Proparco has invested US$100m in Amundi Planet – Emerging Green One, an investment fund created jointly by the International Finance Corporation (IFC), a World Bank subsidiary, and French asset management firm Amundi. The fund’s brief is to invest in “green bonds” to be issued by financial institutions in emerging and developing countries over the next seven years. US$1.2bn have already been committed to this new fund, making it the largest green bond fund operating in those geographies. With its US$100m contribution, Proparco will be taking its place alongside the IFC as a primary source of financing for the fund.
Using finance to promote climate solutions
This investment reflects strong commitment by Proparco and the Agence Française de Développement (AFD) Group to tackling climate change. Since 2006, Proparco has provided over €2bn to projects with climate-change benefits in developing countries, and plans to devote €2bn more between now and 2020. Moreover, like Amundi, Proparco and AFD belong to Finance for Tomorrow, an initiative launched by Paris financial market participants with the aim of promoting sustainable finance in France and abroad.
Green bonds are a component of the fight against climate change in that they increase the funding available for low-carbon investment projects. Uses for renewable energy, improved energy efficiency and urban mobility programmes are just a few of the initiatives likely to benefit from Amundi Planet – Emerging Green One financing.
Green bonds clearly have the wind in their sales, with issuance in 2016 alone exceeding US$100bn, but they are still a rarity in emerging markets, not to mention developing economies. The funding provided by the IFC and Proparco, particularly for the fund’s riskiest tranches, represents a safety cushion that will make it easier to bring on board institutional investors less familiar with geographic investment risk.
Assisting national issuers
In addition to the funding provided, the initiative launched by the IFC and Amundi will enable them to assist financial institutions in the target countries with structuring and issuing green bonds. That assistance will span staff training, supervision of environmental and social management systems deployed by the issuers and help with the process of obtaining “second party opinions”, an obligation included in the Green Bond Principles.
An initiative conducive to a shift in capital flows from the OECD to the Southern Hemisphere
The initiative constitutes a step towards concrete implementation of the commitments made by the OECD countries at the COP19 Conference, and reiterated at the 2015 COP21 Conference in Paris, to deliver US$100bn a year of aid to poorer nations for climate-related projects, one of Proparco’s key objectives.
Illustration Photo: Legga village solar electrified by woman barefoot solar engineers, India, Rajasthan (credits: Knut-Erik Helle / Flickr Creative Commons Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0))