Contributing Editor: Giorgi Mikhelidze
Clariden Leu AG and the World Bank (Aaa/AAA rated International Bank for Reconstruction and Development) have partnered together to make World Bank Green Bonds available to Swiss individual and institutional investors. Investing in the securities of an issuer with the highest credit ratings from Moody’s and Standard & Poor’s is an attractive option for investors in Switzerland who want to support the World Bank’s funding to development projects that especially address climate change.
Through Green Bond transactions, the World Bank has financed roughly USD 1.5 billion in mitigation and adaptation projects since 2008. As an example of how the public and private sectors are working together to close the finance gap required to combat global warming, the World Bank has issued Green Bonds.
The five-year maturity of the USD 10 million notes is coupled with a collared, fluctuating interest rate. World Bank green bonds have never had an interest rate structure like this before. This transaction is being underwritten solely by Clariden Leu AG.
The Future Of Switzerland Green Bonds
Announcing intentions to issue green Confederation bonds, the Swiss government said on Wednesday that it expects to join the increasing list of sovereign debt issuers operating in the sustainable financing market.
To underscore its commitment to sustainability and strengthen efforts for the Swiss financial center to be a worldwide leader in sustainable financial services, the Swiss Federal Council announced that it would participate in the green bond market in the future.
There has been substantial growth in the sustainable financing sector since this announcement. This year is expected to see a record $380 billion in green bond issuance, an increase of 75 percent year-over-year, according to the Moody’s Investors Service report on sustainable bond issuance.
Growing engagement by enterprises and increasingly by sovereign issuers is driving the fast expansion. Switzerland will soon issue green bonds, joining the likes of the UK, which just concluded its first $10 billion Green Gilt sale, and the EU, which just issued a record-breaking €12 billion in green bond proceeds. Early this year, Spain became the first country to sell a €5 billion green bond, while Canada just revealed intentions for issuance of $5 billion in green bonds.
Capital markets may be used to generate money for green initiatives, such as renewable energy, energy efficiency, biodiversity preservation, or green buildings, but only if the funds are used for such purposes. A framework for green Confederation bond issuances, as well as specifics on how projects will be selected and how they will be reported on, will be developed by the Federal Finance Administration (FFA) and the Federal Department of the Environment, Transport, Energy, and Communications (DETEC), according to the Swiss Federal Council. This framework is expected to be completed by the end of 2022.
IFC and Switzerland Agreement
With the signing of a deal with the Swiss government today, the International Financing Corporation (IFC) will assist emerging nations in developing climate finance markets.
International Finance Corporation (IFC) will receive up to $7.5 million from the Swiss State Secretariat for Economic Affairs (SECO) to execute IFC’s Green Bond Technical Assistance Program to assist the development of strong green bond markets. With the assistance of the initiative, emerging markets will be able to design green bond regulations and implement training programs for bankers, as well as embrace the Green Bond Principles and worldwide best practices in emerging markets.
“For many years, Switzerland has supported measures to strengthen market norms for sustainable financing in developing countries. For climate-related initiatives, Green Bonds are a great way to raise private capital. Federal Councillor Johann N. Schneider-Ammann stated the new relationship with IFC was “unique in its magnitude and collaborative approach with the corporate sector.”
Globally, the green bond market grew fast in 2017, reaching more than $160 billion, yet few banks in underdeveloped countries have issued green bonds. Contributing to the development of local green bond markets in developing nations will be a key role for SECO in this technical assistance initiative. IFC CEO Philippe Le Houérou remarked that the initiative “strategically complements” the organization’s long-standing engagement with Switzerland.
Investing with IFC as the lead investor, the fund closed in March 2018 with the goal of accelerating climate financing in developing nations by attracting new money and opening up new markets.
In addition to SECO, IFC Advisory Services has a number of other major partners. In 1989, SECO and IFC Advisory Services began working together.
SECO is a one-stop-shop for all things economic policy-related in Switzerland. Sustainable, inclusive growth and the eradication of poverty are the goals of SECO’s economic cooperation. These initiatives are aimed at improving the quality of life for people in the developing world while also helping to grow the global economy by increasing trade and competitiveness.
Over 2,000 firms throughout the globe rely on our financing, experience, and influence to build markets and opportunities in the most difficult parts of the world. Long-term finance of a record $19.3 billion was given to developing countries in FY17, using the private sector’s potential to help eradicate poverty and increase shared prosperity.
