New fund to cater for green investors

The World Bank’s International Finance Corporation (IFC) and European asset manager Amundi are targeting year-end to raise $2bn for what is expected to be the world’s largest green-bond fund dedicated to emerging markets.

The fund aims to marry the goals of investors seeking more high-yield opportunities and development banks seeking to expand the green economy in emerging markets.

Initially, only 10% to 12% of capital in the fund would be invested in green bonds, said Fred Samama, deputy global head of institutional and sovereign clients at Amundi.

Lenders such as the World Bank are eager to see the market for environmentally-friendly securities grow faster to help reach global climate goals. The entire green bond market is projected to surge more than 30% in 2017 to a record $131bn, according to Bloomberg New Energy Finance, still just about 0.2% of the total bond market.

“We see the opportunity to offer yield and diversification to these investors,” said Jean Marie Masse, chief investment officer at IFC. The IFC said in April it would invest as much as $325m in the Green Cornerstone Bond Fund, which would buy green bonds issued by banks in Africa, Asia, the Middle East, Latin America, Eastern Europe, and Central Asia. Amundi would raise the rest of the $2bn from global institutional investors.

The fund would phase in investments over seven years, “otherwise, we’d need to buy all the green bonds in China and India”, Samama said. Those two countries have issued the most emerging market green bonds.

Amundi and the IFC were seeking investors keen for emerging-markets exposure and yield, but not the risk that sometimes entailed. That was part of the appeal of these bonds, which were typically investment-grade even as the sovereign rating of many emerging markets were not, Masse said. / Bloomberg