The German and Brazilian central banks, major corporates such as Ford and Microsoft, and leading investors including BlackRock, CalSTRS and State Street Global Advisors have all snapped up the latest green bond from the World Bank’s International Finance Corporation (IFC).
The IFC says the issue was “heavily over-subscribed” and follows its $1bn green bond in February, at the time the world’s largest green bond issue. It takes its total green bond issuance to $3.4bn.
Just last week RI reported that investment banks Citigroup and Bank of America Merrill Lynch (BoAML) have called for the formation of a coalition of issuers, dealers and investors to drive the evolution of the nascent green bonds market.
Proceeds from the bonds are invested in renewable energy, energy efficiency, and other areas that reduce greenhouse gas emissions.
“Our clients appreciate investments like these where the yields are competitive and climate related projects are supported,” said Benjamin Bailey, Fixed Income Manager at Praxis Mutual Funds, the US faith-based, socially responsible mutual fund group.
The IFC invested $2.5bn in what it terms “climate-smart” projects in the 2013 fiscal year – nearly 14% of its overall commitments. It expects climate-related investments to make up 20% of its long-term financing by 2015.
Stephanie Miller, Director of IFC Climate Business, said: “There are tremendous investment opportunities in the shift to cleaner and more efficient energy, especially indeveloping countries where solar, wind and other renewables are gaining traction fast.”
Her colleague, IFC Treasurer Jingdong Hua, said the institution was “leveraging the tremendous demand in the global capital markets” for its climate change projects.
The three-year issue pays a coupon, or interest rate, of 0.625%. It’s rated Aaa by Moody’s and AAA by S&P. Lead managers were SEB, Credit Agricole CIB, Citi and Bank of America Merrill Lynch, according to industry group the Climate Bonds Initiative. It quoted an unnamed source at the IFC as saying the body is planning to issue a total of $4bn of green bonds during its current financial year, or a quarter of its total planned issuance.
Investors in the new issue:
Central Bank of Brazil, Blackrock
California State Teachers’ Retirement System
Deutsche Bank Asset and Wealth Management
Ford Motor Company
Praxis Intermediate Income Fund
State Street Global Advisors
Trillium Asset Management
United Nations Development Programme
UN Joint Staff Pension Fund.