Washington, November 9, 2020 – The World Bank today published a guide to help public debt managers improve their engagement with investors on ESG topics. Titled “Engaging with Investors on Environmental, Social and Governance (ESG) Issues - A World Bank Guide for Sovereign Debt Managers,” it helps bridge the communication gap on ESG issues between sovereign issuers and investors. The guide outlines how sovereign debt investors use ESG information in their investment strategies, how debt managers are engaging with them, and how engagement can be improved.
Sovereign issuers, who represent 50 percent of the fixed income market by volume, are facing increasing interest on ESG issues from investors. Rating agencies and investors have long considered governance-related information while assessing sovereign risk, the macro-fiscal outlook, and debt-default risk. Increasingly, environmental and social sustainability is becoming an explicit part of their assessment as they look for long-term economic growth and macroeconomic stability in a more equal, inclusive, and sustained way.
“We are pleased to present this guide for investors and public debt managers as part of our work to promote dialogue on ESG topics between investors and sovereign bond issuers,” said Anshula Kant, Managing Director and World Bank Group Chief Financial Officer. “Stronger engagement helps investors make better investment decisions in line with their institutional objectives and allows issuers to diversify their funding sources, improve access to new investors, and lower the cost of borrowing for sustainable development.”
“We need transparent disclosure as well as a dialogue with sovereign issuers about ESG related concerns and opportunities to enhance mutual understanding and secure long term commitment,” said Peter Branner, CIO APG Asset Management. “This guide promotes such dialogue and can help and encourage issuers to do more.”
“The focus of markets on environmental, social and governance issues represents an opportunity for sovereign debt managers in developed and emerging markets, said César Arias, Director of Public Credit and National Treasury at the Ministry of Finance, Colombia. “Sustainability enhances the quality of fiscal policy, diversifies funding sources, and increases transparency in the dialogue with domestic and foreign investors. “The World Bank’s guide provides examples, best practices, and action plans that can help debt managers enhance their capacity to engage with investors on national sustainability initiatives and performance.”
The World Bank Treasury has conducted surveys and roundtable discussions to gather insights and knowledge on investor expectations and issuer challenges regarding ESG topics. The guide builds on these exchanges and other research and shows how issuers should proactively and systematically communicate ESG information to address investor expectations for more disclosure, and issue thematic bonds—green, blue, social, sustainable— to attract new investors as well as communicate their sustainability commitments.
This guide complements the recently published World Bank report “Riding the Wave: Navigating the ESG Landscape for Sovereign Debt Managers,” which defines a framework that debt managers can use to design an appropriate strategy for undertaking ESG activities. This new guide leverages World Bank Treasury’s expertise to outline the practical steps sovereign issuers can take to engage with investors.
The World Bank plays a leadership role in promoting and financing sustainable development. Its triple-A rated innovative bond issuance program has catalyzed sustainable capital markets across the world. It issued the first green bond in 2008 and has executed more than 160 transactions in over 20 currencies for a total of approximately $15 billion. The World Bank also issues Sustainable Development Bonds to support its activities across a variety of sectors and engages with investors through impact reporting that highlights how projects support the Sustainable Development Goals (SDGs).
The World Bank Treasury facilitates the issuance of green, blue, social, and sustainable bonds in emerging markets and has been a global hub for debt management advisory work for over 20 years, helping more than 100 countries improve their debt and risk management practices.
Banu Turhan Kayaalp