The Washington-based International Finance Corporation (IFC) has partnered with Amundi, Europe’s largest listed asset manager, to raise US$2bn for what they say will be the largest green-bond fund dedicated to emerging markets yet created.
In a joint statement, the IFC, a part of the World Bank Group, and Amundi said they are counting on their new Green Cornerstone Bond Fund, as it’s called, “to encourage more local financial institutions to issue green bonds, by increasing global demand and building local markets”.
“Together, through a donor-funded investment support facility led by [the] IFC, they will work with local financial institutions to strengthen their capacity to issue green bonds, providing training and sharing international best practices with them,” the statement continues.
“IFC will invest up to US$325m in the new fund, which will buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia, [while] Amundi will raise the rest of the US$2bn from institutional investors worldwide, and provide its services in managing emerging market debt.”
They said their fund aims to be fully invested within seven years.
‘Rapidly expanding global market’
The Global market for green bonds has expanded rapidly in recent years, according to the IFC and Amundi, totalling more than US$100bn worth in 2016. Helping to drive this market has been the World Bank Group, which has seen the World Bank issue US$8.5bn in green bonds in 18 currencies thus far, while the IFC has issued US%.8bn worth, in 12 currencies.
Green bond issuance is said to have been given a boost by the so-called Paris climate agreement, which was signed in December 2015 by more than 190 countries.
However, the IFC and Amundi point out, a “huge gap” still persists in the market, since few banks in developing countries have yet begun to issue green bonds.
The IFC/Amundi partnership is the first time the two entities have worked together to develop green finance in emerging markets. The IFC chose Amundi as its partner in the initiative after a “comprehensive and competitive” process, the statement announcing the Green Cornerstone Bond Fund said.
The IFC is the largest global development institution focused on the
private sector in emerging markets. It was founded in Washington in 1956 as the private sector arm of the World Bank Group to promote economic development by investing in strictly for-profit and commercial enterprises that have as their aim the reduction of poverty and the promotion of economic development.
Paris-based Amundi has been traded on the Euronext Paris exchange since November 2015, and is Europe’s largest asset manager based on assets under management, which currently total more than €1trn. It was created in 2010 out of the asset management operations of Crédit Agricole and Société Générale.
In December it announced that it was buying Pioneer Investments from UniCredit, the Italian bank.