Transcript ABN AMRO`s response

ABN AMRO’s response to
climate change
Presentation at the annual conference
on the environment organized by
FinMedia
Plaatjes van de gletsjer
Bucharest, September 28th
Peter Weiss, Country Executive, ABN AMRO Romania
Teia Marina Catana, Group Sustainable Development, Amsterdam
STRICTLY PRIVATE & CONFIDENTIAL
Executive summary

ABN AMRO, an introduction
- international profile,
- operations in Romania,
- the way we conduct our business

The context of climate change
- the issue,
- the risks and opportunities,
- the global solutions,

The carbon markets
- the flexible mechanisms,
- how they operate,
- EU ETS - activity so far, industrial sectors
- Romania’s position

ABN AMRO’s response
- direct and indirect footprint,
- financial services for your climate related activities

Contact information
2
1
ABN AMRO,
an introduction
3
ABN AMRO – the international profile

Well-positioned Bank(2)
Ranking
Total assets
- Worldwide
- European
Tier One Capital
- Worldwide
- European
16
10

We believe in building strong teams and strong relationships. The rich diversity of
cultures, expertise and experience we possess is harnessed to work on your
behalf

Our goal is to create value for our clients through a constant focus on their
financial services needs. There is more than one solution to every challenge. We
aim to find the one that suits you best

We implement our strategy through a number of (Strategic) Business Units Consumer & Commercial Clients, Wholesale Clients, Private Clients, Asset
Management, Transaction Banking Group, Group Shared Services and Group
Functions

The Consumer & Commercial Clients, which serves almost 20 million consumer
clients and clients in the small and medium-sized enterprises sector worldwide.
ABN AMRO is among the leading players in these segments in its three home
markets (the US Midwest, Brazil and the Netherlands) while targeting other highgrowth regions through its Business Unit New Growth Markets (like Romania)
20
11
Solid Credit Rating
Moody’s
Standard & Poor
Fitch IBCA
Long-term
Aa3
AAAA-
Global Resources(1)
Employees worldwide 97,000+
Branches and offices
3,000+
Countries/territories
59
Strong Balance Sheet(1)
Total assets
Group capital
Risk weighted assets
EUR (bn)
701.8
33.2
231.6
ABN AMRO is one of the world’s leading financial institutions with one of the
strongest balance sheets in the industry
(1)
31 December 2004
Federal Reserve Board report on US offices of foreign banks, April 2005
(3) The Banker, July 2005
(2)
4
ABN AMRO – the operations in Romania
The goal of
ABN AMRO in
Romania is to create
value for our clients
Key in our relationship
approach is a constant
focus on the financial
service needs of our
chosen client
segments
It is through the
professionalism and
motivation of our staff
that we realise this
value, resulting in
maximum benefits for
our customers
Ten years since the establishment of ABN AMRO’s Romanian operations, it already has an
impressive history of developing strong business relationships with multinational
corporations, medium-sized international companies doing cross-border business with
Romania, and local companies especially those with export and growth potential. It is the
bank’s aim to continue such relationships as it grows with the Romanian business market.

45o employees in 15 branches covering the entire territory of the country

Ten-years of providing comprehensive banking services

Sixth-largest bank in Romania by total assets

Wholly owned by ABN AMRO Bank NV

Part of the Wholesale Clients SBU, ABN AMRO in Romania focuses on: Consumer Industries,
Automotive Industries, Diversified Industries, Integrated Energy, Telecommunications, Media,
Technology and Healthcare & Financial Institutions and Public Sector.

Starting with September 2004, ABN AMRO offers also consumer services and products to its
Romanian customers.
ABN AMRO presence
A comprehensive branch network
5
ABN AMRO – the way we conduct our business
Business Principles:
ABN AMRO employees
Our shareholders
Our clients
Our business partners
1. We are the heart of our organisation
2. We pursue excellence
Corporate Values
3. We aim to maximise long-term
shareholder value
4. We manage risk prudently and
professionally
5. We strive to provide excellent service
6. We build our business on confidentiality
Society
7. We assess business partners on their
standards
Compliance
8. We are a responsible institution and a
good corporate citizen
9. We respect human rights and the
environment
10. We are accountable for our actions and
open about them
6
ABN AMRO – ambition for sustainable development
“We are committed to continuously improving the integration of sustainable development
into our working environment and business processes. Our aim is to play a proactive
role in contributing to sustainable development, within our spheres of influence. We are
committed to accountability and transparency in our sustainable development
performance.”
Active dialogue with NGOs
Sustainable products
and services
Integrating environmental,
social and ethical
considerations
Supporting local
communities
Client engagement
A great place to work
Minimising impact from
business operations
We are the leader in the European banking sector according to the Dow Jones
Sustainability Index – Stoxx (2004, 2005)
7
2
The context of
climate change
8
The context of climate change – the issue
A critical challenge to the world

The average surface temperature has
increased by about 0.6°C and the CO2e
in the atmosphere increased from 280ppm
to 380ppm (faster than any times in the last
1000 years

Human activity (burning fossil fuels and
deforestation) is a major contributor to
climate change, according to most studies.


Climate change is now regarded as the
world’s most pressing environmental
problem (with social and economic
consequences as well).
Sustainable management of an everchanging planet? (looking into the future)
Source: IPCC report 2001
Sustainable
Management
Ever-Changing
Planet
9
The context of climate change – the risks…

In 2003, drought in Australia cost farmers
and businesses A$3.8 billion and reduced
winter crop yield by 40%

The 2003 European heat wave lead to
27,000 premature deaths, reduced grain
yields by 30-40% and caused economic
losses far exceeding $ 10 billion

Warmer than average weather pushed up
benchmark contracts for crude oil, gasoline
pump prices, and futures for grain, soy
beans and wheat. In 2004 soybeans rose
above $10 a bushel for the first time in 15
years as insufficient rain in South America
threatened to damage crops.
“The magnitude of effects that climate change may have on the global economy
dwarfs any other environmental risk” (World Resource Institute and CERES – coalition of institutional
investors from US)
10
The context of climate change – … and the opportunities.
Reducing GHG is not just costly or “anti-growth” but can bring savings and new
jobs

Low-carbon corporate leaders have achieved a reduction of 60% or more and
companies like BP, IBM and DuPont report savings of $650 million, $791 million and
$2 billion respectively;

In the UK, emissions dropped by 15%, while the economy grew by 30% between
1990 and 2002;

Cities like Portland, Toronto and Heidelberg have also realized millions of dollars in
energy savings, freeing-up public funds for other purposes.
(Findings from “The Climate Group”)
“The EU could save at least 20% of its present energy consumption in a costeffective manner, equivalent to EUR 60 billion per year.. Such an initiative could
potentially create a million new jobs in Europe” (European Commission, Green Paper on energy
efficiency, 2005)
11
The context of climate change – the global solutions
Count down to Kyoto and EU ETS
IPCC “Intergovernmental Panel on Climate Change” formed
1988

1994

UNFCCC enters into force
- Aspirational objectives, no specific targets or timeframes
1997

COP3: Kyoto Protocol
- Emission limits on 34 Countries: Avg -5.2% on 1990 by 2008-12
- Meet limits by emission reductions and/or buying compliance credits
2001

COP7: Marrakech Accords kickstarts the Credits Mechanism
2005
1st January 2005: starts EU ETS
2005
16th February 2005: Kyoto Protocol entered into force
12
3
The carbon
markets
13
The carbon markets – the Kyoto flexible mechanisms
The flexible mechanisms of the Kyoto Protocol
 International Emissions Trading (Allowances) – AAU (assigned amount units)
- allocated to Annex B countries based on 1990 emissions levels
- “Hot air” are excess AAUs of countries whose current emissions are lower than base year / GIS
initiatives
 Clean Development Mechanism (Carbon Credits) – CER (certified emission reductions)
- Designed to assist developing countries in achieving sustainable development by permitting
industrialized countries to finance projects for reducing greenhouse gas emission in developing countries
and receive credit for doing so
 Joint Implementation (Carbon Credits) – ERU (emission reduction units)
- If takes places between industrialized countries (including countries with economies in transition)
- Does not have a sustainable development component
- ERUs can be used by companies under the EU ETS for compliance in the period 2008 – 2012
ABN AMRO can play a role as advisory to governments to maximize their AAUs value,
financing GIS projects, providing access to clients interested in the credits
14
The carbon markets – EU ETS activity so far
6000000
 Approx. 5 million EUAs
exchange hands weekly
25,00
4000000
20,00
3000000
15,00
2000000
10,00
1000000
5,00
0
0,00
1120
04
5220
4- 04
320
1- 04
420
04
6520
3- 04
620
1- 04
720
04
5820
2- 04
920
04
710
-2
4- 00
11 4
-2
2- 00
12 4
-2
00
4
6120
3- 05
220
3- 05
3
24 -20
-3 05
-2
22 00
-4 5
-2
20 00
-5 5
-2
17 00
-6 5
8- 2 00
7- 5
20
05
 Currently most activity is in the
brokered OTC market. Market
share of exchanges is between
25-30 %. But exchanges are
gaining market share.
30,00
5000000
Volume Thousand
 In Phase 1, over 6 billion
allowances (EUAs) have been
allocated, equivalent to a value
of some €120 billion. Trading is
now around €20/EUA
35,00
Date
Almost 50 public and private carbon funds and carbon tender programmes launched, with
more than $1.5 billion in dedicated capital (Carbon Disclosure Project, 2005)
15
EUR/Allowance
EU ETS
The carbon markets – Romania’s position

Romania ratified the UNFCCC by law 24/1994 and the Kyoto
Protocol by law 3/2001

Total net GHG emissions decreased by about 50% in 2002
compared to the reference year 1989 – the emission scenarios
show that a gap of at least 50 million tons CO2e annually is
expected to remain
National Strategy on Climate
Change of Romania 2005-2007
Objective 5
•To participate in flexible
mechanisms under the KP (JI and
IET) to the maximum benefit of the
Romanian environment and
economy in compliance with
UNFCCC and EU regulation, and in
a stable and transparent domestic
policy, institutional and regulatory
framework
16
4
ABN AMRO’s
response
17
ABN AMRO’s response – direct and indirect footprint
Transparency/disclosure


Sustainability reports – 2003, 2004,
including data on our CO2 emissions
Signatory of Carbon Disclosure Project –
2003, 2004, 2005.
Minimising emissions – through technical
and behavioral changes, applying
alternative technologies and using green
energy
Green banking – through financing projects
that prevent environmental harm and
promote the use of sustainable
technologies
ABN AMRO's CO2 footprint 100%
2004
B usines A ir
Travel
80%
60%
40%
From
energy-end
use
20%
0%
Total CO2 tonnes: 366,293
ABN AMRO was selected part of the Climate Leadership Index within the banking sector
based on an assessment by Innovest of the strategic awareness, management accountability,
emissions management and reporting, emissions trading, programs in place, establishment of
targets.
18
ABN AMRO’s response
– financial services for your climate related activities
ACCESS TO MARKET (after joining EU ETS-2007): Over the counter (OTC)

ABN AMRO offers access to the OTC market with the bank as counterparty
– Client buys/sells EUAs to ABN AMRO
– Avoids counterparty risk for client

Master agreements (contracts) between ABN AMRO and client must be
negotiated
– ABN AMRO will trade under ISDA, IETA, and EFET

In addition, client must have credit line with ABN AMRO
– OBSI lines calculate maximum exposure bank is willing to accept with
counterparty

ABN AMRO can also post Exchange-For-Physical contract on the exchange
– Exchange will take over credit risk
19
ABN AMRO’s response
– financial services for your climate related activities
FORWARD TRADING

A forward transaction is a contractual commitment to transact in the future
on terms agreed today. The vast majority of transactions have been forward
transactions in the OTC market
– Role of exchanges are becoming more important
– Future will see much more spot trading

If the market as a whole is confident that the price will rise, the seller’s
forward price will likely reflect this
– Little potential for “upside”

Both buyer and seller are exposed to counterparty risk. Banks can play a
role in establishing creditworthiness
ABN AMRO facilitates forward trading in OTC market and on exchanges
20
ABN AMRO’s response
– financial services for your climate related activities
ACCESS TO MARKET: Exchanges

ABN AMRO Futures is very active on the European Climate
Exchange and is planning to join several more exchanges

Companies cannot trade on the exchange directly but must have
an account with a clearing member
– ABN AMRO Futures is one of the largest clearing members on
the ECX

Companies must deposit collateral as ‘initial margin’. If the market
moves against your position, company must make addition
payments:
– ABN AMRO can finance these ‘margin calls’
The first trade on carbon futures on the European Climate
Exchange’s (ECX) trading platform was between BP an E.ON and
was cleared by ABN AMRO Futures in April 2005.
21
ABN AMRO’s response
– financial services for your climate related activities
COMPANY RISK MANAGEMENT
Trade EUAs on exchange and OTC
Access to carbon credits
Near term: Focus on compliance
Monetise EUAs
Plan for Phase II
Develop trading strategy
Calculate abatement costs
Medium term: Focus on
Risk Management
Where to build new plants
Replacing current stock
Similar advisory possible for the
government too
Developing renewable electricity
Long term:
Strategic
considerations
22
Conclusions
What ABN AMRO Bank can do for the Government and the business environment
ADVISORY

Risk, strategy, legal, hedging, industry knowledge
PRODUCTS

Futures, forwards, spot
MARKET INTERMEDIATION

Access to exchanges, trading, cross border intermediation
PROJECT FINANCE

With Equator Principles
MANAGEMENT/

Monetization, custody, registration(clearing)
23
5
Contact information
24
Contact information
Gerhard Mulder
Vice President
Group Sustainable Development
Eva Karra
Vice President
ABN AMRO Futures Ltd
Richard Cornielje
Director
Commodity Derivatives Marketer
Gustav Mahlerlaan 10, 1082 PP Amsterdam, The
Netherlands
199 Bishopsgate, London EC2M 3XW
Gustav Mahlerlaan 10, 1082 PP Amsterdam, The
Netherlands
Telephone
+31 20 629 9272
Mobile:
+31 6 1371 9003
E-mail: [email protected]
Peter M. Weiss
Chairman of the Board and Country Executive
ABN AMRO Bank Romania
10, Montreal Square, WTCB
Bucharest - 1, Romania
Tel:
+(40 21) 20 20 400
Fax:
+(40 21) 31 91 169
E-mail: [email protected]
Telephone
Mobile:
E-mail:
+44 20 7678 6588
+44 7070 603603
[email protected]
Telephone
+31 20 464 5547
Mobile:
+31 6 5163 1942
E-mail: [email protected]
Roxana Moldovan
Head of Financial Institutions and Public Sector / VP Member of the
Board
ABN AMRO Bank Romania
10, Montreal Square, WTCB
Bucharest - 1, Romania
Tel:
+(40 21) 20 20 400
Fax:
+(40 21) 31 91 169
E-mail: [email protected]
25