I. Project selection criteria: how the World Bank defines "green"
Projects defined as eligible for the World Bank’s Green Bond program are selected by World Bank environment specialists and support the transition to low-carbon and climate resilient development and growth in client countries. This includes both mitigation of and adaptation to climate change—all while observing the World Bank's safeguard policies for environmental and social issues.
World Bank eligibility criteria underwent an independent review by the Center for International Climate and Environmental Research at the University of Oslo (CICERO). CICERO concurred that, combined with the governance structure of the World Bank and safeguards for its projects, the World Bank eligibility criteria provide a sound basis for selecting climate-friendly projects.
Use of Proceeds
"Eligible Projects" means all projects funded, in whole or in part, by IBRD that promote the transition to low-carbon and climate resilient growth in the recipient country, as determined by IBRD. Eligible Projects may include projects that target (a) mitigation of climate change including investments in low-carbon and clean technology programs, such as energy efficiency and renewable energy programs and projects ("Mitigation Projects"), or (b) adaptation to climate change, including investments in climate-resilient growth ("Adaptation Projects").The below table provides some examples of Mitigation Projects and adaptation projects that meet the Green Bond eligibility criteria and thus are eligible to be supported by the World Bank’s Green Bond program (hereafter “Green Bond Projects”):
Examples of eligible Mitigation Projects are:
- Solar and wind installations;
- Funding for new technologies that permit significant reductions in greenhouse gas (GHG) emissions;
- Rehabilitation of power plants and transmission facilities to reduce greenhouse gas emissions;
- Greater efficiency in transportation, including fuel switching and mass transport;
- Waste management (methane emissions) and construction of energy-efficient buildings;
- Carbon reduction through reforestation and avoided deforestation.
Examples of eligible Adaptation Projects are:
- Protection against flooding (including reforestation and watershed management);
- Food security improvement and implementing stress-resilient agricultural systems (which slow down deforestation);
- Sustainable forest management and avoided deforestation.
The above examples of Mitigation Projects and Adaptation Projects are for illustrative purposes only and no assurance can be provided that disbursements for projects with these specific characteristics will be made by IBRD during the term of the Notes.
II. Selecting projects that are eligible for financing by World Bank Green Bond process
World Bank green projects, like all World Bank projects, are designed to reduce poverty and improve local economies. But green projects specifically focus on tackling climate change issues that directly impact developing countries. > More
In addition to meeting the Green Bond eligibility criteria, these projects, like all World Bank projects, undergo a rigorous review and approval process to ensure that the projects meet client countries’ development priorities. The process includes early screening to identify potential environmental or social impacts and designing policies and concrete actions to mitigate any such impacts in accordance with the World Bank’s environmental and social safeguard policies. Every World Bank project is approved by its Board of Executive Directors – a resident Board with 25 chairs representing its member countries.
The lifecycle of a project financed by the World Bank (IBRD) follows six stages as shown in the graph below. World Bank- Green Bond Projects not only follow the same stages as other World Bank financed projects, including the due diligence and monitoring process throughout the project cycle, but in addition undergo three more steps as shown in the outer circle of the graph below. From the outset of the Green Bond Project cycle, environmental specialists get involved in order to identify projects that meet the Green Bond eligibility criteria. Go to https://www.worldbank.org/projectcycle for more information on the World Bank project cycle.
World Bank (IBRD) Green Bond Project Cycle
The Project Selection Criteria are applied to screen projects resulting in a list of eligible mitigation and adaptation projects. Once approved, these projects disburse over several years during the implementation stage. Corresponding amounts are deducted on a quarterly basis from the account created to support the allocation of World Bank Green Bond proceeds to eligible projects.
III. Earmarking and allocating World Bank Green Bond proceeds
The proceeds are credited to a separate Green Cash Account and are invested in accordance with IBRD’s conservative liquidity policy until used for the support of the World Bank’s financing of eligible Green Bond Projects. Disbursement requests for eligible projects take place in accordance with IBRD’s established policies and procedures. Disbursements are often made over a period of several years, depending on when each project milestone is reached. As disbursements are made for Green Bond Projects, corresponding amounts from the Green Cash Account are allocated to the general lending pool on a quarterly basis.
IV. Monitoring and reporting on impact of supported project
The World Bank supervises the implementation of all projects it supports –including the Green Bond Projects. Client countries implement the development projects in accordance with the project loan agreement.
The supervision process comprises regular reports by the implementing government agency on project activities, including a mid-term review of project progress. The project's progress, outcomes and impacts are monitored by the government and the World Bank throughout the implementation phase in order to obtain data to evaluate and measure the ultimate effectiveness of the operation in terms of the objectives it was set to achieve. World Bank project information is available on the main World Bank website and includes documents with detailed information about the projects (e.g., Project Appraisal Documents). In addition, summaries and key impact indicators of the Green Bond Projects are provided on the World Bank’s Green Bond website with links to relevant documents with more detailed project information. Green Bond newsletters also provide highlights of these projects.
V. Ensuring compliance
Projects: Projects eligible under the Green Bond program comply with World Bank safeguards, procurement policies and other procedures addressing project integrity.
Compliance is assessed at the individual project level and through independent reviews of about a quarter of all projects. Project level reviews by the Bank’s specialists in environment, social aspects, financial management, and procurement ensure that adequate controls and management capacity are in place at the country/project level. In addition, the World Bank’s Independent Evaluation Group (IEG) assesses the performance of about one out of four projects, measuring outcomes against original objectives, sustainability of results and institutional development impact.
Green Bond Process: The World Bank Treasury follows procedures specific to its Green Bond program including selecting and reporting on eligible projects, maintaining the separate Green Cash Account and reviewing portfolio implementation progress to provide updated information for impact reporting purposes.