Top 3 things to know about the World Bank’s sustainability bonds
1. Private investors support the financing of World Bank projects in developing countries.
Private capital raised through the sale of Sustainable Development Bonds in global bond markets is used to support the financing of World Bank projects in developing countries. These bonds are issued by the International Bank for Reconstruction and Development (IBRD) – the founding institution of the World Bank Group. The IBRD, known simply in the capital markets as the World Bank, has been issuing bonds in the capital markets since 1947 and has raised more than $ 1,000 billion. Fundraising from the private sector through bonds is at the heart of the World Bank’s business model – which leverages the World Bank’s triple A credit rating to attract investors and use the proceeds. to support the financing of World Bank projects in developing countries. Countries then repay the loans plus interest.
Today, with paid-in capital of its 189 members totaling $ 19 billion, the World Bank links private investors to sustainable development through the sale of its bonds. This funding supports the financing of IBRD operations, which currently span approximately 60 countries and focus on the World Bank Group’s dual goals of ending extreme poverty and promoting shared prosperity.
Commercial banks, pension funds, asset managers, official institutions and insurance companies are the biggest buyers of World Bank sustainability bonds. These investors are increasingly focusing on managing environmental, social and governance (ESG) risks through their investments and looking for ways to have a positive impact.
“Raising private sector fundraising through bonds is at the heart of the World Bank’s business model – which relies on the World Bank’s triple A credit rating to attract investors and use the proceeds to support the financing of World Bank projects in developing countries. ”
2. The World Bank is the world’s largest issuer of sustainable bonds.
The World Bank launched the first labeled green bond in 2008 to engage investors around the positive contribution of the World Bank on climate change. This green bond responded to the growing interest of investors in the risk linked to climate change by offering a simple product adapted to their portfolio. It eventually became the norm for a market focused on increasing transparency and investing for impact. While the World Bank continues to issue green bonds, most are now labeled as Sustainable Development Bonds.
The Sustainable Development Bond label highlights how proceeds are used to support the financing of projects with both green and social goals and emphasizes the holistic approach taken by the World Bank to mainstream climate change into all its operations, as explained in its Climate change action plan 2021-2025. For example, 100% of all World Bank projects are screened for climate risk, and 95% of all IBRD projects last year had climate finance components, including in what are traditionally considered sectors ” social “such as health and education.
The World Bank is the largest issuer of so-called “sustainable” bonds. World Bank Sustainable Development Bonds Aligned with Sustainable Bonds Guidelines as published by the International Capital Markets Association. Sustainability-labeled bonds themselves have grown in leaps and bounds as demand from private investors increases for products that provide information on how they support sustainable activities. According to Bloomberg, those labeled investments have grown from $ 40 billion in 2019 to over $ 70 billion in 2020 – and in the first three quarters of 2021, they have already reached over $ 140 billion. But the amount of labeled bonds still only represents a tiny percentage (less than 3%) of the overall bond market. The growth potential is important, as investors assess the entire bond market for sustainable investment opportunities that allow them to manage ESG risks and invest in products that have a positive impact on society.
“The Sustainable Development Bond label highlights how the proceeds are used to support the financing of both ecological and social projects and underlines the holistic approach taken by the World Bank to mainstream climate change in all of its operations. ”
3. The World Bank’s impact reports provide a model for financial markets.
As a pioneering issuer of green and sustainable bonds, the World Bank has led transformative change in capital markets. One of these areas reported a positive impact. The World Bank worked with investors and other multilateral development banks to establish the first “Harmonized Framework for Reporting on the Impact of Green Bonds” in March 2015. The World Bank has since broadened and adapted the concept of reporting its sustainability obligations, explaining how all funds raised through their sale support the Sustainable Development Goals (SDGs). In his last investor impact report, the World Bank worked with the Stockholm Environment Institution to develop a methodology for mapping projects according to the 17 different SDGs. The tool applies automated text mining software to match each project to SDG targets. The objective of this work is to explore methodologies that can be used to provide a lens through which investors can view the indicative contributions of World Bank-funded projects to the SDGs and share preliminary results to assist other issuers. and investors to connect the results of projects or investments to the SDGs.
This document has been prepared by the World Bank (International Bank for Reconstruction and Development, IBRD) for informational purposes only. The World Bank makes no representations, warranties or assurances of any kind, express or implied, as to the accuracy or completeness of the information contained in this document. This document does not constitute an offer to sell securities of the World Bank. Any offering of World Bank Bonds will be made solely on the basis of the relevant offering documentation, including, but not limited to, the prospectus, term sheet and / or final terms, as applicable. , prepared by the World Bank or on behalf of the World Bank. Bank, and is subject to restrictions under the laws of several countries. World Bank bonds may only be offered or sold in accordance with all of these laws.
World Bank Group published this content on November 03, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on 03 November 2021 04:01:03 AM UTC.