The growing risks brought on by climate change are raising development costs for the world’s fast-growing cities and developing countries. Government funds alone will never be enough to build resilience to extreme weather and deal with the threats to energy, water, and food supplies – the private sector and institutional investors must be involved.
That’s where an innovative funding stream is starting to make a difference. Green bonds are delivering finance for clean energy, mass transit, and other low-carbon projects that can help countries adapt to and mitigate climate change, while giving investors high-quality-credit, fixed-income investment opportunities that have a positive impact.
Green bonds issued by IFC support private sector investments in renewable energy and energy efficiency. This includes diversifying South Africa's electricity away from coal-fired power by using energy generated from mirrors that reflect and concentrate the sun’s rays, and helping a bank in Armenia introduce lending for energy-efficient housing, reducing power demand and lowering utility bills for residents.
IFC's recent $1 billion offering, in November 2013, attracted a new set of green bond investors, including the Ford Motor Company, Microsoft, and the central banks of Brazil and Germany. A floating rate green bond issued by the World Bank in January 2014 drew large institutional investors such as BlackRock, TIAA-Cref and Goldman Sachs Private Wealth Management in addition to other pension funds and sustainable investors. Zurich Insurance recently announced it would invest $1 billion in green bonds issued by the World Bank, IFC, and other development banks.