Green Bonds were created to fund projects that have positive environmental and/or climate benefits. The majority of the green bonds issued are green “use of proceeds” or asset-linked bonds.
Green Bonds raise funds for new and existing green projects with environmentally sustainable benefits aiming to address key areas of concern such as climate change, natural resources depletion, loss of biodiversity and/or pollution control.
The green bond market took off in 2014 with $36.6bn issued; triple the amount issued in 2013 ($11bn). As of May 31, 2016, labelled-green bond market stands at US$ 118bn outstanding.
Supporting National Development Banks (NDBs)
The objective is to support NDBs in their efforts to raise private funds at adequate maturities in both local and international capital markets, through the issuance of green bonds or sustainable bonds. Those issuances should attract national and international institutional and impact investors and therefore have an impact on the issuer’s ability to diversify sources of funding, while promoting low-carbon investments or investments with high positive social impacts.
Those projects will also participate in the development of national capital markets. The Program is currently supporting NDBs in Colombia and Mexico.
Supporting Countries in LAC to Design Efficient Incentivization Strategies for Sustainable Bonds
The IDB is also working with other type of players such as Government Agencies, Financial Sector regulatory bodies or domestic Stock and Bond Exchanges in order to support the design of national strategies to incentivize domestic green and sustainable bonds markets. Pilot projects are currently being developed in Brazil, Mexico and Ecuador.
Both sections of the program include a strong dissemination component and all relevant knowledge products will be made available through this platform.
The program is currently being developed thanks to the support of Switzerland’s State Secretariat for Economic Affairs (SECO) for Colombia, Peru and Ecuador – and of the International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) via the LGI program for other countries in the region.
The IDB is working closely with the Climate Bonds Initiative and several trainings and activities will be carried out within LAC countries throughout 2016-2017. The Climate Bonds Initiative is an international, investor-focused not-for-profit. It is the only organization in the world working solely on mobilizing the $100 trillion bond market for climate change solutions.
Beneficiary Institutions will receive technical and promotional assistance all along the process:
Climate-Aligned Bond Market
The Labelled-Green Bonds Portion
Development Banks First Pool of Green Bonds Issuers
Green Bonds Principles
Developed by the International Capital Market Association (ICMA) and updated in June 2016, the Green Bond principles are a set of voluntary guidelines for green bond issuers. They promote transparency and disclosure and aim at developing a sound green bond market.