Description of Topic
Sovereign issuers have a long tradition of financial innovation to attract investors and adapt to their needs, as witnessed for example by the inflation-linked products launched in the 1980’s. While the objective to address the negative impact of climate change has been shared by governments across the world, they have not been directly involved in the emergence of Green Bonds as an asset class over the past ten years. It was often mentioned that the technical and legal characteristics of Green Bonds were not adapted to the principles and constraints of public budgeting and accounting systems.
This situation changed over the past 12 months when three governments successfully issued Green Bonds: Poland in December 2016, France in January 2017, and Fiji in October 2017. The transactions met strong and sustained Interest from investors (France has already re-taped its January Green Bonds). However, these issuances did not come without efforts and extensive preparation, as the legal, financial and technical hurdles were particularly high. The costs associated with the preparation of the transactions and the monitoring / reporting on projects until redemption should not be underestimated.
The World Bank has played a central role in the emergence of the Green Bond market, launching in 2008 the "Strategic Framework for Development and Climate Change" to help stimulate and coordinate public and private sector activity to combat climate change, and issuing its first Green Bond the same year. Since then, the Bank has issued over USD 10.2 billion equivalent in Green Bonds through more than 135 transactions in 18 currencies. It has also been sharing its experience with client governments to help them prepare financial transactions that address the climate challenge, as illustrated by Fiji being the first emerging country to issue a Green Bond.
The webinar on sovereign Green Bonds will present benefits, challenges and costs of issuing these instruments with the objective of sharing experience and key lessons amongst practitioners. Speakers will include Anthony Requin, Chief Executive at Agence France Tresor, the French Debt Management Office, and Farah Imrana Hussain, Senior Financial Officer at the World Bank Treasury who has been advising country clients on Green Bonds and other financial instruments. They will highlight the benefits of issuing sovereign Green Bonds, such as investors’ diversification, as well as the costs incurred to develop them, in terms of coordination across the public sector, selection of projects, legal expertise, systems to monitor the use of funds and report to investors, human resources, etc. The webinar will provide an opportunity to discuss how Green Bonds could fit into a sovereign debt strategy, to what extent they present value for money from a pure debt management perspective, how to balance the different policy objectives (cost-risk of the debt portfolio versus carbon emission reduction), etc. Participants will have the opportunity to ask specific questions and assess whether Green Bonds would fit their needs and constraints.