Green Bonds Now Playing a Feature Role in Climate Smart Development

Climate Change

1480195403051The UN Paris Climate Change Agreement went into force Nov. 4 having been ratified by the required minimum number of countries accounting for 55 percent of global carbon emissions. World Bank Group President Jim Yong Kim deemed the day “a defining moment in human history,” and urged governments, public and private sector organizations to regain the sense of urgency expressed a year ago in Paris to achieve the agreement’s primary goal of capping global mean temperature rise to between 1.5 degrees Celsius and 2 degrees Celsius.

The World Bank has been a leading “point man” for UN smart climate development programs that are critical in creating and developing innovative financial instruments, institutional mechanisms and markets that provide the capital needed to deploy renewable energy systems, enhance climate change resilience and foster sustainable socioeconomic growth and development in industrially developing and less developed nations worldwide.

Among them, World Bank Group members, such as the International Finance Corp. (IFC), its private sector investment arm, have been instrumental in developing a global market for green bonds. Following their lead, private sector corporations spanning a range of industry sectors have taken to issuing them, utilities in particular.

Growing Green Bond Issuance

The Moroccan Agency for Solar Energy (Masen) announced it had issued the country’s first green bond on Nov. 7, the opening day of the 2016 UN climate change conference in Marrakech. Masen sold the dirham equivalent of $118 million worth of green bonds to help fund three solar energy projects — 170 MW or more total capacity — that are part and parcel of the NOOR PV1 project.

In the U.S., the California State Treasurer’s Office was the lead investor in a $200 million, two-year green bond issued April 1 by the International Bank for Reconstruction and Development (IBRD), the World Bank Group’s flagship international development agency. Rated AAA/Aaa by Standard & Poor’s and Moody’s, respectively, the green bond carries a 1.005 percent coupon with a maturity of Oct. 1, 2010.

There aren’t many, if any, renewable energy companies that can raise that amount of capital at such a low rate of interest. That, among others, is one of the major advantages and benefits World Bank Group has been providing private and public sector organizations involved in international development since it was founded in 1944 as WWII was drawing to a close.

“IFC is one of the world’s largest financiers of climate-smart projects for developing countries,” Alexandra Klopfer, IFC Treasury communications manager, told Renewable Energy World in an email. “Since 2005, IFC has invested about $15.3 billion in long-term financing for renewable power, energy efficiency, sustainable agriculture, green buildings and private sector adaptation to climate change, with an additional $10.1 billion in core mobilization.”

IFC issued a total of $1 billion of green bonds in fiscal year 2016 (July 1, 2015-June 30, 2016. The capital is being used to fund 36 projects across 22 countries, including 16 new markets, such as Bangladesh, Cambodia and China, Klopfer said. Investments in green banking and green buildings represent the two largest sectors, amounting to 59 percent of the Green Bond financed projects.