World Bank unveils first green bonds linking business actions to SDGs

The World Bank has issued its first ever set of green bonds that directly link financial returns to companies performing to the standards and aims on the United Nation's Sustainable Development Goals (SDGs).

Announced on Thursday (9 March), the equity-index linked bonds create a €164m funding pot sourced by institutional investors located in France and Italy. These funds will be issued as green bonds to finance projects that align with SDG aims to eliminate extreme poverty, boost shared prosperity and combat climate change.

The World Bank’s vice president and treasurer Arunma Oteh said: “The global community has made an ambitious commitment to achieve the SDGs, and this requires a new way of looking at development finance.

“This bond is an innovation that demonstrates the powerful role of capital markets in connecting savings with development priorities, while offering investors an attractive risk-reward profile. Looking ahead, we anticipate coming to market with similar issuances that would attract a range of investors across the globe.”

Return on investment for the bonds will be directly linked to company stock performances listed under the Solactive Sustainable Development Goals World Index. The index includes 50 companies that have dedicated a least one fifth of their projects and initiatives towards sustainability issues. Eligibility for inclusion on the index is based on methodology that maps the SDGs against the company’s products, services and actions.

The bonds were sorted and agreed by BNP Paribas as part of the SDGs Everyone initiative, which will allow investors to benefit from the performance of companies listed in the index. The initiative has been labelled as an “innovative solution” to new financial models to support the UN’s accelerated efforts to promote the SDGs.

UN deputy secretary-general Amina J. Mohammed said: “There is a momentous opportunity to change incentive structures in financial markets, shape consumer preferences as well as shareholder interest so that they reflect sustainability. Collaboration between the public and private sector will help to leverage innovative financial solutions that can deliver on the SDGs.”

Cash and Chequered history

Although this is the first-time green bonds have been directly linked to the SDGs, the World Bank has developed a track record in supporting the low-carbon transition. The world’s biggest provider of public finance to developing countries said it would spend 28% of its investments directly on climate change projects, and that all of its future spending would take account of global warming.

The World Bank was also joined by the Global Environment Facility (GEF) in financially supporting a $1.15bn global platform aimed at boosting investment and implementing sustainable practices across an array of developing cities around the world.

May’s day

In related news, UK Prime Minister Theresa May has vowed to place the UK Government “at the forefront” of championing the SDGs. More than 80 global firms including Unilever, Coca-Cola and BT called on May to demonstrate commitment to the global goals earlier this year, and until recently the Prime Minister had remained silent.

May finally issued a reply last month, although it was only made public yesterday, claiming that she “strongly agreed” with the purpose and value of promoting the SDGs.

“The UK Government was at the forefront of negotiating the SDGs and we will be at the forefront of delivering them in the UK and around the world,” May said in the statement. “It is my firm belief that we, as governments, international institutions, businesses and individuals, need to do more to respond to the concerns of those who feel that the modern world has left them behind.”

May noted that the Office for National Statistics would be launching a consultation later this year to encourage businesses to contribute to the SDGs in the UK. This follows an inquiry which was launched by the Environmental Audit Committee concerning the speed of implementation of the SDGs amongst the private sector.

Matt Mace

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