Unit 5: Emerging Trends in Project Finance, Project

Finance and Sustainability

Dr. Leena Dam

 Agenda:
 Public-private partnerships (PPPs)
 Infrastructure as an asset class
 Digitalization and innovation in project finance
 Sustainable financing and ESG
 Impact of sustainability on project finance
 Green and social bonds in project finance
 Public-private partnerships (PPPs)

 PPP, is a collaboration between government entities and private

sector companies to finance, develop, operate, and maintain
infrastructure projects or public services.

 These partnerships leverage the strengths of both sectors to

address the funding gap, improve efficiency, and enhance service
delivery.
 Structures of PPP

 Build – operate – transfer (BOT)

 Build – own – operate – transfer (BOOT)

 Build – own – operate (BOO)

 Build – lease – transfer (BLT)

 Design – build – finance – operate – transfer (DBFOT)

 Common structures in India – BOT, BOOT, BOO models

 Key Project Parties

 Project Sponsors

 Project Vehicle

 Project Lenders

 EPC Contractor (Engineering, Procurement and Construction)

 O & M Contractor

 Government
 Green Bonds

What are Green Bonds?

Green bonds are debt instruments that raise capital to finance environmental or climate-related projects.
While green bonds are similar to conventional bonds as they have a fixed or variable interest rate, they differ
since they are specifically designated for financing or refinancing environmental projects that have positive
effects on the environment or the climate such as the use of renewable energy, energy-efficient
transportation, clean energy, sustainable water management and the reduction of greenhouse gas emissions.
They are issued by Government, Corporations or International Development Banks.
  ESG
ESG (environmental, social, governance) and sustainable finance continue to be at the top of UK and EU regulatory
agendas. In the UK, a new Green Finance Strategy has provided some clarity over the future direction of travel, and
the EU continues to push forward with its Sustainable Finance Action Plan and initiatives under the European Green
Deal. All of these impact the financial sector and regulatory expectations of firms.
Greenwashing concerns are paramount and are driving developments around reporting, taxonomies, product labels,
ESG data and ratings and corporate due diligence. New reporting standards at global (ISSB) and EU (ESRS) level
are nearing completion and additional requirements for transition plans are emerging. Nature and biodiversity are now
sharply in focus, with a final disclosure framework expected from the Taskforce for Nature-related Financial
Disclosures in September 2023.
Investment managers and financial advisers are increasingly expected to consider sustainability risks in their
investment and advice processes, even when they do not offer or specifically advise on green products.
The measurement and management of climate-related risk now form part of business as usual supervision for banks
and insurers. Progress has been made, but there is more to do.
The World Bank Sustainable Finance and ESG Advisory services team facilitates the development of green,
blue and social bond markets in emerging markets through pre- and post-issuance technical assistance for
issuers.
Pre-issuance technical assistance:
•Sharing international best practices and requirements for issuing green bonds
•Developing an action plan/roadmap for the issuance
•Developing a Green Bond Framework
•Helping to identify eligible green categories/projects based on national priorities and Paris Agreement
commitments
•Facilitating the delivery of second opinions/verifications/certification of the Green Bond Framework by an
independent third party reviewer
•Advising on reporting commitment and communication strategy
•Developing use of proceeds and impact report
Post-issuance technical assistance:
•Clarifying the processes and helping issuers understand how to use the standardized impact reporting template
in a manner that meets global standards.
•Explaining information required, including baselines and indicators to measure the impact of selected green
projects.
•Recommending work process flows and timeline for reporting in line with the Green Bond Framework.
•Preparing terms of reference for the Auditor to provide the annual assurance report in accordance with the Green
Bond Framework.
•Delivering digital templates for use by technical staff for monitoring and reporting.
•Reviewing and providing feedback on draft prepared by the issuers.
Capacity building for institutional investors on setting up Environmental, Social and Governance (ESG)
strategies
•Delivering workshops on ESG and Responsible Investment (RI) trends, approaches and strategies
•Undertaking desk review of investor’s individual investment objectives, policies and strategies
•Developing general guidelines for ESG/RI policies and approaches, including
• Criteria for developing an ESG/RI Policy and implications for investment processes
• Organizational setup, governance and operational processes
• Choosing ESG approaches to support investment objectives and mission alignment
• Stewardship, responsible ownership and engagement
• Reporting and disclosure
•Developing individual ESG/RI integration approaches
•Delivering a workshop on implementation of ESG/RI Integration Strategies and Approaches