The International Finance Corporation and European asset manager Amundi have agreed to create a $2 billion green bond fund the largest of its kind dedicated to emerging markets.
IFC has agreed to invest up to $325 million into a new fund called Green Cornerstone Bond Fund, which will buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia. Amundi will raise the remaining $2 billion via institutional investments from around the world, according to a statement from the two entities.
Green bonds are typically asset-linked bonds with proceeds earmarked for projects that will help the environment. A spokesperson from the IFC confirmed that this is the first green bond fund dedicated to emerging markets.
This green-bond fund will lower the risk for the private sector and attract new investors essentially creating a market where there was none, said IFC CEO Philippe Le Houérou in a statement.
IFC is part of one of the largest green bond issuers, the World Bank Group, which houses the World Bank, among others. So far, the company said it has issued $8.5 billion in green bonds, with IFC issuing $5.8 billion of that total. IFC officials previously stated that its goal is to grow its climate investments by 28 percent by 2020.
Green bonds have garnered growing interest since their inception in 2007 thanks to an increase in interest in sustainable investing. However, those in developing countries have received less attention from investors than those in Europe and North America.
According to a Climate Policy Initiative report on green bond funds in developing countries, emerging markets have attracted just 1.7 percent of total green bond market flows since 2007, when the first green bond fund was created in Europe.
Just last year, according to sustainability advocate Ceres, China and India issued their first ever green bonds in 2015. Additionally, a record $42 billion of green bonds were issued that year, according to the firm.
And while interest is growing, even in emerging markets, green bonds still account for a tiny portion of the bond market at large.
It is important to note that green bonds only developed in the last decade and occupy a tiny sliver less than 1 percent of the global fixed income market, according to a Chartered Alternative Investment Analyst Association report on green bonds put out late in 2016.