The FINANCIAL — Washington, D.C., July 11, 2018—The World Bank launched its first green bond for fiscal year 2019. The bond brings the institution’s overall green bond issuance to 143 bonds that have raised nearly US$11 billion from investors around the world since 2008.
The bond is one of the first issuances in the World Bank’s borrowing program for fiscal year 2019 that started on July 1, 2018. It builds on a year of innovative issuances to mobilize finance for development. In fiscal year 2018, IBRD issued US$36 billion in 27 currencies, including Sustainable Development Bonds to support women’s and girls’ empowerment; promote investments in the health and nutrition of women, children and adolescents; and raise awareness for the Sustainable Development Goals (SDGs). It also issued its first Hong Kong dollar-denominated green bond.
For many bond investors, World Bank bonds are an entry point to investing for impact. The World Bank continues to catalyze opportunities for fixed income impact investing—including pioneering the green bond market and promoting the integration of environmental, social and governance (ESG) criteria for investment decisions. Increasingly, the World Bank is focusing on creating innovative products that raise awareness for broader development challenges. These range from structured notes that support the SDGs to benchmark-sized issuances that cover a variety of impact themes including climate, education, gender, health, social services and clean water and sanitation.
The World Bank is also partnering with investors to increase the availability of ESG data through research, and by supporting global transparency and reporting initiatives. This includes a collaboration with Japan’s Government Pension Investment Fund (GPIF) on opportunities and challenges to incorporating ESG factors into investment strategies. The World Bank is also working with investors to facilitate the use of the SDGs as a reporting framework for impact, and develop sustainable investment products and market indices. An example is a collaboration with UBS Wealth Management to expand sustainable investment indices with benchmarks that track debt issued by multilateral development banks.
Leveraging Markets for Emerging Economies to Manage Risk
Investors in World Bank catastrophe bonds enable countries to manage the financial impacts of earthquakes, hurricanes, pandemic disease outbreaks, and other disasters. In fiscal 2018, the World Bank issued catastrophe bonds that provide $1.36 billion in earthquake protection to Chile, Colombia, Mexico and Peru. This was the largest sovereign risk insurance transaction ever and the second largest in the history of the catastrophe bond market. It allowed Chile, Colombia, and Peru to access disaster insurance from the capital markets for the first time.
Making History with IDA—A New Model for Impact Investing
The World Bank Treasury also manages the borrowing program the International Development Association (IDA). IDA is one of the largest sources of assistance for the world’s 75 poorest countries, and the single largest source of donor funds for basic social services in these countries. In April, IDA made its historic debut in the capital markets, issuing bonds for the first time in its nearly 60-year history. The benchmark issuance raised US$1.5 billion as investors around the globe seized the opportunity to invest in a triple-A rated asset and support life-changing programs in IDA client countries. IDA’s borrowing program will supplement donor financing to enable IDA to significantly scale up its support toward achieving the SDGs.
Looking Forward
In fiscal year 2019, the World Bank Treasury will continue to prioritize strategic engagements with investors and other market participants that accelerate opportunities for capital markets to play a key role in mobilizing finance for development and achieving the SDGs. A key focus will be on partnering with investors whose strategies aim to achieve social and financial returns, including by using ESG criteria and the SDGs as a framework for investment decisions and impact reporting.
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