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Speeches & Transcripts November 16, 2018

Arunma Oteh Delivers Opening Remarks at 10 Years of Green Bonds From Evolution to Revolution

I am delighted to welcome you to this historic celebration marking a pivotal milestone in the development of sustainable capital markets. It is also our celebration of the 10th anniversary of the world’s first ever labeled green bond, that we were honored to issue in November 2008.

Each one of you has either contributed to the evolution of the green bond market or will be the champions of the revolution that green bonds will inspire in the years to come.  This is especially true for the students (and future leaders indeed) who are attending this celebration.

My sincere appreciation to our co-host, SEB, our pioneer investors and my team, notably Heike and other colleagues in my capital markets team whose foresight, commitment and hard work have led to the many achievements we have realized together.

My gratitude also goes to the many investors who sought to connect returns and purpose, as well as our bankers, other issuers , scientists notably CICERO, and advocates such as the CERES. Thank you Dr Mindy Lubber for honoring our invitation and also for all you and your team at CERES do. Thanks also to the International Capital Markets Association (ICMA) for the pivotal role you continue to play. Together, we have built a green bond market that has not only grown in leaps and bounds but has also established exemplary standards and practices, notably transparency, accountability, and reporting on use of proceeds and project impact.

Our journey at the World Bank has led to issuance totaling USD12.6 billion through 150 transactions in 20 currencies.  These currencies include Swedish Krona, Norwegian Krona, US Dollar, Euros, Japanese Yen, Canadian dollars, Aussie dollars, Brazilian Real, Colombian Pesos, Hungarian Forint, Indian Rupee, Indonesian Rupiah, Malaysian Ringgit, Mexican Pesos, Hong Kong Dollars, New Zealand dollars, Polish Zloty, Russian Ruble, Turkish Lira, South African Rand.

Investor categories have ranged from European and US asset managers, pension funds, and retail investors, US State Treasuries, Japanese life insurance companies and banks to bank treasuries and dedicated Socially Responsible Investors(SRI) and green bond funds. All investors have sought to earn a reasonable return while positively impacting society.

This week alone, we issued bonds totaling USD1.5 billion and including seven and nine-year transactions in Aussie dollar, Euro and US dollar.

Equally important is that our journey started with one transaction and  establishing the criteria for eligible green bond projects, then inspired the green bond principles, and second party opinions to give investors assurances that eligible projects would address climate change.  We were also the first to commit to investor reporting on the use of green proceeds and expected project impact.

Also crucial is how we have applied the same principles to developing other thematic bonds, to promoting the 17 sustainable development goals and to sustainability more generally. For example, this year we used our bonds to raise awareness for pressing global issues.  In January 2018, we issued a CAD 1 billion benchmark transaction anchored by a Canadian ESG investor Addenda Capital, to raise awareness about the important role of women empowerment in building sustainable societies. I am glad that the CEO of Addenda, Roger Beauchemin, is able to join us today as a speaker.

In July, we issued a series of Sustainable Development Bonds to highlight the critical need for investment in the well-being, health and nutrition of women, children and adolescents. These bonds raised nearly USDeq. 1 billion from institutional and retail investors in Canada, the US, Japan, and Europe.

At the end of August, we launched a campaign to engage investors around the precious asset - water – in particular, SDG 6: clean water and sanitation, and SDG 14: life below water, as well as the World Bank’s strategic focus on conservation and sustainable use of fresh and salt water resources. This initiative commits to raising US$3 billion in World Bank Sustainable Development Bonds by 30th June 2019. We have already raised more than US$600 million, under this program.

Not only have we have opened new markets and collectively transformed investor behavior, we have also supported our client countries including the ASEAN countries in developing Sukuk Green bond principles. I am glad that the Deputy CEO for the Malaysian SEC is here with us as SEC Malaysia worked with us on these principles. We were also pleased to work with Fiji, Indonesia and Nigeria on their recent green bond transactions.

For us at the World Bank, our mission is anchored on sustainability and rooted in our twin goals – to end extreme poverty and boost shared prosperity. We bring our unique combination of financing, knowledge and experience to promote sustainability and to tackle complex challenges such as climate, gender, nutrition, pandemics, and natural disasters.  For example, since July last year, we have leveraged the catastrophe bond markets to transfer sovereign disaster risk totaling US$ 2 billion to the capital markets, helping countries such as Chile, Colombia, Mexico and Peru insure themselves against earthquakes and hurricanes.  This has also helped investors in insurance linked securities, pension funds and other asset managers diversify their investments and earn higher returns while contributing to the climate change agenda.

We also believe that thought leadership will spur the sustainability revolution that Patrick Odier, Senior Managing Partner at Lombard Odier says we all must champion.  Thank you also Patrick for kindly accepting my invitation. Last year we partnered with Japan’s Government Pension Investment Fund (GPIF), the largest pension fund in the world and asset owner of assets totaling USD1.4 trillion.  Our partnership included research on fixed income sustainable investing. The importance we attach to thought leadership is also why we decided to leverage this important milestone and celebration of the world’s first ever green bond to look back on the lessons from the last ten years and together develop a road map for mainstreaming sustainable capital markets. 

I understand that yesterday’s investor roundtable was excellent as you had candid discussions about challenges and opportunities with sustainability. Thank you to our investors and all others who participated in the investor round table. My profound gratitude to our keynote speakers today, Mindy Lubber, Patrick Odier, Laura Tuck, World Bank Vice President for Sustainable Development, as well as our other distinguished speakers.

Permit me to share the reflections I had while preparing for this event. First, we have no doubt significant progress in the journey to mainstream sustainability.

In 2007, we were all prompted to do something, by an urgent call for action, following a definitive United Nations report linking human action to global warming. We were inspired to embark on searching for meaningful ways, through capital markets and finance, to contribute.

In 2015, global leaders sharpened the focus on sustainability through establishing the 2030 agenda and through the landmark Paris agreement, with notable commitments such as maintaining global warming below 2 degrees Celsius. There are several initiatives also that have galvanized private sector stakeholders. For example, the principles of responsible investments(PRI) initiative has almost 2,000 signatories while the sustainable stock exchange initiative brings together 70 partner exchanges representing market capitalization of over US$ 60 trillion and 38,000 listed companies. 

Unfortunately, the 8th October 2018 report of Intergovernmental Panel on Climate Change indicated that not enough was being done to meet targets agreed upon and made a case for a greater focus on maintaining global warming below 1.5 degrees Celsius.  This reinforces the widely held view that climate change is the greatest risk of our time.  Climate change indeed poses a severe threat to global development especially to the poorest and most vulnerable.

At the same time, it presents significant business and economic opportunities that make it the opportunity of our time.  Our experts at the World Bank, estimate that, globally, the transition to low carbon and climate resilient economy could yield direct economic gains of US$ 26 trillion by 2030 compared to the status quo. Also, low-carbon, climate resilient infrastructure investment needs could amount to over $90 trillion. This is an amount that is almost twice the value of the infrastructure, currently in place.

There are obvious benefits in terms of jobs, competitiveness, innovation, and improved well-being.  This indeed may just be the opportunity of our time and all of us attending this celebration are at the forefront of accelerating the global response to climate change.

In the same way we collectively instigated the green bond market or rather the movement that now connects returns to purpose, we must also start the sustainability revolution, an urgent need today.  

I believe the first step is the engaging discussions today that will have today. I hope they will generate tangible concrete ideas that can facilitate the scaling up of finance for sustainability.  

It is an existential issue for our planet

Let me end by borrowing from President Macron words last week about peace during the 100th year anniversary of the end of World War 1. He said, ‘we will not be able to say to future generations we did not know. Peace is our treasure and our responsibility’.

I say ‘we will not be able to say to future generations we did not know. Saving our planet is also our treasure and our responsibility so let the revolution begin.’

Thank you.