The world’s biggest green bond fund was officially launched today, having raised $1.42 billion to buy paper from banks in emerging markets.
The Amundi Planet Emerging Green One (Ego) – which is the brainchild of the World Bank’s private sector arm, the IFC, and is managed by Europe’s biggest asset manager, Amundi – aims to disperse a total of $2 billion over its seven-year lifetime, as it reinvests returns.
Its mission is to help scale up green bonds in emerging markets, by encouraging banks to refinance their green loans as green bonds.
The IFC, which is the biggest investor in the fund, having made a $256 million commitment, has invested in a junior tranche to help boost the fund’s creditworthiness. The fund has closed and is trading on the Luxembourg Stock Exchange.
Until the emerging market green bond market scales up, the fund will buy non-green-labelled bonds from emerging market banks, which have been screened by Amundi for environmental, social and governance risks.
The fund will help educate prospective green bond issuers as to best practice, via a technical assistance programme that has an initial grant of $7.5 million from the Swiss Secretariat for Economic Affairs.
IFC CEO Philippe Le Houérou added: “The global market for green bonds has expanded rapidly in recent years – totalling more than $155 billion in 2017, but few banks in developing countries have issued such bonds.
“IFC and Amundi expect this new fund to encourage more local financial institutions to issue green bonds, by increasing global demand and building local markets.”
A raft of institutions have made commitments, helping make it easily the biggest green bond fund in the market.
- Pension funds: Alecta, AP3, AP4, APK Pensionkasse, APK Vorsorgekasse, ERAFP, MP Pension.
- Insurance companies: Crédit Agricole Assurances, LocalTapiola General Mutual Insurance Company, LocalTapiola Mutual Life Insurance Company.
- Development finance banks: the IFC, European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and Proparco.
It is believed to be the first time that some of these institutions have invested in emerging markets and/or green bonds.
“This landmark transaction with IFC contributes to Amundi’s innovative and leading role in the climate finance space,” said Yves Perrier, Amundi CEO. “Leveraging on Amundi’s emerging market debt investment capabilities, our commitment to ESG, and IFC’s unique outreach in emerging countries, Amundi Planet is a one-of-a-kind example of the potential that public private partnerships can bring to investors and to society.”
A scientific committee consisting of green finance experts from development institutions is being set up to advise Amundi as fund manager. The fund’s ESG policy reflects IFC’s 2012 ‘performance standards’ and IFC’s ‘excluded activities’.