The Micro Utility Partners team like to extend a big Thank You to Silvina for coordinating the event!
Despite fast growth of environmentally-friendly projects and associated financing in recent years, there was no consistent and unified definition of what exactly constitutes Green Finance. This is now being addressed as an important body weighs in on the subject and proposes a framework to assess lending projects.
The Loan Market Association (LMA) with support from the International Capital Market Association (ICMA) has provided a framework for assessing deals, which will cover such aspects as management of proceeds, the process of project evaluation and selection, and reporting on the loan performance. The framework separately covers green loans (Green Loan Principles or GLP) and bonds (Green Bond Principles or GBP) and provides guidelines for external reviews (ie by an institution with environmental expertise, that is independent from the issuer).
Green projects have to show clear environmental benefits – which should be assessed and ideally quantified – and cover projects that help mitigate climate change, prevent pollution and to conserve natural resources. What follows is an incomplete list of eligible green projects:
- renewable energy (including production and transmission)
- energy efficiency (energy storage, smart grids, appliances and products)
- pollution prevention and control (reduction of air emissions, waste recycling)
- environmentally sustainable management of living natural resources and land use (ie environmentally sustainable agriculture)
- sustainable water and wastewater management (sustainable infrastructure for clean and/or drinking water, wastewater treatment)
- eco-efficient and/or circular economy adapted products
- green buildings (must meet recognized standards or certifications)
These standards will become increasingly important, especially, if cost of financing for these green projects proves to be lower than similar non-green projects. Indeed, initial signs of such differentiation can already be observed on French green debt issued in June 2018, which trades at a premium (ie lower yield) to non-green debt of similar maturity. A more significant drop in cost of debt for green projects could come about if regulators incentivized banks and possibly asset managers to favor green bonds. The European Commission has taken first steps towards such a “greener and more sustainable economy” with the publication of an Action Plan and recommendations for the financial sector “to support the transition to the low-carbon economy”.
The publication of Green Principles for bonds and loans by the LMA is an important stage in the development of Green Finance and will allow consistent assessment and labeling of projects. These principles might become a driver of credit provision over time, as regulators incentivize lenders (ie by adjusting leverage ratios and reserve requirements for banks) to prioritize environmentally-friendly financing.
Micro Utility Partners is the first organization in Singapore (and possibly in Southeast Asia) to issue uncertified Green Bonds. A major real estate developer – City Developments Limited – followed shortly afterwards.
Being involved in several green projects in Indonesia and Australia, Micro Utility Partners welcome the new framework for assessing environmentally-friendly loans and look forward to being formally recognized as a green borrower.
NB: the Deal Street Asia article above is behind a paywall but you may find a copy here.
National Geographic has published a series of articles entitled “Planet or Plastic” in which the magazine provides an update on the ocean pollution crisis. Let us consider some of the key findings by the NatGeo team:
- Plastic production took off in the 1950’s and and three-quarters of the plastic ever produced never found its way to a trash can
- Estimates for plastic bio-degradation range from 450 years to never
- Most of the plastic that finds its way to our oceans is not thrown off ships. It is initially dumped on land or in rivers and later blown into the seas.
- The biggest single source of plastic is packaging.
- Ocean plastic is killing millions of animals – some visibly and some invisibly as they involuntarily consume tiny bits of plastic that float around everywhere.
- Nanoplastics (the tiny bits into which plastics degrade into) might pass into animal and subsequently human flesh.
And the punchline comes with this quote:
This isn’t a problem where we don’t know what the solution is. We know how to pick up garbage. Anyone can do it. We know how to dispose of it. We know how to recycle.
Indeed, caring about the planet is something we all can do.
We can not do justice to the original, superbly written and thorough articles with this summary, and would highly recommend them.
The Financial Times featured a timely piece on ocean pollution by plastic trash in its week-end edition (Stop our oceans choking on a plastic overdose, 22nd of April 2018).
The author acknowledges the sad reality that it will not be “practical for the foreseeable future to remove more than a small fraction of the trillions of plastic pieces” that are already in our seas. The practical advice for authorities is to “focus their efforts on rapidly reducing the flow of fresh material into the ocean, by increasing recycling and restricting non-essential uses of plastics”. The article also talks about the circular economy or “making it simpler to separate different components at the end of their life and identify different plastic ingredients“.
Indeed, recycling plastic through effective methods, is the solution Micro Utility Partners advocates in Indonesia, where it is currently operating zero-waste facilities.
As part of its continuous effort to address the garbage emergency in Bali, Micro Utility Partners participated in “Bali’s BIGGEST Clean-Up” on the 24th of February day organized by One Island Voice. Our team joined forces with other volunteers on the southern tip of Bali in Pantai Melasti and collected several truckloads of garbage on the beach and surrounding areas. The garbage has been subsequently transferred to our zero-waste facility, where all waste is segregated and converted into useful products (green building materials, compost, refined oil) or at least into environmentally neutral agents.
Micro Utility Partners have been working with their hotel partners in Bali since 2016, addressing head-on the waste problem, by providing effective solutions.