International Finance Cooperation

Promotion of green finance

This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.

 

 

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Paris alignedHas an active green bond programme and is a leader in the larger green finance discourse.

Explanation

Green bonds

IFC does a lot of work in the green bond space.

In 2013 IFC helped bring the green bond market into the mainstream, becoming the first institution to issue a $1bn global benchmark green bond. As of October 2019, IFC has issued 150 green bonds valued at almost $10 billion across 16 currencies. Through the Cornerstone Green Fund, IFC has bought bonds issued by banks in developing economies. Also, IFC together with HSBC launched the first green bond fund focused on “real economy” issuers in emerging markets – called the Real Economy Green Investment Opportunity; this is targeted to non-financial borrowers, which are considered an untapped market.

In 2018, IFC issued green bonds in the Philippines, the first green bond denominated in Philippine pesos to be issued by a multilateral development institution. The same year, IFC also issued its inaugural Indonesian Rupiah Komodo green bond – the first Rupiah-denominated issuance by a multilateral development bank.

In Asia, IFC signed a memorandum of understanding with the Monetary Authority of Singapore (MAS) with the aim to encourage the issuance of green bonds by financial institutions in the region, whilst promoting the use of better practices and standards at the global level.

In 2018, the IFC released guidelines outlining the considerations that sovereign states should consider when issuing a green bond, taking into consideration lessons from Fiji’s Sovereign Green Bond. The guideline provides detail on the process from preparation to issuance and post-issuance reporting; this could support countries to be able to issue their own green bonds.

Greening the system

IFC hosts the Sustainable Banking Network (SBN) – a voluntary network where financial regulators and banking associations from emerging markets can commit to advancing sustainability within their financial sectors, in line with international good practice.

IFC and the Sustainable Banking Network are observers to the Network for Greening the Financial System (NGFS), a coalition of central banks on this issue.

In addition, the IFC has launched the IFC Green Banking Academy which is a “knowledge and capacity building initiative” to give partner banks the tools and knowledge they need to drive transformative change through their actions. The Academy’s “curriculum” covers strategy alignment and framework development, greening their products and services, understanding environmental and climate risks and natural resource efficiency.

IFC has supported the development of environmental credit lines by working closely with prominent banks. In Argentina, the IFC worked with Banco Galicia to realise investment opportunities in climate-smart agriculture and renewable energy amongst other ventures as part of the country’s Paris Agreement goals. To do this, the IFC helped Banco Galicia to develop the technical capacity to mobilise climate-friendly investments and align its operations with the Green Bond Principles. This work has helped create a market in Argentina and the broader region for sustainable finance.

Furthermore, in October 2018, IFC’s CEO announced changes to its financial intermediary policy, whereby it eliminated its general-purpose loans and replaced them with a more stringent and adequate policy on which the Corporation’s lending to financial intermediaries is ringfenced to prevent on-lending to coal-related investments. (For information on IFC Green Equity Approach please see IFC Fossil fuels page.)

Since 2018, IFC’s annual report discloses the institution’s climate-related risks following the TCFD guidelines.

Case study: IFC – Largest Green Bond Fund dedicated to Emerging Markets

The objective is to buy green bonds issued by banks in developing countries to deepen local capital markets and expand financing for climate investments by attracting private investment.  Initially it will focus on countries where there is high interest. This fund is complemented with a donor-funded investment support facility led by IFC, working with local financial institutions to strengthen their capacity to issue green bonds, providing training and sharing international best practices. The IFC has partnered with Amundi, Europe’s largest listed asset manager, to create this fund.

Outcome:  The Fund is the world’s largest green bond fund focused on emerging markets. IFC committed $325m in the new Green Cornerstone Bond Fund, which bought green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia with the goal of stimulating the economy and fostering supply. Amundi raised the rest of the $2bn from institutional investors and provided services in managing emerging-market debt. The fund has been successfully closed, and has begun investing in a variety of green bonds.  The Fund’s aim is to be fully invested in green bonds within seven years.

Transformational aspect:  Amundi and IFC can be said to be greening capital markets in emerging economies by unlocking green finance. The fund is split into three different tranches: junior, mezzanine (mixture of public and private money) and senior (private investors). Overall, the mix is about 80% private money, 20% public. The fund could also help to develop capital markets in countries by providing technical assistance to those local financial institutions interested in issuing green bonds, strengthening their capacity, and familiarising investors with these instruments.

Last Update: November 2020

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