World Bank Group’s member IFC and French asset management giant Amundi are to create a $2bn green bond fund dedicated to emerging markets that aims to deepen local capital markets and expand financing for climate investments.
The fund is the first product of a joint venture between IFC and Amundi aimed at developing green finance in emerging markets.
IFC and Amundi expect the strategy to support more local financial institutions in the issuance of green bonds by increasing global demand and building local markets.
They will train local financial institutions to strengthen their capacity to issue green bonds and share international best practices with them.
IFC will invest up to $325m in the new Green Cornerstone Bond Fund, which will purchase green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia.
Amundi will raise the remaining $2bn from institutional investors worldwide and will provide its services in managing emerging-market debt.
The fund will be fully invested in green bonds within seven years.
It will initially focus on countries and banks that have high potential to issue green bonds— before spreading into other markets.
It is understood IFC will also provide first-loss coverage. This will help to lower the risk and mobilise financing from the private sector.
The fund will contribute significantly to the World Bank Group climate targets and IFC’s goal of increasing its climate investments to 28 percent of investments made from its own account while mobilizing an additional $13 billion a year in private financing by 2020.
“This green-bond fund will lower the risk for the private sector and attract new investors – essentially creating a market where there was none,” said IFC CEO Philippe Le Houérou.
“We’ve already identified dozens of banks in many developing countries around the world that could be interested in this fund. It’s a win-win—supporting the green economy and deepening access to international markets for emerging market issuers.”
Xavier Musca, chairman of Amundi said: “This innovative partnership with IFC is a major achievement for Amundi, the leading European Asset Manager. This project highlights the strong capabilities in green financial innovation of Credit Agricole Group. I consider this project as a game changer: it is both an investment opportunity for institutional investors and it will have an impact on society by accelerating the shift of emerging markets toward a green economy.”
The Bank Group is a major issuer of green bonds. So far, the World Bank has issued $8.5 billion in green bonds in 18 currencies. IFC has issued $5.8 billion in 12 currencies.