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Investor Perspectives on Emerging Market Sovereign Green, Social and Sustainability (GSS) Bonds

October 28, 2021

Washington D.C.


As we head into COP 26, the world faces two crises— the COVID-19 pandemic and Climate Change. The first is estimated to have pushed over 100 million people into extreme poverty in 2020. The second is threatening to increase that number by another 130 million people in the next ten years. While we continue our efforts to provide financing to developing countries, we are also reinforcing partnerships with the private sector.

With this in mind, the World Bank Treasury hosted a roundtable discussion with emerging market sovereign debt investors to brainstorm challenges and opportunities for investing in sustainability-related initiatives through green, social and sustainability-linked (GSS) bonds. Participants included representatives from Alliance Bernstein, Amundi, AP2, BlackRock, BlueBay Asset Management, Calvert, Children's Investment Fund Foundation (CIFF), Franklin Templeton, Global Evolution, Nuveen, Pictet, PIMCO, Prudential, and Western Asset Management.

Anshula Kant, Managing Director and Chief Financial Officer of the World Bank Group delivered the opening address. The keynote speech was delivered by Vincent Mortier, Deputy Global Chief Investment Officer at Amundi.


"The level of private investment directed at emerging and frontier markets has been extremely low relative to developed markets. Many of them contribute little to global greenhouse gas emissions but are highly vulnerable to the effects of climate change and have limited resources to tackle these challenges. Without funds flowing to them, we cannot achieve our collective goal of a sustainable future"
Anshula Kant
Managing Director and Chief Financial Officer of the World Bank Group

"Providing long-term financing to sustainable development outcomes has, by definition, higher potential additionality and positive impact spillovers in emerging markets than in more developed economies. GSS bonds provide investors with the ability to finance environmental and socially impactful projects while securing about the same risk/return profile to conventional bonds."
Vincent Mortier
Deputy Global Chief Investment Officer at Amundi

And yet very few sovereign issuers have tapped the pool of investors integrating environmental, social and governance factors in investment decisions.

George Richardson, Director of Capital Markets and Investment department at the World Bank Treasury, highlighted some of the challenges for emerging market sovereign issuers, including “limited access to international capital markets, lack of understanding how these instruments fit into approved public debt management strategies, smaller eligible project portfolios, and the costs of GSS bond preparation", as well as recent successes such as Colombia and Egypt.

GSS bonds are increasingly a part of emerging market investment toolkits. The quality of the issuer and ESG factors remain a critical consideration for investors. Credit enhancement and co-investment with Development Finance Institutions (DFIs) will attract more investment to these markets. Investors are equally interested in the ESG credentials of issuers, including human rights records.

At the same time, investors want to see how proceeds from GSS bonds connect to Nationally Determined Contributions (NDCs), including strategies and policies at the quasi-sovereign level in the energy sector. They are looking for impact. Accountability and tracking of the use of proceeds are key. Issuers need to measure and report impact accurately and consistently in line with accepted best practices.

The World Bank’s Sustainable Finance and ESG Advisory Services focus on addressing these challenges. Investors say the World Bank’s involvement increases the credibility of emerging market transactions. Therefore they want to see the World Bank involved much more in information dissemination and education of issuers, capacity building to ensure the use of proceeds are aligned with coherent green strategies and NDC plans, and standard-setting for GSS bond issuance and impact reporting.