Strengthening Capital Markets and Promoting Sustainable Finance

IBRD has mobilized finance for middle-income client countries for more than 70 years, raising over $1 trillion since its first bond in 1947. IBRD engages with investors on special development themes, helping connect their investing to the Sustainable Development Goals. We continue to see greater interest from investors in supporting investments that incorporate environmental, social, and governance considerations, including topics such as health, education, gender, climate, clean water, and sanitation. The World Bank Treasury publishes an annual impact report for investors, which summarizes results achieved by IBRD-financed projects; highlights of the Treasury’s activities in fiscal 2021 are also outlined in this chapter. More information about IFC and MIGA’s work to strengthen countries’ capital markets can be found in their respective annual reports.

In fiscal 2021, IBRD drew on its triple-A rating and strong standing in the markets to raise $68 billion in Sustainable Development Bonds to support the Bank’s development activities, including our work with clients to respond to COVID-19 and build resilience to future shocks.

Highlights from the fiscal year included an innovative $100 million five-year bond, issued by IBRD in March 2021, to support sustainable development and the global response to COVID-19. To address the pandemic’s impact on children, the issuance channeled $50 million to UNICEF, with IBRD facilitating the risk transfer. In February 2021, IBRD issued a $600 million 10-year floating rate bond—the longest maturity floating rate benchmark to date for the Secured Overnight Financing Rate (SOFR). This supports development of the SOFR market, boosting alternatives to the U.S. dollar London Inter-Bank Offered Rate (LIBOR) and helping ensure the efficient functioning of the global financial system.

Developing sustainable capital markets

As the first issuer of a labeled green bond, IBRD continues to support the growth of the sustainable bond market and the harmonization of impact reporting and issuance processes. As part of its Sustainable Development Bond program, IBRD issues sustainability bonds and green bonds, which are tailored to investors’ interests; for green bonds, IBRD allocates equivalent amounts to eligible activities that address climate change. As of June 30, 2021, IBRD has raised approximately $16 billion through 185 transactions in 23 currencies since 2008. The Bank is also helping countries reach their climate and environmental goals with technical assistance to develop greener and more sustainable capital markets and financial systems, facilitate market-based solutions, and drive private sector capital toward environmental and social priorities. In fiscal 2021, we supported a sovereign green bond in Egypt—the first in the Middle East and North Africa—and the first green bond by the Indonesia Infrastructure Financing Company. We also helped develop national green taxonomies in Colombia and Malaysia and advised on green finance strategies and transactions in several countries, including options for linking debt relief to climate issues.

IDA supports the world’s poorest countries, many of which face major challenges from COVID-19. 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, and Swedish kronor. IDA’s triple-A rating enables it to issue Sustainable Development Bonds that leverage shareholder contributions to help low-income countries respond to COVID-19. In fiscal 2021, IDA issued $10 billion.

Informing countries about financial products and solutions

Throughout the fiscal year, the Bank’s Treasury advised countries on financing solutions as they faced resource constraints, limited fiscal space, and rising public debt levels. We provided information about financing options under the World Bank Group’s $14 billion Fast-Track COVID-19 Facility, increased the maturity limits on fast-disbursing IBRD operations, and helped maximize low-cost, long-term development financing, including loans under the IDA Scale-Up Facility.

The global transition away from LIBOR toward alternative reference rates will affect all participants in the financial and capital markets, including the Bank and our member countries. To ensure a smooth and orderly transition, we made changes to our financial terms, starting with the April 2021 suspension of the IBRD flexible loan with the fixed spread. We are helping countries understand the implications of these changes and make informed decisions about their financing and risk management options; efforts have included communication campaigns, ongoing engagement with countries and project teams, and online training for more than 3,000 borrowers and staff. 

Managing disaster risks through global capital markets

The Bank helps countries increase financial resilience against disasters by helping members improve 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. To date, we have transferred $5 billion of disaster risk to international markets for countries. Of this amount, $710 million of IBRD-issued catastrophe bonds—which address earthquake and hurricane risks in Mexico and the Philippines—are outstanding in the capital markets.

Countries in Asia and the Pacific are among the most exposed to natural disasters. In fiscal 2021, the Treasury organized events with the APEC Business Advisory Council and the Asia Pacific Financial Forum that looked at how disaster risk–transfer instruments and capital markets can strengthen financial resilience across the region. The Treasury also secured a grant for the Philippines catastrophe bond from the Monetary Authority of Singapore and is engaging with the Hong Kong Insurance Authority (located in Hong Kong, SAR, China) on another potential IBRD-issued catastrophe bond.

Building human capital in public sector asset management

The World Bank Treasury’s Reserve Advisory and Management Partnership (RAMP) delivers demand-driven capacity building and asset management services to official sector asset managers. It helps central banks, international financial institutions, pension funds, and sovereign wealth funds build capacity and strengthen investment operations through advisory missions, technical workshops, and global conferences. RAMP now serves 78 institutions, including 20 in low-income countries and eight in countries affected by fragility and conflict. For fiscal 2021, the Partnership transformed and expanded its services by delivering 170 advisory missions, two global conferences, 25 workshops for 1,400 people, and 31 webinars with 3,200 participants. It also established the RAMP Trust Fund to extend membership to central banks and other public sector institutions in countries that are IDA-eligible or affected by fragility and conflict and that could not otherwise afford to participate.

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