Game changers

NEW players from emerging markets could be the game changers for the green bond market, which will hit new record highs this year, says Alzbeta Klein, IFC’s director for climate business.

A new report by IFC, which is a sister organisation of the World Bank, says emerging markets and other sovereign nations are becoming a significant new force in the global green bond market attracting millions of dollars to help combat climate change by reaching a new class of investors through sovereign green bonds.

A statement from IFC yesterday said the report, Guidance for Sovereign Green Bond Issuers, focused on lessons from Fiji’s historic making move in being the first emerging economy to issue a sovereign green bond.

It said in recognition of that leadership, Fiji had just been awarded a prestigious Green Bond Pioneer Award at the Climate Bonds Initiative’s conference in London and in another first, Fiji will debut its first Fijian dollar bond on the London Stock Exchange next month.

“We are seeing clear momentum building following Fiji’s bond with other emerging market economies moving to create a new market for climate finance through sovereign green bonds,” said Ms Klein.

“The bonds can also help countries demonstrate national leadership on the green agenda and deliver on their commitments under the Paris Climate Change Agreement,” she said.

According to the report while there are additional costs involved for international issuances of sovereign green bonds, compared with standard government bonds, they do allow countries to reach new classes of investors.

It says transparency at every step of the process is critical to the success of the green bond market, so resourcing and expertise needs to be applied to both monitoring and reporting on the use of proceeds.

And in what could be a potential plus for emerging economies, the report says an increasing number of millennials are now attracted to investments delivering a positive impact.

According to the statement, as a pioneer issuer, the report says Fiji sought to set high standards for other nations to follow suit and was supportive of the establishment of a robust and transparent process.

It also provides a step by step roadmap for other sovereign nations to follow when considering issuing their own green bond.

Reserve Bank of Fiji governor Ariff Ali said Fiji’s sovereign green bond attracted interest from both local and international investors, with the foreign investor participation a first for Fijian dollar denominated bonds.

“Fiji has shown that small economies, under threat from climate change, can deliver effective, credible and innovative ways to finance climate work, and it’s hoped other nations will learn from Fiji’s experience that it’s possible to pursue new markets for climate action,” said Mr Ali.

The IFC also confirmed that at the request of Fiji’s Reserve Bank, IFC led World Bank Group support to provide technical assistance to assist the government in issuing a sovereign green bond.

This collaboration took place under a broader, three-year Capital Markets Development Project supported by the Australian Government.

The Guidance for Sovereign Green Bond Issuers, developed by IFC, says there’s significant appetite for international issuances of green bonds from environmental, social and governance focused investors, as well as institutional investors.