The World Bank has launched the first bond linked to an index that supports the UN’s Sustainable Development Goals.
The global development bank sold €163m of notes in a club deal with 10 Italian and French investors including arms of BNP Paribas and Generali (full list below).
The deal, run by BNP Paribas, had two tranches: a €106.8m, 15-year offering and a €56.8m, 20-year offering. The longer-dated notes pay a fixed coupon of 1.2% for the first ten years, for investors who require an annual cash flow before the index performance is determined.
The bonds are linked to a newly-created equity index from German provider Solactive, which uses Vigeo Eiris data to select 50 companies deemed to be aligned with the SDGs.
Companies that have a lower ESG score than their regional average, those involved in alcohol, weapons, nuclear power, pornography, tobacco or “critical controversies” linked to the environment, human or labour rights are all excluded from the index.
The most intensive carbon emitters can only be included if they have a “robust” energy transition score from Vigeo Eiris. Remaining companies are assessed on whether they generate more than 20% of their activities from sustainable business, or are a leader on sustainability in their sector. The final 50 companies are selected based on liquidity and volatility filters, and sectorial and geographical diversification.
The indices, which are licensed to BNP Paribas, are currently available in both USD and EUR. The are rebalanced annually.The bonds will be listed on the Luxembourg Stock Exchange.
This was the first transaction to be issued under the World Bank’s recently-launched ‘SDGs Everyone’ initiative, in partnership with BNP Paribas. Further bonds will be issued under the programme, and each is expected to be linked to the same Solactive index.
Arunma Oteh, Vice President and Treasurer of the World Bank, said future deals “would attract a range of investors across the globe”.
It comes as farmers in Honduras are reportedly accusing the World Bank’s private sector IFC arm of ‘profiting from murder’. The Financial Times said the farmers have filed a lass-action lawsuit in the US District Court for the District of Columbia alleging the International Finance Corporation and its IFC Asset Management Company subsidiary of “ turning a blind eye” to the murder of over 100 people over the past eight years in the country. The FT said the IFC declined to comment.
BNP Paribas Cardif France
BNP Paribas Cardif Italy
Fideuram Asset Management Ireland
Sella Gestioni SGR