start up costs. Projects should be replicable.

3. MarketFossil fuels are still the benchmark and these are very volatile.(the higher oil prices > the better for renewable energy)

4. RegulatoryUnstable regulations and subsidy schemes make investors nervous

5. Financial Markets Crisis combined with Basel III and Solvency 2 makes it more difficult to raise capital for long term investments

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Feasibility Study: Conclusions

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1. 4 GIC roles• Co-financer• Matchmaker• Aggregator• Knowledge Centre

2. Focus within the Dutch Economy• Decentral energy production• Energy-efficiency in built environment

3. GIC characteristics• Public/Private• Precompetitive• Initial capital: 100 mln (first 3 years)• Estimated RoE: 5-8%

4. Government policyNeed for a long term green growth policy from the Dutch government

100 Cases

40 researched cases

11 analysed cases

2 business cases

The GIC may have two legs

− Mezzanine− Bundling

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Green Investment Corporation

Debt EquityBanks Private Equity Funds

Innovation CapitalMatchfund (ICM)

MatchMaking

MatchMaking

Definition of Match-making: Pre-competitive, pari passu (or at least keeping the risk and rewards in balance) and alongside the banks/private equity funds

The life cycle and the two roles for GIC (Debt & Equity)

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Source: UNEP & SEFIEquity(ICM)

Debt

Sustainable innovation equity fund with relevant parties

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PartnersObjectives

Innovation Capital MatchfundObjectives Key figures

• Enhance Partner’s profile as a sustainable company or institute

• Sharing risks with a public/private institute

• Underline commitment to both government and financial industry

• Open up a new portfolio in The Netherlands

• Accelerate the seed capital market for Dutch sustainable investments

• Co-invest with mature funds

• Allign partner networks in dealflow

• Positive IRR

Committed capital:• Government: € 20 mio• Financial Participants:

€ 60 mio (2 times € 10 mio* and 8 times € 5 mio)

Management:• Team size: 3-4 FTE**• 3% management costs,

long term sustainable incentives

Launch date:• 1st closing: March

2012• 2nd closing: Sep 2012

Targeted IRR:• 8-15% * This includes a seat in the Investment Cee Board

** If the ICM is going to manage local revolving funds there will be a need for more FTE’s

DRAFT

What is the added value of a GIC?

For the market:• Standardising financing process new concepts• Bundle & share knowledge from all parties to get better

insight in risks

For authorities• Bundling/coordinating local initiatives• Better form of subsidies, tailor made, higher public/private

leverage

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Opportunities for key stakeholders

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• Possibility to shorten balance sheet (by focus on project finance and instit. Investors who take over long term finance)

• Additional business because of projects that otherwise wouldn’t be done

• Opportunity to show society coporate social responsibility

Banks Institutional Investors

• Extra opportunity for maturity matching

• Access to asset class that is now difficult to enter because of scale and structuring

• Opportunity to show society coporate social responsibility

Government /Society

• Substantial contribution to climate goals and other government targets

• Acceleration of market financed energy transition and reduction of subsidies

• Employment• Enhance

competitiveness

Way forward: Proposal to Invest

Deliverables

Strategy and Implementation Capitalisation and Funding

►P&L►Concrete Pipeline of Cases

Marketing and Sales Governance and Operations Legal Structure

Go/No Go Decision: Implementation of the GIC

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Thank you for your attention!

Gerard van Baarvanbaar@hollandfinancialcentre.nlwww.hollandfinancialcentre.comwww.fsinsight.org

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Gerard van Baar

Gerard van Baar is responsible for the Finance & Sustainability section within Holland Financial Centre (HFC). HFC is a public private foundation with participants from the financial industry, consultants, audit and legal firms as well as government (both central and local) and regulators. The objective of HFC is to develop initiatives aimed at preserving a strong, open internationally competitive financial industry in the Netherlands. Gerard is in charge of the initiatives for Finance & Sustainability a.o. the Green Investment Corporation, the launching of a dedicated global web portal for finance and sustainability together with Universities of Tilburg, Maastricht, Berkeley, Singapore and Duisenberg School of Finance (www.fsinsight.org), and integrating education on F&S into the existing masters at Duisenberg. Before joining HFC in 2010, Gerard was in charge of Deloitte’s European Centre of Excellence on Energy & Commodity Risk Management. He worked with the major European utilities and was Trustee on several electricity auctions throughout Europe. He lived several years in Vietnam and was involved in the CDM market and wind farm development. Gerard holds a Masters in Economics from the Vrije Universiteit Amsterdam.

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Dit is de titel van deze presentatie | 13 january 2010 27