Amundi and IFC have agreed to create the largest green-bond fund dedicated to emerging markets, a $2bn initiative that aims to deepen local capital markets and expand financing for climate investments.
Xavier Musca, Chairman of Amundi, said: “This innovative partnership with IFC is a major achievement for Amundi. This project highlights the strong capabilities in green financial innovation of Credit Agricole Group.”
“I consider this project as a game changer: it is both an investment opportunity for institutional investors and it will have an impact on society by accelerating the shift of emerging markets toward a green economy,” he said.
IFC will invest up to $325m in the new Green Cornerstone Bond Fund, which will buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia.
Amundi will raise the rest of the $2bn from institutional investors worldwide and will provide its services in managing emerging-market debt.
The fund aims to be fully invested in green bonds within seven years.
The fund is the first product of a joint venture between IFC and Amundi aimed at developing green finance in emerging markets.
The global market for green bonds has expanded rapidly in recent years totaling more than $100bn in 2016, but a huge gap persists with only a few banks in developing countries having issued such bonds.
IFC and Amundi expect the new fund to encourage more local financial institutions to issue green bonds by increasing global demand and building local markets.
Together, through a donor-funded investment support facility led by IFC, they will work with local financial institutions to strengthen their capacity to issue green bonds, providing training and sharing international best practices with them.
“This green-bond fund will lower the risk for the private sector and attract new investors – essentially creating a market where there was none,” said IFC CEO Philippe Le Houérou.
“We’ve already identified dozens of banks in many developing countries around the world that could be interested in this fund. It’s a win-win—supporting the green economy and deepening access to international markets for emerging market issuers,” he said.
Initially, the fund will focus on countries and banks that have a high potential to issue green bonds, before spreading into other markets.
IFC will also provide first-loss coverage, helping to lower the risk and mobilizing financing from the private sector.
This will help ensure that the fund can operate in more challenging markets, including the poorest countries and conflict-affected areas.
The fund will contribute significantly to the World Bank Group climate targets and IFC’s goal of increasing its climate investments to 28% of investments made from its own account while mobilizing an additional $13bn a year in private financing by 2020.
The Bank Group is a major issuer of green bonds.
So far, the World Bank has issued $8.5bn in green bonds in 18 currencies.
IFC has issued $5.8bn in 12 currencies.