Finance
World Bank Launches Financial Instrument to Expand Funding for Sustainable Development Goals
The World Bank (International Bank for Reconstruction and Development, IBRD) has issued 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 EUR163 million 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, said: “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.”
Amina J. Mohammed, UN Deputy Secretary-General, said: “The 2030 Agenda for Sustainable Development is a transformative agenda which aims to make our world more inclusive, peaceful and prosperous. There is a momentous opportunity to change incentive structures in financial markets, shape consumer preferences as well as shareholder interest so that they reflect sustainability. Collaboration between the public and private sector will help to leverage innovative financial solutions that can deliver on the SDGs.”
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 4 billion euros 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.”
Pietro Calati, Head of Investments, Fideuram Asset Management Ireland, said: “We are pleased to have been part of this initiative. Fideuram’s participation in the transaction reflects the dual mandate of our Ethical fund: to pursue financial opportunities and, at the same time, to have a positive impact on the community.”
Nicola Trivelli, Chief Investment Officer, Sella Gestioni SGR, said: “We are enthusiastic to invest in this initiative in support of the SDGs and look forward to more issues like this.”
Bernard Le Bras, President and Chief Executive Officer, Suravenir, said: “We are very proud to participate in this innovative initiative which supports the UN’s Sustainable Development Goals. Innovation and responsible investments are at the heart of the strategies of Suravenir and Credit Mutuel Arkea. We see this as an opportunity to promote innovative investment products that combine performance with sustainable investments, together with the great satisfaction that comes with contributing to the development of these new solutions.”
Olivier Osty, Executive Head of Global Markets, BNP Paribas, said: “We are delighted to collaborate with the World Bank on this innovative program of structured issuance to satisfy increasing investor focus on the SDGs. Innovation and sustainability are key foundations of our strategy at BNP Paribas and we are pleased to bring our expertise and commitment to the UN’s financing platform for SDGs. We are confident that we can replicate the success of the World Bank’s Green Growth Bonds with this new program.”
Transaction Summary for the 15-year Bond:
| Issuer: |
World Bank (International Bank for Reconstruction and Development, IBRD) |
| Issuer rating: | Aaa /AAA (Moody’s / S&P) |
| Amount: | EUR 106.8 million |
| Settlement Date: | 21 March 2017 |
| Maturity: | 15-year |
| Index: |
Solactive Sustainable Development Goals World RC 8 EUR Index (SOGOALEU) |
| Coupon: | None |
| Maturity Date: | 22 March 2032 |
| Issue price: | 100% |
| Specified Denomination: | EUR 100,000 |
| Redemption at maturity (per Specified Denomination): |
Specified Denomination plus any Index Linked Interest Amount |
| Index Linked Interest Amount: |
EUR 100,000 x Participation Rate x the greater of (i) Average Index Return and (ii) zeroParticipation Rate = 100%
Average Index Return = the quotient equal to (i) the Average Index Level minus the Initial Index Level divided by (ii) the Initial Index Level Average Index Level = average of the closing levels of the Index on the annual observation dates from years 10 to 15 Initial Index Level = the lowest closing level of the Index among the seven monthly observation dates starting from the Settlement Date |
| ISIN: | XS1579356079 |
| Listing: |
Luxembourg Stock Exchange |
| Clearing systems: | Euroclear / Clearstream |
| Sole lead manager: | BNP Paribas |
Transaction Summary for the 20-year Bond:
| Issuer: |
World Bank (International Bank for Reconstruction and Development, IBRD) |
| Issuer rating: | Aaa /AAA (Moody’s / S&P) |
| Amount: | EUR 56.8 million |
| Settlement Date: | 21 March 2017 |
| Maturity: | 20-year |
| Fixed Coupon for years 1-10: | 1.2% p.a. |
| Index: |
Solactive Sustainable Development Goals World RC 8 EUR Index (SOGOALEU) |
| Index Linked Coupon for years 11-20 (if any): | EUR 100,000 x 0.1 x the greater of (i) Average Index Return and (ii) zero
Average Index Return = the quotient equal to (i) the Maximum Index Level minus the Average Index Level divided by (ii) the Average Index Level Maximum Index Level = the highest closing level of the Index among the two observation dates in year 5 and 10 Average Index Level = average of the closing levels of the Index on the five monthly observation dates starting from the Settlement Date |
| Maturity Date: | 23 March 2037 |
| Issue price: | 100% |
| Specified Denomination: | EUR 100,000 |
| Redemption at maturity (per Specified Denomination): |
Specified Denomination plus any Index Linked Coupon payable on the Maturity Date |
| ISIN: | XS1579354611 |
| Listing: |
Luxembourg Stock Exchange |
| Clearing systems: | Euroclear / Clearstream |
| Sole lead manager: | BNP Paribas |
About the World Bank
The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization created in 1944 and the original member of the World Bank Group.
About BNP Paribas
BNP Paribas is a leading bank in Europe with an international reach. It has a presence in 75 countries, with more than 189,000 employees, including more than 146,000 in Europe.
About the United Nations and the Sustainable Development Goals (SDGs)
World leaders agreed to implement a new plan for the future of people and the planet that has the potential to make our world more inclusive, peaceful and prosperous. The plan reflects three agreements adopted by the United Nations Member States in 2015: the Addis Ababa Action Agenda on Financing for Development, the 2030 Agenda for Sustainable Development, and the Paris Agreement on climate change.
