Issue 29: 2015

Global Perspective

Bank of America’s Catalytic Finance Initiative: Investing for Our Future

Helping to remove the barriers to investment in high-impact clean energy projects worldwide.

Abyd Karmali, Managing Director of Climate Finance, Bank of America Merrill Lynch (Photograph by dan burn-forti)

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Bank of America recently announced a partnership with the Global Alliance for Clean Cookstoves (GACC). The goal is to raise $100 million to help provide clean cooking solutions to millions of households in the developing world, which will greatly reduce harmful carbon emissions.

Purna Saggurti, global corporate and investment banking chairman at Bank of America Merrill Lynch, announced the partnership at the Cookstoves Future Summit, a two-day event in New York City that brought together world leaders to discuss the adoption of — and investment in — clean cooking solutions. “This broad-based public-private partnership will help improve the health and well-being of millions of people around the world,” says Abyd Karmali, managing director of climate finance, Bank of America Merrill Lynch. “Our commitment to working with GACC to advance clean cookstoves shows how we are using financial innovation to increase investment in clean energy technologies.”

The GACC initiative involves a partnership with Deutsche Bank, development finance institutions and private investors.

Bank of America has financed clean cooking solutions in the past. In 2011 the bank financed CleanStar Mozambique, a sustainable bioethanol fuel and cookstove venture that aims to displace charcoal in household cooking. CleanStar has already sold 35,000 clean stoves in Maputo, Mozambique. The bank arranged financing using compliance market carbon credits that helped to crowd-in equity and debt financing from investors. The bank previously partnered with The Nature Conservancy to promote efficient cookstoves and reduce deforestation in Yunnan Province, China.

There is a critical need for clean cooking solutions throughout the developing world.

“We understand there is a critical need for clean cooking solutions for families and communities throughout the developing world,” says Anne Finucane, global chief strategy and marketing officer at Bank of America. “This initiative will improve health, particularly for women and children; protect the environment by reducing carbon emissions; and spur economic growth. We often do our best work when we combine our scale and resources with partners’ expertise to help address the world’s toughest challenges.

The Catalytic Finance Initiative

Advancing clean cooking solutions is a component of Bank of America’s recently launched Catalytic Finance Initiative (CFI), through which the bank is working to raise at least $10 billion toward investments in renewable energy, energy efficiency and energy access.

Bank of America CEO Brian Moynihan announced the CFI this past September, at the United Nations Secretary-General’s Climate Summit, as part of its partnership with the Sustainable Energy for All Initiative to help the United Nations and World Bank address three goals: 1) provide 100% access to electricity and modern cooking solutions, 2) double the renewable energy share of power produced and consumed from 18% to 36%, and 3) double the energy efficiency improvement rate.

The CFI is part of Bank of America’s 10-year, $50 billion environmental business plan, announced in 2012. This $50 billion commitment followed an initial $20 billion commitment that started in 2007.


Clean cookstoves help reduce carbon emissions (Images courtesy GACC).

 

Making clean energy investments more financeable

Under the CFI, Bank of America will commit $1 billion in capital to investment structures that employ a range of de-risking tools, developed in conjunction with development finance institutions (DFIs), insurance providers, foundations and institutional investors. “The goal,” says Saggurti, “is to make clean energy investments more financeable, particularly in emerging markets where project impact is often amplified — addressing other large-scale issues like health, education and job creation.” Institutions looking to back innovative, unprecedented projects often have to proceed with caution. But by providing advanced risk management across the CFI, as well as $1 billion of our capital, Bank of America can leverage our stability and expertise to encourage others to get involved.

Bank of America is specifically targeting four categories of opportunity where public capital is needed:

  • Investment-grade debt for clean energy infrastructure in Organisation for Economic Co-operation and Development (OECD) and emerging markets. In October 2014, Bank of America contributed $800 million in financing for new renewable energy and energy efficiency, in partnership with New York State Green Bank and several other private investors.
  • Senior and mezzanine debt financing for smaller-scale opportunities in emerging markets. A $100 million credit facility with the Global Alliance for Clean Cookstoves was announced in November 2014.
  • Underwriting green project bonds and green asset-backed securities. In December 2014, the bank announced a $204 million green project bond for wind developer ContourGlobal through its subsidiary Energía Eólica S.A. in Peru.
  • Potential future use of Bank of America philanthropic funds. Promote investment in energy access, such as providing high-impact credit- enhancement structures, working with philanthropic investors.

“I think CFI really speaks to our willingness to devote time and resources — our intellectual and financial capital, as well as our strong global client and institutional investor relationships — to help increase investment in a variety of clean energy projects,” says Alexandra Liftman, global environmental executive at Bank of America. “We believe there are big opportunities to do that with a blended finance approach — that is, developing innovative solutions by working creatively with private, public and philanthropic capital.”

IMPORTANT INFORMATION

Investing involves risk. There is always the potential of losing money when you invest in securities.

Some of the featured participants are not employees of U.S. Trust. The opinions and conclusions expressed are not necessarily those of U.S. Trust or its personnel. Any of their discussions concerning investments should not be considered a solicitation or recommendation by U.S. Trust and may not be profitable.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

Equities Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Energy and natural resources stocks have been volatile. They may be affected by rising interest rates and inflation, and can also be affected by factors such as natural events (for example, earthquakes or fires) and international politics.

International Investing International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards, and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.

Bank of America recently announced a partnership with the Global Alliance for Clean Cookstoves (GACC). The goal is to raise $100 million to help provide clean cooking solutions to millions of households in the developing world, which will greatly reduce harmful carbon emissions.

Purna Saggurti, global corporate and investment banking chairman at Bank of America Merrill Lynch, announced the partnership at the Cookstoves Future Summit, a two-day event in New York City that brought together world leaders to discuss the adoption of — and investment in — clean cooking solutions. “This broad-based public-private partnership will help improve the health and well-being of millions of people around the world,” says Abyd Karmali, managing director of climate finance, Bank of America Merrill Lynch. “Our commitment to working with GACC to advance clean cookstoves shows how we are using financial innovation to increase investment in clean energy technologies.”

The GACC initiative involves a partnership with Deutsche Bank, development finance institutions and private investors.

Bank of America has financed clean cooking solutions in the past. In 2011 the bank financed CleanStar Mozambique, a sustainable bioethanol fuel and cookstove venture that aims to displace charcoal in household cooking. CleanStar has already sold 35,000 clean stoves in Maputo, Mozambique. The bank arranged financing using compliance market carbon credits that helped to crowd-in equity and debt financing from investors. The bank previously partnered with The Nature Conservancy to promote efficient cookstoves and reduce deforestation in Yunnan Province, China.

There is a critical need for clean cooking solutions throughout the developing world.

“We understand there is a critical need for clean cooking solutions for families and communities throughout the developing world,” says Anne Finucane, global chief strategy and marketing officer at Bank of America. “This initiative will improve health, particularly for women and children; protect the environment by reducing carbon emissions; and spur economic growth. We often do our best work when we combine our scale and resources with partners’ expertise to help address the world’s toughest challenges.

The Catalytic Finance Initiative

Advancing clean cooking solutions is a component of Bank of America’s recently launched Catalytic Finance Initiative (CFI), through which the bank is working to raise at least $10 billion toward investments in renewable energy, energy efficiency and energy access.

Bank of America CEO Brian Moynihan announced the CFI this past September, at the United Nations Secretary-General’s Climate Summit, as part of its partnership with the Sustainable Energy for All Initiative to help the United Nations and World Bank address three goals: 1) provide 100% access to electricity and modern cooking solutions, 2) double the renewable energy share of power produced and consumed from 18% to 36%, and 3) double the energy efficiency improvement rate.

The CFI is part of Bank of America’s 10-year, $50 billion environmental business plan, announced in 2012. This $50 billion commitment followed an initial $20 billion commitment that started in 2007.


Clean cookstoves help reduce carbon emissions (Images courtesy GACC).

 

Making clean energy investments more financeable

Under the CFI, Bank of America will commit $1 billion in capital to investment structures that employ a range of de-risking tools, developed in conjunction with development finance institutions (DFIs), insurance providers, foundations and institutional investors. “The goal,” says Saggurti, “is to make clean energy investments more financeable, particularly in emerging markets where project impact is often amplified — addressing other large-scale issues like health, education and job creation.” Institutions looking to back innovative, unprecedented projects often have to proceed with caution. But by providing advanced risk management across the CFI, as well as $1 billion of our capital, Bank of America can leverage our stability and expertise to encourage others to get involved.

Bank of America is specifically targeting four categories of opportunity where public capital is needed:

  • Investment-grade debt for clean energy infrastructure in Organisation for Economic Co-operation and Development (OECD) and emerging markets. In October 2014, Bank of America contributed $800 million in financing for new renewable energy and energy efficiency, in partnership with New York State Green Bank and several other private investors.
  • Senior and mezzanine debt financing for smaller-scale opportunities in emerging markets. A $100 million credit facility with the Global Alliance for Clean Cookstoves was announced in November 2014.
  • Underwriting green project bonds and green asset-backed securities. In December 2014, the bank announced a $204 million green project bond for wind developer ContourGlobal through its subsidiary Energía Eólica S.A. in Peru.
  • Potential future use of Bank of America philanthropic funds. Promote investment in energy access, such as providing high-impact credit- enhancement structures, working with philanthropic investors.

“I think CFI really speaks to our willingness to devote time and resources — our intellectual and financial capital, as well as our strong global client and institutional investor relationships — to help increase investment in a variety of clean energy projects,” says Alexandra Liftman, global environmental executive at Bank of America. “We believe there are big opportunities to do that with a blended finance approach — that is, developing innovative solutions by working creatively with private, public and philanthropic capital.”

IMPORTANT INFORMATION

Investing involves risk. There is always the potential of losing money when you invest in securities.

Some of the featured participants are not employees of U.S. Trust. The opinions and conclusions expressed are not necessarily those of U.S. Trust or its personnel. Any of their discussions concerning investments should not be considered a solicitation or recommendation by U.S. Trust and may not be profitable.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

Equities Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Energy and natural resources stocks have been volatile. They may be affected by rising interest rates and inflation, and can also be affected by factors such as natural events (for example, earthquakes or fires) and international politics.

International Investing International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards, and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.