World Bank issues first UN sustainable development bond

The World Bank (International Bank for Reconstruction and Development, IBRD) has issued two long term bonds that for the first time directly link returns to the performance of companies advancing global development priorities set out in the Sustainable Development Goals, including gender equality, health and sustainable infrastructure.

The equity-index linked bonds raised a total of €163m from institutional investors in France and Italy. The World Bank will use the proceeds to support the financing of projects that advance its goals of eliminating extreme poverty and boosting shared prosperity, and that are aligned with the Sustainable Development Goals or SDGs.

The return on investment in the bonds is directly linked to the stock performance of companies included in the Solactive Sustainable Development Goals World Index. The index includes 50 companies that, based on methodology developed by Vigeo Eiris’ Equitics, dedicate at least one fifth of their activities to sustainable products, or are recognized leaders in their industries on socially and environmentally sustainable issues. Solactive applies volatility and diversification filters to reach the final index composition. Vigeo Eiris is a global provider of environmental, social and governance research to investors and public and private corporates.

The bonds were arranged by BNP Paribas as part of the “SDGs Everyone” initiative. Under the initiative, the World Bank will issue bonds that raise funding to support the financing of projects that support the SDGs, and investors benefit from the performance of companies included in the equity index. The initiative is an innovative solution and new financial model that supports the SDGs, as called for by the UN Secretary-General’s Financial Innovation Platform (FIP) launched in October 2016.

Arunma Oteh, World Bank Vice President and Treasurer, explains, “The global community has made an ambitious commitment to achieve the Sustainable Development Goals, and this requires a new way of looking at development finance. This bond is an innovation that demonstrates the powerful role of capital markets in connecting savings with development priorities, while offering investors an attractive risk-reward profile. Looking ahead, we anticipate coming to market with similar issuances that would attract a range of investors across the globe.”

Investors in the bond include AGPM VIE, AREAS VIE, BNP Paribas CARDIF France, BNP Paribas CARDIF Italy, Fideuram Asset Management Ireland, Generali France, MGEN, Prevoir VIE, Sella Gestioni SGR and Suravenir.

Olivier Héreil, Chief Operating Officer and Head of Asset Management, BNP Paribas Cardif, said: “We are proud to be part of the SDGs Everyone initiative which will support the United Nations’ Sustainable Development Goals. Since 2014, BNP Paribas Cardif in France has invested more than €4bn in SRI. Today we are delighted to announce that our Italian subsidiary joins our French entity in investing in this new sustainable bond. These innovative products combine financial performance with environmental and social impacts, and as a responsible investor, we are pleased to have played an active role in their development.”

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