Washington, D.C, November 30, 2018—The World Bank (International Bank for Reconstruction and Development, IBRD, Aaa/AAA) priced a landmark EUR inflation index-linked bond to support the financing of sustainable development activities around the world. The Sustainable Development bond is also the World Bank’s first inflation index-linked issue denominated in a G10 currency in 15 years and the first EUR inflation index-linked bond issued by a Supranational since 2010.
The bond is a EUR 26.5 million, 20-year issue where the coupon and principal are indexed based on the EUROSTAT Consumer Price Index (HVPI) (excluding Tobacco) for the Eurozone. The transaction highlights the demand from European investors to diversify their inflation index-linked holdings while maintaining a focus on the highest credit quality and support sustainable development outcomes. Pensionfund DSM Netherlands (PDN) was the lead investor and Morgan Stanley was the sole distributor of the bonds.
“As we look to meet the Sustainable Development Goals, the challenges facing us today are too big for governments to tackle alone. The private sector can play a catalytic role in finding solutions, and the diverse range of investors supporting our Sustainable Development bonds demonstrate their commitment to supporting innovative projects. We greatly appreciate the partnership with our capital market counterparts as together we find new ways to ensure better stewardship of our planet,” said George Richardson, World Bank Director for Capital Markets.
“The board of PDN considers sustainability to be a major aspect of the investment philosophy and an important component of PDN's investment principles. DSM Pension Services (DPS), the inhouse service provider, has been tasked by the Board of Trustees to manage the pension scheme assets and implement the sustainability policy. This inflation index-linked Bond for Sustainable development clearly contributes to the long-term goals of the pension fund,” said Bob Puijn, Chief Investment Officer DPS.
“This transaction epitomises the World Bank’s innovation in the capital markets. The bond provides investors with much-needed diversification as an ultra-high grade alternative to European Sovereign or Agency inflation-linked issuance. Morgan Stanley is proud to partner with the World Bank on its mission to deliver bonds for Sustainable Development, which also resonates with progressive-thinking investors like PDN,” said Navindu Katugampola, Head of Sovereign, Supranational & Agency Origination, Morgan Stanley.
With annual issuances between US$50-US$60 billion, all World Bank bonds support the financing of programs that support the Sustainable Development Goals. World Bank bonds are aligned with the sustainability bond guidelines published by the International Capital Markets Association (ICMA). The World Bank is also a member of the Executive Committee of the Green Bond Principles. A key priority for the World Bank’s engagement in the capital markets is to build strategic partnerships with investors to raise awareness for the role of private sector financing in sustainable development.
This bond is part of an ongoing initiative by the World Bank to engage with investors on highlighting the vital role of fresh and saltwater resources. Freshwater and marine ecosystems cover more than three-quarters of the earth’s surface and provide critical services—from habitats and drinking water, to contributing to climate control, while also providing nutrition, jobs and livelihoods. The World Bank, as the biggest multilateral funder for ocean and water projects in developing countries, is committed to working with countries to ensure access to safe and clean water and for the sustainable use of ocean and marine resources. This includes avoiding pollution reaching oceans through better waste management.
The thematic bond initiative was launched in August. A range of institutional and retail investors globally have supported the initiative since it was launched in August. This bond brings issuances under the theme to more than US$660 million (equivalent) raised through 11 bonds issued in five currencies. Investors all voiced strong support for the strategic focus on SDG 14 and SDG 6. The World Bank will continue to issue bonds under the initiative.
The thematic focus on SDGs 14 and 6 follows World Bank Sustainable Bonds launched earlier this year that focused on gender and health and nutrition.
Summary of terms
The World Bank (International Bank for Reconstruction and Development, IBRD)
Aaa / AAA (Moody’s / S&P)
EUR 26.5 million
6 December 2018
6 December 2038
Rate of Interest
The product of 0.1% times the performance of the Inflation Index, annual 30/360
The EUROSTAT Consumer Price Index (HVPI) (excluding Tobacco) for the Eurozone
100%, linked to Inflation Index
Luxembourg Stock Exchange
About the World Bank
The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization. Created in 1944, it is the original member of the World Bank Group and operates as a global development cooperative owned by 189 nations.
The World Bank provides loans, guarantees, risk management products, and advisory services to middle-income and other creditworthy countries to support the Sustainable Development Goals and to end extreme poverty and promote shared prosperity. It also provides leadership to coordinate regional and global responses to development challenges.
The World Bank has been issuing sustainable development bonds in the international capital markets for over 70 years to fund programs and activities that achieve a positive impact. More information on World Bank bonds is available at www.worldbank.org/debtsecurities.