IFC and HSBC aim to galvanise green bond market
by Graham Buck
The International Finance Corporation (IFC), and HSBC Global Asset Management announced that they have established the first global green bond fund targeting “real economy” issuers in emerging markets, to increase access to climate finance and promote the further development of green bond markets.
The Real Economy Green Investment Opportunity (REGIO) Fund aims to generate US$500 million to US$700 million in multilateral and private sector capital to support well-diversified climate-smart investments in developing countries worldwide — largely through green bonds issued by non-financial, or real sector, companies.
Philippe Le Houérou, CEO of the IFC, which is a member of the World Bank Group said the innovative fund would provide new opportunities for an important class of borrowers in green bond markets. “The capital raised by REGIO will make a vital contribution to the fight against climate change and further promote sustainability-oriented capital markets,” he added.
REGIO draws on IFC’s experience in the green bond market as an issuer, investor and standard-setter. Since 2010, IFC has issued 143 green bonds in 16 currencies, worth over US$9 billion.
Non-financial borrowers are regarded as an untapped opportunity in the global green bond market. REGIO aims to increase access to climate finance for these borrowers by targeting a mix of manufacturing, agribusiness, services, infrastructure and sub-sovereign bonds, as well as a smaller allocation of financial sector bonds.
IFC will provide a US$100 million anchor investment in the fund, while HSBC will invest up to US$75 million. The fund will have a lifespan of up to 15 years, including a seven-year investment period.
In collaborating with the IFC on the new green bond fund, HSBC Global Asset Management global CEO, Sridhar Chandrasekharan, said that his company has deep expertise and experience in investing in global emerging markets and a strong commitment to playing its part in mobilising capital to deliver on the UN Sustainable Development Goals (SDGs) and transition to a low-carbon global economy.
REGIO aims to attract private capital by helping institutional investors attain their goals of allocating resources to developing economies, while achieving long-term sustainable growth and meeting fiduciary obligations.
Among the fund’s priorities helping to address the demand for climate finance by providing an innovative, sectorally-diversified vehicle to investors who currently lack the capability to invest in individual green bond transactions.
A proprietary green impact framework and clear sustainability governance policies will ensure that REGIO adheres to measurable green impact objectives, both for targeted issuers and transparent impact reporting.
To bolster the supply of green bonds issued by real sector borrowers, REGIO’s investment activities will also be complemented by a technical assistance facility (TAF), managed by IFC.
“By partnering in this diversified fund solution, IFC and HSBC are sending a clear message to the market on the importance of mobilising capital needed to make meaningful progress towards achieving the SDGs,” the partners announced.
“This effort complements the World Bank Group’s commitment to investing and mobilising US$200 billion over five years to combat climate change and increasing climate finance to at least 35% of its direct financing commitments.”
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