$1 Billion in Green Bonds Planned for Emerging Markets – New Green Financing Mechanism

GLOBE-Net, April 19, 2013 – IFC, a member of the World Bank Group, expects to issue at least $1 billion in green bonds a year to support private sector investment in renewable energy, energy efficiency, and other climate-friendly sectors.

Proceeds from the bonds are earmarked for projects that reduce greenhouse emissions-for example, by rehabilitating power plants and transmission facilities, installing solar and wind power, and providing funding for new technologies that result in significant reductions in emissions.

“Climate change is one of the most urgent development challenges of our time, and only markets can mobilize the investment necessary for mitigation and adaptation,” said IFC EVP and CEO Jin-Yong Cai.

[stextbox id=”custom” float=”true” width=”200″ bcolor=”add3d5″ bgcolor=”add3d5″ image=”null”]Green bonds, also known as climate bonds, are a relatively new asset class. [/stextbox]

“We are ramping up our Green Bond program to meet the growing demand for this asset class and enable investors to support climate-smart investment in developing countries.”

According to the International Energy Agency, $5 trillion of investment is needed worldwide by 2020 in renewable power, energy efficiency, and cleaner transportation to contain rising global temperatures. The United Nations estimates that 80 percent of the capital needed to address climate change will come from the private sector.

Green bonds, also known as climate bonds, are a relatively new asset class. IFC has issued $2.2 billion in green bonds since 2011. The Green Bond concept was first developed in 2007/2008 by Sweden’s SEB  Enskilda  Bank and the World Bank as a response to increased investor demand for engagement in climate-related opportunities.

According to SEB green bonds are investment vehicles that integrate the fiduciary element of Fixed Income products with climate mitigation and adaptation awareness, giving mainstream investors access to climate-related investment opportunities.

Criteria for the use of IFC Green Bonds proceeds are certified CICERO, an independent research center associated with the University of Oslo.

In February, IFC issued a $1 billion green bond, the largest climate-friendly issuance to date. The three-year bond was a benchmark issue available to investors globally. The bond was 80 percent oversubscribed and sized to address the demand from an increasing number of investors interested in climate-related opportunities.

See also GLOBE-Net article “Korean Exp-Imp Bank Green Bond Issue Oversubscribed“

Addressing climate change is a strategic focus for IFC. In FY12, IFC invested $1.6 billion in climate-related investments-more than 10 percent of the institution’s overall commitments for the year. About 70 percent of IFC’s investments in the power sector involved energy efficiency and renewable energy. By FY15, IFC expects to double its climate-related investments to roughly $3 billion per year.

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. For more information, visit  www.ifc.org.

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