IFC, HSBC green bond fund targets untapped opportunity
This collaboration to produce the first real economy global green bond fund raises finances for non-financial borrowers like manufacturers to help combat climate change
The International Finance Corporation (IFC), a member of the World Bank Group, and HSBC Global Asset Management on June 4 announced the establishment of the first global green bond fund targeting “real economy” issuers in emerging markets, thereby increasing access to climate finance and promoting the further development of green bond markets.
The Real Economy Green Investment Opportunity (REGIO) Fund is expected to catalyze around US$500 million to US$700 million in multilateral and private sector capital to support well-diversified climate-smart investments in developing countries around the world — largely through green bonds issued by non-financial, or real sector, companies.
IFC CEO Philippe Le Houérou says this innovative fund will 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 adds.
Non-financial borrowers represent an untapped opportunity in the global green bond market. REGIO will increase access to climate finance for these borrowers by targeting a mix of manufacturing, agribusiness, services, infrastructure and sub-sovereign bonds, in addition to 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 total life 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 says his company has deep expertise and experience in investing in global emerging markets and a strong commitment to playing its part in mobilizing capital to deliver on the UN Sustainable Development Goals (SDGs) and transition to a low-carbon global economy.
REGIO draws on IFC’s strong 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.
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. In particular, the fund will help 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, or 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 mobilizing capital needed to make meaningful progress towards achieving the SDGs. This effort complements the World Bank Group’s commitment to investing and mobilizing 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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