Energy Efficiency for Sustainable Development A reinsurers perspective

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Energy Efficiency for Sustainable Development - A
(re)insurers perspective
Overcoming the traditional response of the
financial sector
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Thumbnail Profile of Swiss Re

• Key facts
• AA Rated
• North Americas largest reinsurer (property,
  life)
• Direct Insurance/financial services
• Our sustainability commitment and expertise
• 1 in sector sustainability rating (since 2000)
• 3 of our shares held by socially responsible
  investors
• 1994 - First climate change publication
• 2001 - Created business unit Greenhouse Gas Risk
  Solutions
• 2003 - Health Effects of Climate Change study
  with Harvard
• 2003 - Greenhouse Neutral Swiss Re pledge for
  10 years
• 15 internal emissions reductions 85 offset
  via the World Bank Community Development Carbon
  Fund (CDCF) which supports projects in least
  developed countries

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Sustainability Project Finance risks in the
Developing World Finding the Holy Grail

Overcoming Wind-farm in Kenya Comfort Fossil
fuel Plant in Ohio Newest Long
History Political risk No Political Risk New
technology risk Familiar Technology
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Risk Mitigation Concepts
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Risk financing solutions can provide support to
the sponsor and the project at various levels.
Financing emissions reducing projects Risk
extraction
Contingent Capital -Financial Guarantee to
reduce potential overcapitalization, improve ROE
Purchasers of ROCS, RECS, carbon credits
Corporate Owner(s)
Contingent Capital Financial Guarantee to
improve viability of the project
Funds
Dividends
Equity
Co2
Funds
Premium
Special Purpose Entity (LP, LLC, etc.)
Insurers
Lenders (Banks, Investors)
Policy
Debt Service
Operations, Management, Maintenance
Goods Services
Revenue
Goods Services
Customers
Physical Asset
Contingent Capital Financial Guarantee to
improve quality of debt service
Cover for cost-overrun, performance deficiency,
forced outage, market off-take risk, asset value
insurance
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An insurers role in project finance

• Application of project finance techniques such as
  Contingent Capital and Financial Guarantee in new
  areas
• Facilitation of Technology implementation (e.g. -
  emissions reduction technology)
• Renewables
• Energy Efficiency
• The benefits of extracting risks from a project
  are
• Raises the project investment rating
• Increases ROE
• Reduces financing costs
• Frees up capital for other investments
• Insurance can be the facilitator of projects by
  structuring the risk elements and thus enabling
  the financing

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Potential ROI Kicker? Carbon Financing
Carbon Return
Return
CO2 _at_ 2-3 / ton
Carbon credits
CO2 _at_ gt5 ton
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Private Equity Fund Return

Commitment Phase 1
2002
2012
2008
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Climate Investment Partnership (CIP) Overcoming
the lack of support forsmall to medium emission
reduction projects
Platform screening
Internal Platform
Equity
Loans
GHG documents managed and if necessary enhanced
Documents visible to PFF members
Registered
HTML form
Project Agent
Guarantees
Insurance
Grants
Project Developer
Project Finance Facility
Project developer with direct Internet access and
English language skills do not need to use agents
Any additional due diligence
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The current stakeholders
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The Financial Industry

• Leadership and advisory
• Facilitation and enabling of emerging GHG market
• Financing
• Market and Sustainability Standard Setting
• Knowledge Clients expect the financial community
  to
• Be knowledgeable about the sustainability
  implications of emissions reductions on their
  clients
• Offer solutions for diversification of the risks
  (investment funds, insurance products etc)..
• The Financial Sector needs to become engaged!

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Contact details
Christopher_Walker_at_swissre.com Tel [phone]
5280 Webpage www.swissre.com www.swissre.com/e
missions Reports from Reducing GHG emissions
conference series Beyond carbon - emerging
markets for ecosystem services 29-30 October