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What are the World Bank Green Bonds?

What is the World Bank?

logo-World-Bank

  • The International Bank for Reconstruction and Development (IBRD), commonly known as ‘the World Bank’, was founded in 1944 with the mission of financing the reconstruction of Europe after World War II. Nowadays, the mission of the World Bank is to work with middle income countries to reduce poverty and promote shared prosperity by providing them with financing and knowledge services.
  • The World Bank supports sustainable development, poverty reduction and inclusive growth across a range of sectors including among others: agriculture and food security; education; energy; finance, trade and industry; healthcare and social services; law and governance; transport; and water and sanitation. World Bank projects undergo a rigorous review and approval process including early screening to identify environmental and social impacts and designing concrete mitigation actions. Projects eligible for Green Bond financing are a subset of the World Bank’s activities promoting sustainable development where addressing the impacts of climate change is the primary objective.

Why did the World Bank create green bonds?

  • Climate change affects all of us. But it is expected to hit developing countries the hardest. If we do not tackle climate change, reducing poverty will be much harder and costlier. Its potential effects on temperatures, precipitation patterns, sea levels, and frequency of weather-related disasters pose risks for agriculture, food, and water supplies. It also risks increasing violent conflicts by amplifying drivers of such conflicts such as poverty and economic shocks.
  • Tackling this immense challenge must involve both mitigation—addressing the source of emissions–—and adaptation—to manage the inevitable impacts—all while maintaining a focus on its social dimensions.
  • Addressing climate change requires unprecedented global cooperation across borders. The World Bank is helping support developing countries and contributing to a global solution.

What makes the World Bank Green Bonds “Green”?

All World Bank bonds support sustainable development, poverty reduction and inclusive growth. The World Bank’s Green Bonds are a subset of our sustainable investment opportunities focused specifically on climate change mitigation and adaptation. The key characteristics of World Bank Green Bonds include:

  • The green bond proceeds exclusively support the financing of projects that seek to mitigate climate change or help affected people adapt to it. The proceeds are exclusively used for this purpose: if one of the projects financed stops, the proceeds are reallocated to other climate-friendly projects.
  • The projects are carefully selected by the World Bank, based on the eligibility criteria that underwent an independent review by CICERO (Center for International Climate and Environmental Research of the Oslo University).
  • The projects are monitored throughout their implementation: government agencies report the projects’ progress and the World Bank monitors the agreed milestones towards achieving the project’s objectives.

What investment opportunity do World Bank Green Bonds represent?

  • World Bank Green Bonds are an opportunity to support climate solutions through a high quality bond product.
  • The triple-A credit quality of the Green Bonds is the same as for any other World Bank bond.
  • Since 2008, the World Bank has raised over US$ 8 billion equivalent in Green Bonds through more than 80 transactions in 18 currencies.
  • Green bond proceeds are used to support projects in member countries that meet specific criteria for climate mitigation and adaptation.

For more information on World Bank Green Bonds, please visit the website:

http://treasury.worldbank.org/cmd/htm/WorldBankGreenBonds.html

Comments on Green Bonds

Doris Herrera-Pol

Director and Head of Global Capital Markets at the World Bank

“Green bonds are building an engaged investor base to finance low-carbon development. Green Growth Bond 05/2023 represents a further step in the development of the green bond market because it reaches retail investors seeking to benefit from the financial performance of a sustainable equity index, while supporting climate-focused activities in World Bank member countries.”

Fan Jiaqiang

Employee of a biogas management company in the Gongcheng region in China, involved in the World Bank’s Eco-Farming Project

“Our company signed an agreement with pig farms to help dispose the waste which we bring to farmers to feed their biogas digesters. This way, we ensure adequate supply of waste for biogas and also reduce pollution caused by large pig farms.”

Frank

Investor in green bonds

“When investing in green bonds I know that the funds will be used to finance projects having a real impact on the environment and on the life of the people affected. Moreover, with Green Growth Bond 05/2023, my investment is in the World Bank, which has the safest rating on the market.”

Green Growth Bond 05/2023 is redeemed in US dollars. This implies a foreign exchange risk if investors decide to convert the capital and the potential redemption premium that are paid to them to their own currency.
Positive performance of the index, to which Green Growth Bond 05/2023 is linked, is not assured and historical data is not necessarily a guide to future performance.