Sustainable Finance

Converting Risks in to

Opportunities

Keynote Address by

SOMAK GHOSHPresident

Corporate Finance & Development Banking YES BANK Ltd.

Paradigm Shift – Periphery to Mainstream

From the intellectual labyrinth to day-to-day lexicon

of global businesses and core business strategy

Current thinking in Sustainability

Aligned to core strategy

Helps businesses understand and respond to changing

social and environmental pressures/realities

Enables innovation in process and products

Helps identify new potential markets

Lends competitive advantage

Long-held beliefs…. “Business of business is business ”

As a ‘an artificial person’ a corporation does not have responsibilities

Profits the only responsibility of business as long as it stays within the rules of the game

Realisation that businesses do not operate in a vacuum; taking cognisance of changing market realities and mainstreaming sustainability Goal of business is to deliver long term value

Focus on short-term profits, ignoring long-term sustainable growth detrimental for business

Accounting for and using resources efficiently and responding to needs of society is the RESPONSIBILITY of business

Paradigm Shift – Periphery to Mainstream

Business Case for Sustainability – Drivers for Sustainability

Rapid Globalisation – increasing integration; what happens in one part of the world affects the rest

Changing Ecosystem – rising temperatures, melting glaciers, finite natural resources, significant demand-supply mismatch pushing up cost of resources

Consumer Preference – increasing awareness of and sensitivity to clean and green issues pushing up demand for clean products & services

Regulation – in 2000 Brazilian state-owned company Petrobras fined $ 28 million and $ 118 million for two oil spills, highest fines ever in Latin America

Stakeholders for Sustainability

GE - to invest $1.5 billion a year in clean tech R&D by 2010, part of Ecomagination strategy

BP – alternative energy unit spending $8 billion over 10 years for solar, wind and hydrogen

Toyota – $ 8 billion for its hybrid and fuel-cell development in 2006

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Goldman Sachs – clean energy investments of $2 billion in companies such as First Solar, GridPoint, Iogen and SunEdison

Kleiner Perkins Caufield & Byers (investor in in Amazon.com, Google & Netscape) created $ 200 million Greentech investment fund

Vinod Khosla, Founding CEO of Sun Microsystems, picked up a 15% stake in a leading Indian microfinance institution, SKS Microfinance

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Japan - 10 year programme in 1990s to fund growth of solar PV industry; today flourishing without significant subsidies

Germany – significant investment in solar and biodiesel industries

China – committed to investing $180 billion over 15 yrs for clean energy

India – government to deliver electricity to 56% of 700 million rural residents lacking access to electric power by 2012 – 50% from renewable resources

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Banks & Sustainability

A bank transforms money in to place, term, size and risk in an economyand, as such, it affects economic development. This influence is not onlyquantitative but can be qualitative since banks can influence the nature

ofeconomic growth (Marcel Jeucken)

Source: “Sustainable Finance: Strategy Options for Development Financing Institutions,” Gilbert Heim and Oliver Zenklusen (Sept, 2005)

Banks & Sustainability

Equipped to weigh risks, can attach prices to risks and use price differentiation to foster sustainability

Can use carrot & stick approach – lend at higher rate to environmental laggards and lower rate to environmental front-runners

Sustainability – Risk Mitigant for Banks

Source: “ Just a Fad?”, Oliver Zenklusen and Gilbert Heim, Ecofact AG, Zurich (2005)

Sustainability @ YES BANK

Cognizant of responsibility as a Public Trust Institution to mainstream sustainability within the Indian context

Vision to create a commercially viable financial institution that incorporates sustainability in core business focus through

Fourth Generation Sustainability not Philanthropy

Identifying and fostering sustainable businesses in sunrise sectors including

Infrastructure Information Technology Bio-tech and Pharma Agriculture Social Infrastructure Sustainable Livelihoods

SUSTAINABILITY @ YES BANK

Deal Generator

Deal Generator

SUSTAINABILITY in ACTION

Deal Generator

Not for profits

Microenterprises

Responsible Banking (CSR & Sustainability

Initiatives)

Agri & Rural Banking (ARB)

Sustainable InvestmentBank (SIB)

Idea Formation“development

finance in thought”

Projects

Microfinance

InvestmentBanking

Rural Lending

Alternative Energy &

Environment

CarbonFinance

SocialEnterprises

Microfinance Institutions Group (MIG)

YES SAMPANN: Direct Lending

ThoughtLeadership /

AdvisoryLending Lending

Advisory /Private Equity /

Funding

SUSTAINABILITY in THOUGHT

Sustainability Financing – Suzlon

Suzlon Energy Ltd – ‘house banker’ to Suzlon, among

worlds top 5 wind turbine manufacturer Managed IPO in 2005

Sole Strategic & Financial Advisor to raise USD 25 mn. growth

capital in 2004 (entry at a business valuation of USD 120

mm approx, grown to USD 3 bn. appx)

Sole Advisor on key acquisitions Hansen Transmission ( USD

565 mn) 2006 & RE Power Systems ( USD 1.2 Bn) 2007

Advisory Date: Over 2004-2007Bank’s Exposure to Company: USD 25-30 milRegion/Sector: South Asia / Wind Energy

Honey Beekeeping – structured trade transaction solutions to augment sustainable livelihoods of over 2000 honey beekeepers winning the EUROMONEY Deal of the Year

Paramparik Karigar – structured trade facility to Paramparik Karigar, NGO of Indian craftsmen, enabling 27 craftsmen to exhibit indigenous Indian handicrafts at “ Gateway of India Exhibition” held in New York, March 2007

Sustainability Financing – Select Initiatives

YES BANK - Bank of Choice for Business of the Future

YES BANK – Future of Alternative Investments

THANK YOU