EBRD presents recent expansion of its green bond investment work at COP24

By Vanora Bennett

Green Bond Principles: Second Annual Conference

  • €250m framework aims to bring in €1bn of private sector capital investment
  • Bank seeks to double the supply of Green and Sustainability Bonds in its regions
  • Investment framework builds on Bank’s 8 years of expertise as a Green Bond issuer

The EBRD presented its plans for a €250 million direct investment framework for Green and Sustainability Bonds targeted at financial institutions at an event during international climate talks in Katowice, Poland. Over the next three years, the EBRD framework, approved in September, is expected to mobilise private sector capital investments of a further €1 billion, and aims to double the supply of Green and Sustainability Bonds issued by financial institutions across the regions where the bank invests.

Green Bonds – whose proceeds exclusively go to projects with clear environmental benefits – have gained global recognition for enabling debt issuers to finance projects that transition their business towards greater environmental stability. They are also seen as a key part of efforts in supplying a pledged US$ 100 billion in annual climate funding, due from 2020, which helped convince developing countries to sign up to the Paris climate agreement in 2015.

With the approval in September 2018 of the EBRD’s direct investment framework targeted at financial institutions, the Bank may support Green and Sustainability Bond issuance in its regions. The objective of the EBRD Investment Framework is to incentivise transparency and adherence to high green standards with its financial institution clients and to report on the underlying projects’ quantitative and qualitative environmental benefits and impacts.

The EBRD has issued Green Bonds since 2010 to finance its green project portfolio, which includes more than 380 projects in EBRD regions from Morocco to Mongolia and from Estonia to Egypt.Turkey accounts for 34 per cent of this green portfolio, which is in excess of €4 billion, and Poland 15 per cent. At the COP24 international climate conference in Katowice, Poland, the EBRD set out the latest expansion of its green bond operations – as an investor - at a side event on 10 December on “Extending Green Bonds to New Frontiers”.

While the global market for Green Bonds has grown rapidly in recent years, exceeding US$ 155 billion of issuance in 2017, large regional gaps remain with just under two per cent of global issuance volume coming from the EBRD regions.  The Bank has been leading efforts to increase the market’s scale and notes increasing calls from potential issuers for EBRD’s involvement as investor and technical assistance provider for pilot issuance.

In March 2018, the Bank completed a US$ 68.5 million investment in Amundi Planet - Emerging Green One, the world’s biggest Green Bond fund and the first dedicated to emerging markets, including the EBRD regions. In parallel with this investment, the EBRD launched a dedicated Green Bond Technical Cooperation Programme across its regions to help increase the issuance of green bonds to finance environmentally friendly projects.

Together with other multilateral development banks, the EBRD seeks to establish harmonised best practices for this market, including for emerging Green Bond issuance, through its participation in the executive committee of the Green Bond Principles, which provide voluntary process guidelines developed by a broad forum of market participants under the secretariat of the International Capital Market Association.

Since 2010, the EBRD has issued more than 70 Green Bonds totalling €2.6 billion equivalent.

The EBRD is also a leading international financial institution in terms of renewable energy and energy efficiency financing. It is the largest financier of renewable energy projects in its markets; 43 per cent of the Bank’s 2017 investment was made in Green Economy Transition (GET) projects, achieving the initial target under the flagship initiative two years ahead of schedule.

The EBRD invests in green projects across sectors, both directly and through intermediated channels. The sectors include clean energy, green transport, sustainable agriculture, and manufacturing and services.