Promoting Sustainable Finance and Capital Markets

IBRD has mobilized finance for middle-income countries for more than 75 years, raising over $1 trillion from private investors since issuing its first bond in 1947. IBRD engages with investors through its issuance of sustainable development bonds, helping connect investing to the Sustainable Development Goals and, increasingly, environmental, social, and governance considerations, Investors are also interested in how their investments contribute to topics such as climate action, biodiversity, and gender equality. The World Bank Treasury publishes an annual impact report for investors that summarizes results of IBRD-financed projects; highlights of the Treasury’s issuance activities in the fiscal year are also outlined here.

In fiscal 2023, IBRD drew on its triple-A rating and strong standing in the markets to raise about $43 billion in sustainable development bonds, which were issued in a variety of structures and maturities. As part of its funding program, IBRD issues sustainability bonds and green bonds. Since issuing the first-ever labeled green bond in 2008, it has issued almost $290 billion in labeled bonds, including $18 billion in green bonds. For green bonds, IBRD allocates equivalent amounts to eligible activities that address climate change. We have expanded our approach to issue sustainable development bonds that support all our activities—today, IBRD is the largest issuer of sustainable development bonds and uses the funds raised from capital markets to support development activities in member countries.

Since its capital market debut in 2018 with a $1.5 billion bond in U.S. dollars, IDA has been building its market presence to support a larger funding program by issuing bonds in various maturities and currencies, including the euro, British pound, Swedish krona, and Norwegian krone. IDA’s triple-A rating enables it to issue sustainable development bonds that leverage shareholder contributions to help low-income countries address their most pressing issues. In fiscal 2023, IDA issued approximately $2 billion in bonds.

Supporting climate action, conservation, and other development priorities through capital markets

As part of its efforts to mobilize capital from capital markets, IBRD continued to engage with bond investors in fiscal 2023 about how we mainstream climate action and integrate climate and sustainability throughout our work with countries. We also engaged with investors on development priorities such as biodiversity, education, climate change, road safety, and water.

Following the first-of-its-kind outcome bond for wildlife conservation in March 2022, we issued another outcome bond in March 2023: a five-year emission reduction–linked bond that provided additional financing from private investors to a water purifier project in Vietnam. Instead of regular coupons, bond investors receive a return linked to the carbon credits generated by the project. This new approach raises upfront financing for a climate-focused project by securitizing future carbon credit sales revenue and passing project performance risk onto bond investors. The purifier project will make clean water available to 2 million children in Vietnam and reduce greenhouse gas emissions by almost 6 million tons of CO2 over 10 years.

Developing sustainable capital markets

The Bank provides countries with technical assistance to develop greener and more sustainable capital markets and financial systems, facilitate market-based solutions, and mobilize private sector capital toward environmental and social priorities. After working with Colombia on their first sovereign green bond—by helping develop a national green taxonomy to identify projects and activities that can be supported by these bonds—we assisted with their post-issuance impact report in fiscal 2023. We also provided technical assistance for post-issuance impact reports for Egypt and Indonesia, as well as for the state-owned enterprise, PT Indonesia Infrastructure Finance. Also in fiscal 2023, we provided technical assistance to the government of India in establishing a sovereign green bond program, helping them raise the equivalent of about $2 billion in Indian rupees in domestic capital markets through two green bonds. These will help finance renewable energy and the electrifying of transport systems throughout the country. The Bank also leveraged its capital market expertise by analyzing climate finance options, including green, social, and sustainability bonds, through our Country Climate and Development Reports—in fiscal 2023, we conducted these analyses for Malawi, South Africa, and the Sahel countries.

Informing countries about financial products and solutions

Ahead of all World Bank loans transitioning from LIBOR to alternative reference rates in July 2023, our Treasury executed more than $1.3 billion in interest rate fixing transactions in fiscal 2023, working with clients to use interest risk management options where possible when accessing new borrowing. This included our engagement with Armenia and Georgia to automatically fix the interest rates at the disbursement of recent IBRD loans to fund a green and inclusive recovery. We also provided capacity building and training on financial risk management to government officials in Bhutan, Botswana, Brazil, Kenya, Maldives, Mozambique, Namibia, North Macedonia, Pakistan, Peru, and South Africa.

We helped countries secure access to concessional climate financing by structuring blended financing packages for investments. In fiscal 2023, this included large-scale loans that combined IBRD funding with concessional loans from various climate funds to cover investments for renewable energy in South Africa and climate resilience in the Republic of Congo. In Tanzania, we structured a $500 million development policy loan—the largest in the country's history—by blending funds from IDA’s new highly concessional Short Maturity Loan product and a regular IDA Scale-Up Window loan (which is based on IBRD financial terms). We also designed and implemented the new Investment Project Financing with Delayed Drawdown Option, which provides financing for earmarked expenditures in the event of shocks; the pilot project provided a liquidity backstop for the Romanian Bank Deposit Guarantee Fund.

Managing disaster risks through global capital markets

The Bank helps countries increase fiscal resilience against disasters by improving their access to the reinsurance and capital markets. Our Treasury works with governments to prepare and execute risk-transfer transactions before a catastrophic event occurs. In March 2023, we executed a joint catastrophe bond and swap transaction that provides Chile with $630 million of insurance—$350 million of catastrophe bonds and $280 million of catastrophe swaps—for extreme earthquake events for three years. This was IBRD's 19th catastrophe bond issuance, the second catastrophe risk transfer transaction for Chile, and the first World Bank bond as well as catastrophe bond ever listed on Hong Kong Exchanges and Clearing Limited.

As of June 2023, we have helped countries transfer $5.8 billion of disaster risk to international markets; of this, $1.3 billion in IBRD-issued catastrophe bonds and swaps addressing earthquake and hurricane risks in Chile, Jamaica, and Mexico are outstanding.

Building capacity and managing assets for the public sector

The World Bank Treasury’s Reserve Advisory and Management Partnership supports public asset management institutions worldwide through advisory services, executive training, and asset management services—all through a global network of practitioners. It serves 72 central banks, public pension funds, sovereign wealth funds, and international financial institutions, including six in low-income countries and six in countries affected by fragility, conflict, and violence. The Reserve Advisory and Management Partnership Trust Fund extends membership to central banks and other public sector institutions in IDA countries or those affected by fragility, conflict, and violence and that could not otherwise afford to participate.

The Bank also manages around $82 billion for trust funds and external clients, including other official sector institutions. We issued our inaugural Impact Report for our dedicated Sustainable Fixed Income Strategy, which focuses on asset management mandates for trust funds managed by the Bank.

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