WASHINGTON D.C., June 15, 2020 —More than 800 financial institutions in emerging markets issued nearly $1.5 trillion in hard-currency bonds from 2009 through the first half of 2019. This finding is included in a new report issued today by IFC, a member of the World Bank Group, which shows the increasing size and potential diversity of the fixed-income market in emerging markets.
The “ Emerging Markets: Assessment of Hard-Currency Bond Market ” report finds that banks and non-bank financial institutions in 60 emerging-market countries have a total of $648 billion in hard-currency bonds outstanding as of June 30, 2019. While relatively small compared to the more than $100 trillion global bond market, this segment is sufficiently large and diversified to support new investment strategies and instruments.
Hard-currency bonds in this report are broadly defined as bonds denominated in euros or U.S. dollars with a maturity equal to or longer than one year.
The report suggests that many financial institutions that currently issue hard-currency bonds are well positioned to become first-time issuers of green or other social bonds. The report also finds that since nearly half of the hard-currency bonds issued by financial institutions in emerging markets have a three- or five-year maturity, these institutions are expected to continuously issue new bonds. This can pave the way for new issues of green bonds to finance institutions’ green loan portfolios, which will be critical as the world recovers from the COVID-19 pandemic.
“This report provides insight into the market for hard-currency bonds in emerging markets, and the potential for financial institutions to issue more targeted instruments, such as green bonds,” said Paulo de Bolle, Global Director of IFC’s Financial Institutions Group. “Banks and other financial institutions may see green and social bonds as a way of meeting environment goals, mitigating negative health and socioeconomic impacts, building sustainable financial systems, and transitioning into a more balanced world economy.”
An earlier report produced jointly by IFC and Amundi, Europe’s largest Asset Manager, finds that the global green bond market grew at a faster rate in 2019 with a record issuance of $240 billion. Emerging market green bond issuances rose 21 percent to $52 billion, bringing the amount outstanding to US$168 billion. These findings signal that investor appetite for green bonds continues to grow, and emerging market issuers are likely to benefit from increasing demand.
The Hard Currency Bond Market report is produced in partnership with the Ministry of Finance of Luxembourg, the Swedish International Development Cooperation Agency, and the Swiss State Secretariat for Economic Affairs SECO, as part of the IFC-managed Green Bond Technical Assistance program, which aims to stimulate the supply of green bonds issued by financial institutions in emerging markets.
About IFC
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2019, we invested more than $19 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org .
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