Some 36 leading global institutional investors have backed an inaugural three-year $500m (€368.1m) ‘green bond’ from the African Development Bank (AfDB).
The transaction was placed with investors including Swedish state funds Tredje AP-fonden and Fjärde AP-fonden (AP3 and AP4), BlackRock, California pension giant CalSTRS, Calvert Investment Management, Nordea Investment Management, Pictet Asset Management, State Street Global Advisors, TIAA–CREF and Trillium Asset Management.
The AfDB said the proceeds will support the financing of low carbon and climate resilient projects such as renewable energy generation, energy efficiency, urban transport change, solid waste management, fugitive emissions and carbon capture, urban development, and water supply and access.
The AfDB said it decided to take advantage of a “clear issuance window” due to the stalled US budget discussions.
“This first Green Bond of the African Development Bank is part of its quest to use public-private partnerships to meet the challenges of development in Africa. It is another opportunity for private capital to earn market rates of return, while supporting sustainable and low-carbon growth in the continent,” said AfDB President Donald Kaberuka.The bank added that “very strong support” came from investors focused on socially responsible investing, who bought 84% of the bonds. Forty-three percent of the issue went to asset managers, 28% with central banks and official institutions, 28% with insurance companies and pension funds, and 1% with retail and private banks. J.P. Morgan, Morgan Stanley and SEB were joint-lead managers.
The news comes as a new report has been published by not-for-profit group the Carbon Tracker Initiative and accounting body ACCA focusing on the fossil fuel and extractive industries.
The 44-page Carbon Avoidance? Accounting for the Emissions in Hidden Reserves finds current financial reporting standards, exchange listing requirements, industry reporting frameworks and non-financial reporting guidelines don’t alert investors to the risks of reserves associated with climate change.
It argues that the way in which fossil fuel reserves are accounted for and reported does not factor in the risk that some current reserves may not be combusted – indicating that the issue of “unburnable carbon” is not being addressed.
One recommendation is that companies should be required to convert reserves into potential carbon dioxide emissions.