Thematic Bond Advisory

  • Thematic bonds such as green, blue and social bonds (i) raise money for investments that delivers sustainable economic and social outcomes and (ii) offer investors the opportunity to earn competitive financial returns and diversify their portfolios while supporting positive societal impact. These bonds are bought by a growing number of investors who have begun to embed Environmental, Social, and Governance (ESG) standards into their investment decisions. The World Bank (Bank) has played a leading role in founding and developing these markets.

    What are green and blue bonds?

    Green and blue bonds raise financing for development with clear environmental benefits on land and at sea, e.g. power generation from renewables, infrastructure that increases energy efficiency, and sustainable fishing economies.

    What are social bonds?

    Social bonds finance projects that benefit under-served populations with limited access to essential services such as basic infrastructure or finance. 

    What are the challenges?

    There has been slower growth in green bond markets in emerging countries than developed ones, largely due to less developed capital markets and lack of market awareness and knowledge of the green bond issuance process.

    Treasury Advisory Services

    The World Bank Financial Advisory and Banking team facilitates the development of green, blue and social bond markets in emerging markets through pre- and post-issuance technical assistance for issuers.   

    Why Treasury?

    The Treasury is uniquely positioned to provide customized technical assistance/advisory services for the issuance of such bonds and the development of sustainable bond markets. The Bank issued the world’s first green bond in 2008, defining a specific process that provides investors with full assurance that these projects will address climate change. Over the last ten years, it has directly raised $13 billion through more than 150 green bond transactions in 20 currencies. Both sovereigns and private companies have since joined this market as issuers.  

    In 2018, Treasury helped found the Blue Bond market. Working closely with Seychelles, it helped structure and de-risk the transaction so the government could issue the fixed-income market’s first debt instrument supporting ocean-based sustainability projects.

    All World Bank bonds are social bonds that support sustainable development. The World Bank issues approximately $50 billion annually in bonds to support sustainable development in agriculture, education, energy, finance/trade/industry, governance, health and social services, transportation, water/sanitation and themes: gender, environment.

     

     

  • The World Bank Financial Advisory and Banking team facilitates the development of green, blue and social bond markets in emerging markets through pre- and post-issuance technical assistance for issuers.

    Pre-issuance technical assistance:

    • Sharing international best practices and requirements for issuing green bonds 
    • Developing an action plan/roadmap for the issuance 
    • Developing a Green Bond Framework
    • Helping to identify eligible green categories/projects based on national priorities and Paris Agreement commitments
    • Facilitating the delivery of second opinions/verifications/certification of the Green Bond Framework by an independent third party reviewer
    • Advising on reporting commitment and communication strategy
    • Developing use of proceeds and impact report

    Post-issuance technical assistance:

    • Clarifying the processes and helping issuers  understand how to use the standardized impact reporting template in a manner that meets global standards.
    • Explaining information required, including baselines and indicators to measure the impact of selected green projects.
    • Recommending work process flows and timeline for reporting in line with the Green Bond Framework.
    • Preparing terms of reference for the Auditor to provide the annual assurance report in accordance with the Green Bond Framework.
    • Delivering digital templates for use by technical staff for monitoring and reporting.
    • Reviewing and providing feedback on draft prepared by the issuers.

    Capacity building for institutional investors on setting up Environmental, Social and Governance (ESG) strategies

    • Delivering workshops on ESG and Responsible Investment (RI) trends, approaches and strategies 
    • Undertaking desk review of investor’s individual investment objectives, policies and strategies 
    • Developing general guidelines for ESG/RI policies and approaches, including
      • Criteria for developing an ESG/RI Policy and implications for investment processes
      • Organizational setup, governance and operational processes
      • Choosing ESG approaches to support investment objectives and mission alignment
      • Stewardship, responsible ownership and engagement
      • Reporting and disclosure
    • Developing individual ESG/RI integration approaches
    • Delivering a workshop on implementation of ESG/RI Integration Strategies and Approaches

    Examples of our work: 

    • With technical assistance from World Bank Treasury, a Malaysian issuer issued the world’s first green sukuk/Islamic Bond
    • Malaysian rating agencies (RAM Ratings and Malaysian Rating Corporation Berhad) and Malaysian Green Technology Corporation established methodologies for green bond/sukuk assessment/rating with knowledge transfer and capacity building facilitated by World Bank Treasury;   
    • Ministry of Finance of Indonesia issued the first sovereign green sukuk in the world in February 2018.
    • With technical assistance from World Bank Treasury, Fiji and Nigeria issued sovereign green bonds,
    • With technical assistance from World Bank Treasury, the ASEAN Capital Markets Forum developed the ASEAN Green Bond Standards and Sustainable Bond Guidelines
    • With guidance from World Bank Treasury, Indonesian Financial Services Authority developed Green Bond Regulations
    • With technical assistance from World Bank Treasury, PT SMI, a state-owned enterprise, issued the first corporate green bond in Indonesia
    • The World Bank Treasury structured a new Blue Bond market instrument to help the government of Seychelles mobilize private sector capital into sustainable fishing, marine spatial planning, aquaculture and biodiversity. TRE structured the bond, combining an IBRD guarantee and a commitment from Global Environment Facility (GEF) to bring the transaction to market at favorable terms.

    Contact: Farah Hussain, Senior Financial Officer, World Bank Treasury at fhussain@worldbank.org