3rd Annual OECD Green Investment Financing Forum

1. 3rd Annual OECD
Green Investment Financing Forum
(GIFF)
In association with the Asian Development Bank Institute
(ADBI)
October 13-14 2016
Tokyo
Rintaro Tamaki
Deputy Secretary General
Organisation for Economic Co-operation and Development
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without prior written approval from the OECD. This presentation represents the views of the author alone and unless specifically stated,
does not represent opinions, estimates or forecasts of the OECD or its member countries. This material was used during an oral
presentation; it is not a complete record of the discussion.

2. 1
Regional cost of selected climate
impacts
Uncertainty ranges in 2060
dueto uncertainty in ECS
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2010 2020 2030 2040 2050 2060
-South & South East Asia
OECD Pacific
Rest of Europe & Asia
OECD Europe
Latin America
OECD America
World
-Sub Saharan Africa
Middle East & North Africa
Source: OECD ENV-Linkages calculations in OECD (2015) Costs of Inaction
on Environmental Challenges: Insights from a NAEC project

3. Breaking the tragedy of the horizon: 3
climate-related financial sector risks
Physical risks:
• Impacts on insurance liabilities and
value of assets that arise from climate-
and weather-related events
Liability risks:
• Impacts that could arise if parties who
have suffered loss/damage from effects
of climate change seek compensation
from those held responsible
Source: Carney, M (2015), Bank of England:
http://www.bankofengland.co.uk/publications/Pages/speeches/2
015/844.aspx
Transition risks:
• Financial risks which could result from
process of adjustment towards a lower-
carbon economy.
• Changes in policy, technology and
physical risks could prompt value
reassessment of range of assets as costs
and opportunities become apparent.
• The abruptness with which such re-
pricing occurs could influence financial
stability.
2

4. Rethinking the governance of institutional
investments
OECD is undertaking a review of governance
standards around investment decisions
• Institutional investors’ duties towards their
beneficiaries
• What these mean for the integration of ESG factors
• How institutional investors manage (financial) risks
and opportunities linked to green investments /
climate change
– Linkage with corporate carbon disclosure
• Identify effective approaches regarding investment
governance and green finance
OECD analysis will seek to rethink governance and
assess how “green” risks and opportunities can be
incorporated more systematically into investment
decisions.
Too few institutional
investors include the
financial impacts of
environmental factors
in their investment
process
• Short-term focus
• Difficulty balancing
conflicting interests of
beneficiaries
• Lack of standardised
models and analytical
tools
• Limited expertise and
resources
3

5. 1% of large OECD pension fund assets invested
directly in infrastructure
LARGE OECD
PENSION FUND
ASSETS
USD 10 trillion
Source: OECD Global Pension Statistics, Global Insurance Statistics and Institutional Investors databases,
and OECD staff estimates. (1) Public Pension Reserve Funds, (2) Other forms of institutional savings
* Direct unlisted equity investment by large OECD pension funds, covering $10+tn
* * BNEF estimates
<1%
INFRASTRUCTURE
INVESTMENT
(direct)
*
<3%
.
**
GREEN
INFRASTRUCTURE
INVESTMENT
(direct)
4

6. Source: OECD, 2015: http://dx.doi.org/10.1787/9789264224582-en
Ensure a stable “investment grade” policy environment -
evaluate and fix unintended regulatory impacts
Address market failures (incl. lack of carbon pricing &
remove fossil fuel subsidies)
Provide a national infrastructure road map & pipeline
Facilitate the development of liquid financing
instruments (e.g. green bonds) and risk mitigants
Promote market transparency, disclosure,
standardisation and improve data availability
Reduce the transaction costs of green investment
Establish a “green investment bank” or refocus existing public
financial institutions
OECD policy recommendations for G20 and Climate
Finance Ministers: Overcoming barriers and greening
institutional investors
Establish pre-conditions for institutional investmentBarriers to institutional investment
• Weak, uncertain or
counterproductive environmental,
energy and climate policies
• Regulatory policies with unintended
consequences
• Lack of suitable financial vehicles
with attributes sought by
institutional investors
• Shortage of information. knowledge
and data to assess portfolios and
investments and underlying
risks/returns
5

7. OECD Progress Report on Approaches to Mobilising
Institutional Investment for Green Infrastructure (Sept. 2016)
G20 Green Finance Study Group (GFSG)
33
MDBs: > 33%
GIBs: 25%
National-level PFIs: > 25%
Equity investment: 50%
Investment at construction:
most
involving
6
Source: OECD (2016) Progress Report on Approaches to Mobilising Institutional Investment for Green Infrastructure

8. Composition of the green bond market
(as of August 2016, USD Bn, gross
issuance)
*Note: SSA: Sovereign, Supranational and Agency / ABS: Asset Backed Securities / Other Corporate includes Consumer, Industrials,
Technology sectors, 2016 as of August
Source: OECD (2016 forthcoming) based on Bloomberg and Climate Bonds Initiative data
77

9. 8
Potential for low-carbon bond issuance to 2035 in
a 2 degree scenario:
In China, Japan, EU and US (in the renewable energy, low-emission vehicle
and energy efficiency in buildings sectors)
100
300
500
700
900
1,100
1,300
1,500
1,700
1,900
-500
500
1,500
2,500
3,500
4,500
5,500
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Annualbondissuanceinfour
regions($bn)
bondsoutstandinginfourregions
($bn)
Amount outstanding Issuance
Source: OECD (2016) A Quantitative Framework for Analysing Potential Bond Contributions in a Low-Carbon Transition

10. OECD Centre on Green Finance and Investment
MISSION
HOW?
WHEN?
Promote policies, institutions and
instruments to mobilise GF&I
• A global platform for knowledge
exchange
• Analysis leveraging expertise of
OECD and stakeholders
• Collaboration to address knowledge
gaps, market challenges
• Launched today Green Investment
Financing Forum (13 Oct)
• Build out the Centre over 2017-18 9