IFC launches $2bn emerging market green bond fund run by Amundi

A lack of green bonds issued by banks in developing countries has prompted IFC, the private sector investment arm of the World Bank Group, to launch a mammoth $2bn green bond fund dedicated to emerging markets, which will be run by Amundi, the Paris-based global fund manager. The new fund is significantly bigger than the existing value of green bond funds in emerging markets, which is estimated at about $1.3bn. IFC and Amundi said they hoped the new fund, which is being launched alongside an innovative education partnership, would encourage more local financial institutions to issue green bonds by increasing demand and building local markets.
IFC will invest up to $325m in the new Green Cornerstone Bond Fund, which will buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia.
Amundi, which was selected to run the fund following a competitive tender, will raise the remaining assets to meet the $2bn target from institutional investors worldwide, and run the fund via its emerging-market debt team.
The fund aims to be fully invested in green bonds within seven years.
It said prospective investors could get a diversified, green bond exposure to emerging markets with risk mitigation provided by IFC’s first loss position in the bond structure.
The IFC and Amundi said the fund would sit alongside a new ‘partnership’ between the two entities to develop green finance in emerging markets.This will take the form of a donor-funded investment support facility led by IFC that will work with local financial institutions in emerging markets to strengthen their capacity to issue green bonds, provide training and share international best practices.
The aim of the combined bond fund/training dual track approach is to simultaneously stimulate demand (through the fund) and supply (through the targeted technical assistance).
IFC CEO Philippe Le Houérou said: “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: “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 fund will contribute significantly to the World Bank Group’s climate targets and IFC’s goal of increasing its climate investments to 28% of investments made from its own account while mobilizing an additional $13bn a year in private financing by 2020.
To date, the World Bank has issued $8.5bn in green bonds in 18 currencies. IFC has issued $5.8bn in 12 currencies.