London, March 20, 2018 –
Emerging markets and other sovereign nations are becoming a significant new force in the global green bond market attracting millions of dollars to help combat climate change by reaching a new class of investors through sovereign green bonds, according to a new report by IFC, a sister organization of the World Bank.
The report,
Guidance for Sovereign Green Bond Issuers
, focuses on lessons from Fiji’s historic making move in being the first emerging economy to issue a sovereign green bond. In recognition of that leadership, Fiji has just been awarded a prestigious Green Bond Pioneer Award at the Climate Bonds Initiative’s conference in London. And in another first, Fiji will debut its first Fijian dollar bond on the London Stock Exchange next month.
“We are seeing clear momentum building following Fiji’s bond with other emerging market economies moving to create a new market for climate finance through sovereign green bonds,” said Alzbeta Klein, IFC’s Director for Climate Business. “These new players from emerging markets could be gamechangers for the green bond market, which will hit new record highs this year. The bonds can also help countries demonstrate national leadership on the green agenda and deliver on their commitments under the Paris Climate Change Agreement.
The Guidance for Sovereign Green Bond Issuers, developed by IFC, says there’s significant appetite for international issuances of green bonds from environmental, social and governance focused investors, as well as institutional investors.
“Fiji’s sovereign green bond attracted interest from both local and international investors, with the foreign investor participation a first for Fijian dollar denominated bonds,” said the Governor of the Reserve Bank of Fiji, Ariff Ali. “Fiji has shown that small economies, under threat from climate change, can deliver effective, credible and innovative ways to finance climate work, and it’s hoped other nations will learn from Fiji’s experience that it’s possible to pursue new markets for climate action.”
The report says while there are additional costs involved for international issuances of sovereign green bonds, compared to standard government bonds, they do allow countries to reach new classes of investors. It says transparency at every step of the process is critical to the success of the green bond market, so resourcing and expertise needs to be applied to both monitoring and reporting on the use of proceeds.
And in what could be a potential plus for emerging economies, the report says an increasing number of millennials are now attracted to investments delivering a positive impact.
As a pioneer issuer, the report says Fiji sought to set high standards for other nations to follow suit and was supportive of the establishment of a robust and transparent process. The report provides a step by step roadmap for other sovereign nations to follow when considering issuing their own green bond.
At the request of Fiji’s Reserve Bank, IFC led World Bank Group support to provide technical assistance to assist the government in issuing a sovereign green bond. This collaboration took place under a broader, three-year Capital Markets Development Project supported by the Australian Government.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit
www.ifc.org
About DFAT-IFC Fiji Partnership
Technical support for Fiji’s green bond forms part of a capital markets development project under the Fiji Partnership. Australia and IFC are working together through the Fiji Partnership to stimulate private sector investment, promote sustainable economic growth and reduce poverty in the Pacific.
About the Green Bond Pioneer Awards
The Green Bond Pioneer Awards recognise financial institutions and government bodies and individuals who have led the development of green finance and green bond markets in the past year and through their pioneering initiatives have provided positive examples of climate resilient and low carbon investment. For more information please visit
www.climatebonds.net
.
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