Green Bond Impact Report Financial Year 2018 Green Bond Impact Report | Financial Year 2018 1 Table of Contents 2 FY18 Highlights 3 Message from Philippe Le Houérou 4 Letter from Jingdong Hua 5 Letter from Alzbeta Klein 6 Coffee Chat with IFC Client 9 IFC Climate Business Overview for FY18 10 IFC Green Bond Program Overview for FY18 12 IFC Green Bond Commitments by Region 13 IFC Green Bond Commitments by Sector 14 Featured Project: Egypt’s Solar Feed-in-Tariff Program 15 Featured Project: Green Energy Development in the Philippines 16 IFC Green Engagement 17 Spotlight on Environmental and Social Risk Management 18 Green Bond Eligible Project Commitments for FY18 25 Appendix A: IFC Green Bond Commitments Reconciliation 26 Appendix B: IFC Green Bond Program Process 28 Appendix C: IFC Impact Reporting Approach 30 Authors and Contacts 29 Disclaimer Green Bond Impact Report | Financial Year 2018 1 FY18 Highlights How the IFC Green Bond Program made an impact in Financial Year 2018 32 totalling IFC all-time record green bonds $1.8 billion of green bond issuance 52 Record project Expected new projects portfolio Expected to reduce to contribute greenhouse gas in annual (GHG) emissions renewable energy amount by generation 6.3 million equivalent to GHGs 1.3 million 8.2 million equivalent to powering 700,000 metric tons from more passenger cars megawatt hours (MWh) average U.S. homes of CO₂-equivalent of renewable energy almost than reduced in one year ¹ driven for one year ¹ contributed in one year ² for one year or powering up households (Increase from 2.2 million metric tons (Increase from 2.2 million MWh in the cities of San Francisco and of CO₂-equivalent for FY17 committed portfolio) Washington, D.C., for one year ² for FY17 committed portfolio) 1 https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator 2 U.S. Census Bureau QuickFacts Green Bond Impact Report | Financial Year 2018 2 Message from Philippe Le Houérou IFC Chief Executive Officer Combating climate change is one of the greatest challenges of our time, requiring far more investments than governments alone can provide. Philippe Le Houérou IFC Chief Executive Officer Our recent Climate Business Report found that more than $1 trillion in investment Together with Amundi, IFC has also been the driving force behind the world’s first is already flowing into climate-related projects every year. Yet trillions more are targeted green bond fund dedicated to unlocking private funding for climate- needed. That’s why finding new avenues for green financing is a key priority at IFC, smart projects in emerging markets. We are creating a market by building both the the largest global development organization working with the private sector in demand and the supply side. This is unprecedented. Leveraging Amundi’s emerging emerging markets. market debt investment capabilities, our commitment to ESG, and the unique outreach of IFC in developing countries, we announced Amundi Planet EGO in early The good news is that climate change is not only an environmental menace but 2018 as a unique way to increase financial flows and develop sustainable financing also a tremendous business opportunity. Climate action generates natural capital, to support the energy transition in countries where it is most needed. opening the way to billions of dollars of investments and profitable ways to help protect the planet. But as an issuer of green bonds and a conduit helping banks and sovereigns in emerging markets to issue green bonds, we are highly conscious that without an In fact, we are living in the decade of green bonds, generating financing from the integrated approach it remains difficult to track the impact of green finance. private sector for renewable energy – solar, wind and biomass – energy efficiency, green buildings and other eco-friendly projects. As green bond volumes increase, it has become even more important to develop common guidelines that promote integrity, transparency standards, responsible In 2007, green bonds were nonexistent. A decade later, more than $155 billion investor behavior and impact evaluation. That is what this report is about. in green bonds was issued around the world in 2017 alone. Globally, the green bond issuance is predicted to exceed $200 billion in 2018, and that number is rising IFC fully embraces the climate change agenda of the Paris Agreement, with the dramatically as global capital markets accelerate the fight against climate change. goal of holding the increase in average global temperature to well below two degrees. The only way to deliver is to create markets for climate business. At IFC, we have played a leadership role in the green bond space, helping to Government reforms are also required to help unlock more investment, but the transform the market from niche to mainstream. One of our key objectives with private sector holds the key to fighting climate change – it has the innovation, the green bond program is to encourage traditional investors to convert to green the financing and the tools. Green bonds offer a pathway forward. and Environmental, Social and Governance (ESG) investing. Green Bond Impact Report | Financial Year 2018 3 Letter from Jingdong Hua IFC Vice President and Treasurer As we transition into cooler autumn weather, Addressing climate change is a priority for IFC. Without action, the impact of climate change on global development and efforts to end poverty will only it begins to fade how we faced all-time heat intensify. Already, IFC is one of the world’s largest financiers of climate-smart records just a few months ago. A collage of projects in emerging markets on its own account. But to maximize our impact, we are working towards scaling up finance for climate action, as the transition global newspaper front pages covering summer to a low-carbon resilient global economy requires trillions in financing. Capital markets will play a key role in mobilizing international savings to help close the 2018 brings back loud headlines on ’red-hot climate finance gap. planet’, ’record-breaking summer’ and ’the IFC continues to be at the forefront of stimulating the development of the green strongest climate signal yet.’ Current weather and ESG-focused bond market. We are one of the pioneers in the issuance of green bonds and the development of the requisite market standards. In 2013, we led extremes impact millions of people, especially by example when we issued the first $1 billion global benchmark green bond, in developing countries that are most vulnerable and we continue to lead with groundbreaking initiatives in 2018, such as issuance of the first Philippine peso-denominated green bond, or the first ever green bond in to climate disasters. New Zealand. This year, we have issued 32 green bonds across 13 currencies, totalling $1.8 billion. At the close of FY18, our green bonds supported cumulatively 177 investment projects. Beyond our own issuances, we also help financial sector clients issue their own green bonds – often the first in their markets – through investment capital and technical assistance. Since 2015, IFC has supported 13 clients issuing green bonds – 12 of which were first-time green bond issuers – for a total green bond issuance of $1.2 billion. These investments go alongside our broader efforts to strengthen Crowding in mainstream investors financial institutions’ awareness of green bond issuances and help build capacity for decision makers and banks. On the demand side, IFC contributed to – as IFC has done – is critical for stimulating interest for green bonds through the creation of Amundi Planet EGO, us to accelerate the development the first-ever green bond fund focused on emerging markets. We have also supported broadening of ESG investing across fixed income asset portfolios through a joint of the green bond market. We need report by the World Bank Group and Japan’s Government Pension Investment Fund, Incorporating ESG Factors into Fixed Income Investment. Jingdong Hua IFC Vice President and Treasurer scale to tackle climate change, Initiatives like these get us closer to fulfilling the goals of the Paris Agreement which requires trillions of dollars – and we will continue to develop innovative products in the years to come. We in financing. welcome more market participants to join us as we create vibrant markets for climate business! Green Bond Impact Report | Financial Year 2018 4 Letter from Alzbeta Klein Alzbeta Klein Director and Global Head Director and Global Head of IFC Climate Business IFC Climate Business Climate change is one of our biggest challenges operations across its campuses by 2026. Santo Tomas is Colombia’s oldest university and the first university globally but also one of the world’s biggest investment to certify all of its new and existing buildings with EDGE. opportunities, especially in emerging markets. The university has even integrated the philosophy and finance of green buildings into its curriculum. The funding required for an orderly shift to a low- In the client interview featured in this report, we further hear about how green carbon, resilient global economy is estimated at bonds have laid the foundation for scaling investment in Colombia’s green buildings. trillions of dollars. IFC estimates that between In Africa IFC developed a roadmap for Côte d’Ivoire to achieve the country’s 42 percent renewable energy commitment under the Paris Agreement. now and 2030, the investment potential in IFC’s climate investment in infrastructure reached $1.3 billion on our own account 21 large emerging markets will exceed $23 trillion. with an additional $1.8 billion mobilized. Notable was our IFC investment in Benban Solar Park in Egypt, the result of a joint World Bank Group effort. It is no longer just about climate change but about climate business. In financial year 2018, 34 percent of IFC’s long-term lending volume on our own Engaging the private sector is essential to achieve the goals of the Paris Agreement, account was climate-smart, exceeding our target in the Climate Implementation Plan. and green bonds play a pivotal role in channeling capital towards climate-smart This means over $3.9 billion in own account climate-smart investments and an solutions, especially in some of the most challenging and poorest countries. Since additional $4.5 billion in core mobilization, totalling $8.4 billion. IFC launched the Green Bond Program in 2010, we have raised billions of dollars for clean energy, climate-smart cities, green buildings and green finance. We are taking a programmatic approach with IFC Treasury, working upstream and helping our clients ask what it means to issue a green bond and where climate The impact is evident in our investment volumes, with an almost doubling of green business fits into broader capital markets development. projects in the IFC green bond portfolio this financial year, from 32³ projects in FY17 to 52 projects worldwide in FY18. As a founding partner of the Global Green Bond Partnership with the World Bank, IFC helps grow the issuance of green bonds and ’crowd in’ more climate finance. The IFC Climate Business Department supports our investment teams, clients, other potential issuers of green bonds and regulators on eligibility, international Looking forward, we are setting a new climate target of having one-third of IFC guidelines, standards, practices, and impact reporting. investments in climate-smart business by 2030 – with an eye toward new and disruptive technologies in each sector from drone applications in precision farming In September 2017, IFC approved a $214 million investment in Schwarz Group, a to electric autonomous vehicles. To achieve our goals we will bring others along chain of discount supermarkets, to support its expansion and ’greening’ of grocery with us, expanding upon market-creating platforms, that include Scaling Solar, an stores in Romania, Bulgaria and Moldova. Schwarz pledged to certify all its initiative to develop solar projects in Africa; EDGE, a green-building certification stores using EDGE, Excellence in Design for Great Efficiency, an IFC green building process; Amundi Planet EGO, a green bond fund; and others. We will also develop certification system. new solutions that will expand business in climate priority sectors. In May 2018, IFC invested $25 million in green buildings for campuses of the Myriad opportunities exist around the world for investors to make a difference. University of Santo Tomas, which is committed to achieving zero-net carbon Because – as we agreed at the inaugural One Planet Summit – there is no Planet B. 5 In FY17, there were 33 new commitments financed with our green bonds, but 32 new projects. 3  A commitment to Consorcio RE (#36053) in FY17 is the continuation of a climate-smart project from FY15. Green Bond Impact Report | Financial Year 2018 Coffee Chat with IFC Client A chat with Mr. Franco Piza, Corporate Director of Sustainability for Bancolombia S.A. Franco Piza Corporate Director Why did Bancolombia decide to issue a green bond? of Sustainability for Bancolombia S.A. Mr. Franco Piza: Our financial services are linked to a positive transformation of society through a long-term sustainable business strategy. Sustainable business results in bottom-line profits with the additional positive outcome of protecting the environment. Because we are the largest commercial bank in Colombia financing 42 percent of market volume, it is our responsibility to offer an array of products and services to reach new markets, lower risks and foster innovation. Green bond issuance was a way to expand our corporate sustainability strategy into our financing operations, allowing us to support our green portfolio and tap a new investor base. How did you go about building your green pipeline? Proceeds of IFC green bonds issued in FY17 Mr. Franco Piza: Prior to issuing a green bond, we had learned from upgrading supported IFC’s investment in the first green our own corporate facilities that green technologies improve the operational issuance by a commercial bank in Latin America performance of buildings. It made clear economic sense to us to extend a credit line for green buildings, either certified with IFC’s EDGE or other approved to fund renewable energy projects and green certification systems. buildings. In December 2016, IFC was the sole To promote our discounted green building financing, we held events and meetings investor in 350 billion Colombian Pesos (about across Colombia, supplemented by our online knowledge platform, webinars, prime-time advertising and social media coverage. In response to overwhelming $117.1 million) green bond by Bancolombia, demand, we have already invested $175 million in green buildings, using our own one of the largest commercial banks in Colombia funds to supplement the proceeds of the bond. We predict a pipeline 12 times the size of the original bond.W (IFC project 38731 in FY17). A year after IFC’s investment in Bancolombia, we spoke with the bank to discuss its green bond financing experience. Bancolombia offers property sector clients a variable interest rate loan for design-certified green building construction with a discount rate of up to one percent. The bank also offers green mortgages to qualified homebuyers who purchase certified properties. The rate of these mortgages is up to 65 basis points lower than a loan for a conventional property. Green Bond Impact Report | Financial Year 2018 6 Coffee Chat with IFC Client What are your prospects for green bond markets? Mr. Franco Piza: After our first green bond with IFC, we were operationally set up and seeing a solid pipeline of green buildings that our clients could affordably certify with EDGE. The first green bond allowed us to test the waters. We saw investor interest and the potential for more issuance. It was only natural for us to issue a second green bond in the local market. We issued our second green bond in June, also in the local currency, in the amount of 300 billion Colombian pesos (about $100 million). It was oversubscribed 2.8 times, attracting 72 domestic investors. This helped broaden our investor base and promote Bancolombia brand as a champion of sustainability in the banking sector. As a bank operating in a developing country, we are keen to mobilize funds to obtain the best pricing for our clients. We took the lead and welcome our banking peers to duplicate our success. It’s our goal to prove, ’Bancolombia makes it possible’, for everyone. Ambar Infinity Colombia One of the projects financed by Bancolombia’s green bond is the Ambar Infinity building. With EDGE certification, residents of the Ambar Infinity building can save 31 percent in energy costs and 35 percent in water off -31% -35% their monthly utility bills, compared with a conventional home. Green Bond Impact Report | Financial Year 2018 7 Green Bond Impact Report | Financial Year 2018 8 IFC Climate Business Overview for FY18 34% $3.9 billion Over the past few years, IFC’s climate business has diversified to be much more than renewable energy projects. Large and growing sectors include green This buildings, climate-smart cities and green finance. In addition to diversifying translates its climate business, IFC is taking a more programmatic approach with of IFC total own account to over in climate-smart investments governments, clients and other actors to help establish systems and policies commitments in FY18 on IFC’s own account that can unlock private investment and create markets. are climate-related Since 2005, IFC has invested about $22.2 billion in long-term financing and raised another $15.7 billion in core mobilization through partnerships with investors for climate-related projects, renewable power, energy efficiency, sustainable agriculture, green buildings, waste and private sector adaptation to climate change. With an addition of $4.5billion in core mobilization For a total of $8.4billion in climate-smart projects Green Bond Impact Report | Financial Year 2018 9 IFC Green Bond Program Overview for FY18 FY18 marks the eighth year since the launch of IFC’s Green Bond Program. This year, IFC maintained a strong presence in the Japanese green retail market, placing IFC issued a record number and a record volume of green bonds to date – 11 Uridashi trades in NZD, TRY, MXN, ZAR currencies for a total amount of 32 green bonds for a total volume of $1.8 billion. This brings the cumulative $20 million equivalent. issuance since 2010 to $7.6 billion across 111 bonds in thirteen currencies. On top of that, IFC entered a new market – the Italian retail market – in October At the start of FY18, IFC placed an inaugural 125 million New Zealand dollar Green 2017 with debut issuances of three green bonds in BRL, TRY and USD in the course Kauri bond – the equivalent of approximately $95 million – to support climate- of a few months, totaling $27 million equivalent. smart investments. This was the first time that a green bond was launched in Throughout the year, IFC enjoyed a solid flow of green private placement inquiries, New Zealand. The 10-year fixed rate bond pays a 3.750% coupon and was primarily selling in excess of $500 million in medium-term notes and club deals. Of note placed among local (59%) and Asia Pacific (38%) investors. The bond was well is a strong demand IFC has seen in Swedish Krona, having issued SEK1.3 billion of received by the market opening up green and sustainable investing opportunities bonds to a number of investors. in New Zealand dollars. Finally, at the close of the financial year IFC issued the first internationally Later in October, IFC issued a 5-year green bond that raised $1 billion for climate- rated triple-A Philippines peso-denominated green bond – the equivalent of smart investments, amid surging investor demand. This was IFC’s third $1 billion approximately $90 million with a 15-year maturity – to support the local capital benchmark green bond, after being the first global institution ever to access this market and renewable energy. Adding pesos as a new green bond currency size in the market. Half an hour after order books opened, demand surged above supports IFC’s goal to strengthen the important green asset class. This report $1 billion, with significant support from investors focused on socially responsible features a story about the project financed by the proceeds of this bond. investments (SRI). Overnight, indications of interest grew in excess of $2.25 billion. The trade attracted a very high quality order book supported by strong interest On 30th June 2018, IFC’s outstanding green bonds amounted to around $4 billion. from SRI accounts and was 2.6 times oversubscribed. Pricing-wise, the trade came with a spread of 11.8 basis points over Treasuries and marked the tightest pricing versus 5-year US Treasury Note in the sovereigns, supranational and agencies space since 2015. IFC continued increasing awareness of climate-smart investment instruments among retail investors in FY18. Since converting one of its US retail notes program into a fully green format more than a year ago, IFC has enjoyed increasing interest in green bonds from American household investors. In FY18, IFC sold $50 million of green bonds under its Impact Notes program, double the size of the demand in the previous year. Green Bond Impact Report | Financial Year 2018 10 IFC Green Bond Program Overview IFC Historical Green Bond Issuance by Year IFC Cumulative Green Bond Issuance by Currency Volume Number of Million $ green bond CNH 1.1% issues NZD PHP 1% ZAR INR 0.6% 2% AUD 2% MXN 0.6% 2,000 35 2% EUR 0.3% 32 PEN 0.2% 1,800 TRY 30 3% SEK 1,600 4% 24 BRL 1,400 25 4% 1,200 18 20 USD 79% 1,000 19 15 800 600 10 400 6 5 5 200 1 3 3 0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Green Bond Impact Report | Financial Year 2018 11 IFC Green Bond Commitments by Region Disbursements Commitments As of June 30, 2018, there were cumulatively 177 green bond eligible projects supported by IFC green bond proceeds. The total committed amount for these projects is $6.8 billion, of which $5.2 billion has been disbursed. FY14 936 242 FY15 1,143* 956 For reconciliation of the regional breakdown numbers with historical reporting FY16 961* 754 please refer to Appendix A. Volumes marked with (*) have been adjusted from the  correction to 4 A FY17 1,555 1,356*⁴ volumes reported in previous impact reports – Appendix A provides further details. disbursement FY18 2,205 1,914 numbers for FY17. FY17 Green Bond Total 6,799 5,223 Impact Report included only a subset in M$ of disbursements for Disbursements Disbursements Commitments Commitments newly-committed projects in the same year ($899 million). Disbursements Commitments The total amount of disbursements for FY17 toward Green Bond Eligible Projects Disbursements Commitments FY14 618 156 FY14 178 66 is $1,356 million. FY15 422 551 FY15 370* 228 FY14 62 11 FY16 90* 210 FY16 284 265 FY15 155 125 FY17 534 449 FY17 320 312 Disbursements FY16 200 117 Commitments FY18 406 357 FY18 834 833 FY14 55 9 FY15 143 34 FY17 233 170 Latin America and Europe and FY16 119 123 FY18 297 151 the Caribbean Central Asia in M$ in M$ FY17 203 208 South Asia in M$ FY18 265 124 FY14 0 0 Disbursements Commitments Disbursements FY15 0 0 Commitments Middle East and North Africa FY16 229 18 in M$ FY17 204 179 FY18 340 427 FY14 23 0 FY14 0 0 East Asia and FY15 43 19 the Pacific FY15 10 0 in M$ FY16 39 21 FY16 0 0* FY17 36 22 FY17 24* 17 FY18 63 14 FY18 0 7 Sub-Saharan Africa Multi Region in M$ in M$ Green Bond Impact Report | Financial Year 2018 12 IFC Green Bond Commitments by Sector Commitments by sector Renewable Energy Energy Efficiency Other Mitigation Adaptation FY18 FY14 FY15 Total M$ 2,205 11 Total M$ 936 86 Total M$ 1,143 51 94 284* 281 756 808 1,129 FY16 FY17 Total M$ 961 Total M$ 1,555 131 784 134 306* 845* 579* 521 For reconciliation of the sector breakdown numbers with historical reporting please refer to Appendix A. Volumes marked with (*) * have been adjusted from the volumes reported in previous impact reports – Appendix A provides further details. Green Bond Impact Report | Financial Year 2018 13 Featured Project: Egypt’s Solar Feed-in-Tariff Program Ensuring a steady energy supply has been challenging due to years of underinvestment in the sector and a lack of maintenance of power generation and transmission lines. This has resulted in frequent power outages. In 2014, Egypt experienced one of its most serious energy crises in which parts of the country faced around six power cuts a day for up to two hours at a time. The government of Egypt has identified electricity generation from renewable energy sources a low-cost development priority. Although Egypt’s Nationally Determined Contribution, as set forth by the Paris Agreement, does not include a formal GHG reduction target by 2030, it does outline a range of GHG mitigation and adaption goals. As an example, the government has a target for 20% of electricity consumption to be generated from clean energy sources by 2022. In 2014, the Ministry of Electricity and Energy and the regulatory agency launched a Feed-in-Tariff (FiT) program for solar photovoltaic (PV) and wind projects less than 50MWac to boost renewable energy production in Egypt. To support Egypt in meeting its growing energy demand through renewables, IFC created the Nubian Suns Renewable Energy Program and led a consortium With a growing population and increasing of 11 international lenders in offering the largest private sector financing program for a solar PV facility in the Middle East and Africa. As part of the program, the industrial production, Egypt requires a large $653 million debt package finances the construction of 13 solar power plants worth $823 million with a combined capacity of 590 MWac /752MWp near Aswan, Egypt. supply of power to meet energy demand These solar power plants will be part of the larger Benban Solar Park, which will and growth. initially include 32 power plants in total to soon become the world’s largest solar PV generation park. IFC’s participation in Benban Solar Park construction is part of our broader effort to create a market for renewable energy in Egypt by leveraging World Bank Group’s resources and expertise. By demonstrating the power of private sector capital for improving country’s renewable energy production, IFC encourages replication, greater private sector participation and competition in Egypt’s energy market. Green Bond Impact Report | Financial Year 2018 14 Featured Project: Green Energy Development in the Philippines The urgency to combat climate change in To help advance climate change mitigation efforts by the Philippines and accelerate green growth, IFC provided a $90 million 15-year loan to support Energy the Philippines is reflected in the country’s Development Corporation (EDC). EDC owns over 60 percent of the country’s total vulnerability to weather events, which are installed geothermal capacity and is the largest producer of geothermal energy in the country and one of the largest in the world. EDC is also the only company in increasing in frequency and impact. the Philippines included in the 2017 Carbon Clean 200TM, a list of the top 200 firms that lead the way with solutions for the transition to clean energy future. Between 1996 and 2015, the Philippines was hit by 283 typhoons – eight of the In July 2017, a 6.5-magnitude earthquake damaged some of EDC’s power plants in most damaging typhoons occurred in the last decade. In this context, high Leyte province, reducing geothermal energy production capacity. IFC’s loan exposure to climate change risk underscores the importance for the country to will support the company’s efforts to bring production capacity back and optimize transit to a more balanced energy mix and green economic growth model. production by upgrading existing geothermal facilities. The completion of The Philippines is committed to reduce its carbon emissions under the Paris the restoration work and increased production efficiency are expected to yield Agreement. The development of geothermal energy is critical for implementation 2,387 GWh of energy produced and contribute to reduction of 1.4 million tCO2 on of this commitment and the country’s sustainable economic development, an annual basis. particularly in light of a growing coal power share in the grid throughout the The loan is financed through the proceeds of the first peso-denominated last decade. Unlike other renewable energy sources, such as wind and solar, green bond by IFC, called ’Mabuhay bond’, which was also the first green bond geothermal power can provide stable, reliable power 24 hours a day and at low denominated in Philippine pesos issued by an internationally-rated, triple-A cost using steam generated below the Earth’s surface. The Philippines has already multilateral institution. Major local insurance companies, such as Sun Life and become the largest producer of geothermal power in Asia Pacific, with the Insular Life, announced their investment in the IFC maiden Mabuhay bond. expectation to surpass 12,000 GWh to be produced in 2022. Energy Development Corporation’s Geothermal Plant Energy Development Corporation’s Geothermal Plant in Leyte, Philippines in Mindanao, Philippines Green Bond Impact Report | Financial Year 2018 15 IFC Green Engagement IFC continues its broader engagement with Lessons learned from Fiji’s Sovereign Green Bond market participants to develop SRI space issuance  hile green bonds allow sovereign issuers to appeal to a new class of investors • W – domestically or internationally – in addition to the usual costs associated with the preparation of a vanilla government bond, green bonds require upfront and ongoing resources that are not necessarily recoverable through bond proceeds.  learly identifying the reasons for issuing a green bond will drive many • C decisions in the issuance process.  arefully identifying potentially eligible green projects will help determine • C the structure of the bond, which must also suit the overall debt profile of the sovereign. Projects can be defined quite broadly and may include tax relief, subsidies, financing and refinancing. However, all expenditures should be Images: Alana Holmberg/World Bank assessed by an external reviewer to ensure they qualify as ’green’. As an active member of the Executive Committee (EXCOM) for the Green Bond  ransparency at every step of the process is critical to the success of the green • T Principles, IFC participated in the work on A High-Level Mapping to the Sustainable bond market, so resources and expertise must be applied to monitoring and Development Goals – a framework by which issuers, investors and bond market reporting on the use of the proceeds and the impact of funded projects. participants can evaluate the financing objectives of a given Green, Social or An extensive level of work is required to set up these processes and ensure Sustainability Bond Program against the UN Sustainable Development Goals. accountability and consistency. As a practical engagement, IFC provided technical assistance on the debut green  here is a significant appetite for green bonds from both environmental, social • T issuance by a developing country early in FY18. The Pacific island state Fiji became and governance-focused investors, and institutional investors with mandates to the first emerging market sovereign to issue a green bond, raising 100 million have a minimum percentage of their portfolio meeting ESG standards. Fijian dollars – $50 million equivalent – to support climate change mitigation and adaptation. In preparation for the issuance, Fiji requested assistance from IFC and the World Bank. With World Bank Group’s technical support, Fiji aligned its green bond framework with the Green Bond Principles. The transparency with which Fiji has approached the issuance process has provided the market with a roadmap that countries can follow when issuing their own green bond. Drawing on lessons learned from Fiji’s experience, IFC has published Guidance for Sovereign Green Bond Issuers, which outlines practical considerations sovereigns can face at each step of the process from issuance preparation to post-issuance reporting. Green Bond Impact Report | Financial Year 2018 16 Spotlight on Environmental and Social Risk Management An introduction to the IFC E&S Risk Assessment and Mitigation Processes IFC and Sustainability Transparency and Accountability IFC helps clients avoid, mitigate, and manage environmental and social risk Transparency and accountability are central to IFC’s approach. IFC believes that as a way of doing business sustainably. IFC’s Sustainability Framework helps these are fundamental to fulfilling the institution’s development mandate and clients improve business performance, transparency, stakeholder engagement, strengthening public trust in IFC and its clients. IFC’s Access to Information environmental protections and developmental impact, while contributing to jobs Policy reaffirms and reflects IFC’s commitment to these principles. IFC discloses and inclusive growth. information about all of its projects, including project-level environmental and social review summaries (ESRS) for direct investments, through its project The IFC Sustainability Framework articulates our strategic commitment to disclosure portal. sustainable development, and it is an integral part of IFC’s approach to risk management. The Sustainability Framework comprises the Sustainability Policy, Two independent accountability mechanisms continuosly evaluate IFC’s work. the Performance Standards on Environmental and Social Sustainability and the The Independent Evaluation Group evaluates World Bank Group activities, including Access to Information Policy. IFC’s work in private sector development. The goals of evaluation are to provide an objective assessment of the results of the World Bank Group’s work and identify IFC Performance Standards are a globally-recognized benchmark for environmental and disseminate lessons learned. The Compliance Advisor Ombudsman (CAO) is and social-risk management in the private sector. They reflect good practice for an independent recourse mechanism for IFC. The CAO responds to complaints sustainability and risk mitigation for issues increasingly important to sustainable from communities affected by a project with the goal of enhancing social and businesses, including supply chain management, resource efficiency, climate environmental outcomes on the ground. change and business and human rights. While delivering climate mitigation impacts, such as reduced GHG emissions, climate-friendly projects may still pose risks to the environment and communities requiring active prevention and mitigation measures. For example, there may be IFC Performance Standards risks to wildlife, such as threats to birds from wind energy projects or migratory fish from hydropower projects; impacts to livelihoods and ecosystem services, such as effects to water users along the diverted reach of hydropower projects, loss of access to agricultural land, cattle grazing and fuelwood collection; and risks to labor rights and occupational safety of construction workers. To understand the risks of its investments, IFC conducts enviromental and social (E&S) risk due diligence for all potential projects and identifies risks, impacts and prevention and mitigation measures to meet IFC Performance Standards. If additional prevention and mitigation measures are required as a condition for IFC investment, these are described in a time-bound Environmental and Social Action Plan that is an integral part of the investment agreement between IFC and clients. IFC monitors the client’s implementation of the plan through the life of the investment. Green Bond Impact Report | Financial Year 2018 17 Green Bond Eligible Project Commitments for FY18 The Impact Assessment table below lists the expected climate results from projects eligible to be funded, in whole or in part, with IFC green bond proceeds. The table includes only the projects committed in FY18. The projects are organized by sector and are categorized by project type as renewable energy (RE), energy efficiency (EE), climate mitigation projects that do not fall under RE and EE (Other Mitigation), and Adaptation. Adaptation refers to reduction in the vulnerability of human or natural systems to the effects of climate change and climate variability-related risks by maintaining or increasing adaptive capacity and resilience. Reporting is based on ’ex-ante’ estimates at the time of project appraisal. Because the Impact Assessment table includes the estimated results of projects that are still in the construction or implementation phase, there is no guarantee that these results will ultimately materialize. Thus, the reporting is not intended to provide actual results achieved in a specific year or reporting period. climate sector rehabilitated constructed/ Climate loan annual GHG RE capacity short name Green bond description committed Project ID reduction produced Expected Country savings Annual Annual Project Project energy energy Type M$ MWh kWh MW tCO2eq/yr Wind PECASA 32227 Dominican RE Construction of a 50MW wind power generation plant in the 18.50 161,700 N/A 50.0 91,000 Wind Republic northwest of the Dominican Republic. The project will utilize wind resources and reduce dependence on imported fuel. Wind Cibuk 1 33839 Serbia RE Development, construction, operation and maintenance 62.22 475,000 N/A 158.0 370,000 Wind Farm, of a 158MW wind farm in Serbia. The project will increase Dolovo renewable energy capacity and contribute to Serbia’s efforts to reduce its carbon footprint. Wind La Castellana 39065 Argentina RE Construction and operation of a 100.8MW wind power plant, 36.60 405,000 N/A 100.8 213,443 a transformation substation and a 37 km transmission line connecting the plant and the substation to the national grid in the department of Villarino. This is one of the two IFC projects under the renewable energy program in Argentina (RenovAr), creating opportunities to link Argentina’s renewable energy potential to private investments. RenovAr is an innovative renewable energy bidding program targeted at producing 20 percent of Argentina’s electricity from renewable sources by 2025. Wind Achiras 39358 Argentina RE Construction of a 48MW wind power plant, a transformation 20.70 177,000 N/A 48.0 93,404 substation and a 17 km transmission line near the city of Achiras, Argentina. This is the other one of two IFC projects under the renewable energy program in Argentina (RenovAr). Green Bond Impact Report | Financial Year 2018 18 Green Bond Eligible Project Commitments for FY18 climate sector rehabilitated constructed/ Climate loan annual GHG RE capacity short name Green bond description committed Project ID reduction produced Expected Country savings Annual Annual Project Project energy energy Type M$ MWh kWh MW tCO2eq/yr Solar FCS RE 36857 Burkina Faso RE Construction, operation and maintenance of a 23MW 10.42 38,842 N/A 23.0 15,180 Windiga solar PV power plant in Burkina Faso to increase power generation, improve energy security and diversify the country’s energy mix. Solar SS Zambia 37811 Zambia RE Construction of a new 28MW solar PV plant located in the 9.00 70,000 N/A 28.2 45,000 Lusaka South Multi-Facility Economic Zone to increase solar electricity generation capacity. Solar SS Zambia 2 38685 Zambia RE Construction of a new 47.5MW solar PV plant located in the 13.30 100,000 N/A 47.5 98,013 Lusaka South Multi-Facility Economic Zone to increase solar electricity generation capacity. Solar Masdar 39339 Jordan RE Construction, operation and maintenance of a greenfield 53.75 565,340 N/A 200.0 367,835 Baynouna 200MW solar PV plant in Amman, Jordan. The plant will diversify Jordan’s energy supply mix and improve energy security. Solar Rewa Actis 39866 India RE Financing of two 250MW solar farms for a total capactiy of 46.77 526,000 N/A 250.0 461,666 500MW in the low-income state Madhya Pradesh, India. The projects will contribute to addressing India’s growing Solar Rewa 40646 India RE electricity demand: as one of the largest solar parks to date 31.44 526,000 N/A 250.0 461,666 Mahindra in India, the two projects will add 1,052GWh annually to the grid and displace 923,332 tons of CO₂-equivalent each year. Solar Solem Uno 40372 Mexico RE Construction and operation of two greenfield solar PV 28.87 435,000 N/A 150.0 218,985 power plants with a total installed capacity of 290MW, three electrical substations (two step-up substations and one Solar Solem Dos 40374 Mexico RE maneuver substation), and a 6.6 km power transmission line 21.14 407,000 N/A 140.0 204,889 connecting the plants to the national grid. Solar Azure RG 40099 India RE Development of 200MW solar PV rooftop projects across 35.00 303,000 NA 200.0 265,941 India to increase clean energy production. Solar Azure RGA 41615 India RE 10.00 Solar* Phoenix Power 1 37591 Egypt RE Construction of a 50MW solar PV plant by Phoenix Energy 13.70 141,000 N/A 50.0 66,626 and its partners Infinity Solar SAE and IB Vogt GmbH as part of the second round of solar PV projects being implemented under the Feed-in-Tariff Program (FiT). With a total combined capacity of 590 MW, these are 13 sub-projects under the umbrella Egypt FiT project aimed at mobilizing private investment to * build the world’s largest solar photovoltaic (PV) generation park in Benban and harness the country’s exceptional solar resource. Launched by the Government of Egypt in September 2014, the program aims to develop 2,300MW of solar PV capacity and 2,000MW of wind power. Green Bond Impact Report | Financial Year 2018 19 Green Bond Eligible Project Commitments for FY18 climate sector rehabilitated constructed/ Climate loan annual GHG RE capacity short name Green bond description committed Project ID reduction produced Expected Country savings Annual Annual Project Project energy energy Type M$ MWh kWh MW tCO2eq/yr Solar* Alcazar Solar 1 37633 Egypt RE Construction of four 50MW solar PV plants by Alcazar Energy 13.25 142,600 N/A 50.0 67,430 Partners at the Benban Solar Park in Eqypt as part of the Solar* Delta Solar 37636 Egypt RE second round of solar PV projects being implemented under 13.00 142,600 N/A 50.0 67,430 the FiT program. Solar* Alcazar Solar 3 40386 Egypt RE 18.25 142,600 N/A 50.0 67,430 Solar* Alcazar Solar 4 40390 Egypt RE 18.25 142,600 N/A 50.0 67,430 Solar* TaqaArabia Solar 37637 Egypt RE Construction of 50MW solar PV plant by Taqa Arabia at the 16.80 153,944 N/A 50.0 65,731 Benban Solar Park in Egypt as part of the second round of solar PV projects being implemented under the FiT program. Solar* SP Infra Solar 39728 Egypt RE Construction of 50MW solar PV plant by Shapoorji Pallonji 13.25 140,000 N/A 50.0 66,390 Infrastructure Capital at the Benban Solar Park in Egypt as part of the second round of solar PV projects being implemented under the FiT program. Solar* Acciona Benban 1 39729 Egypt RE Construction of three 50MW solar PV plants by Acciona and 12.00 130,000 N/A 50.0 61,472 its partner Enara Bahrain as part of the second round of solar Solar* Acciona Benban 2 39995 Egypt RE PV projects being implemented under the FiT program. 12.00 130,000 N/A 50.0 61,472 Solar* Acciona Benban 3 39997 Egypt RE 12.00 130,000 N/A 50.0 61,472 Solar* SECI ARC 37580 Egypt RE Construction of one 50MW and two 20 MW solar PV plants 12.00 134,319 N/A 50.0 63,514 by SECI and its partner Desert Technologies Industries Solar* SECI Arinna 40019 Egypt RE Company Limited as part of the second round of solar PV 6.00 53,668 N/A 20.0 25,377 projects being implemented under the FiT program. Solar* SECI Winnergy 37713 Egypt RE 6.00 53,668 N/A 20.0 25,377 Geothermal Energy Dev III 39842 Philippines RE Restoration and improvement of a geothermal plant that 90.00 2,387,000 N/A N/A 1,413,015 was damaged by an earthquake. The project will improve reliability and efficiency of power supply, increase output and reduce health, safety and environmental risks. Electric Zorlu Disco 39691 Turkey EE Financing the upgrade and expansion of electricity 70.40 N/A - N/A 30,880 Power distribution network in the Oedas region, Turkey. The Distribution project will support Oedas to undertake much-needed major rehabilitation and modernization of the distribution network, helping to improve power supply reliability, reduce energy losses and enhance customer service quality. With a total combined capacity of 590 MW, these are 13 sub-projects under the umbrella Egypt FiT project aimed at mobilizing private investment to * build the world’s largest solar photovoltaic (PV) generation park in Benban and harness the country’s exceptional solar resource. Launched by the Government of Egypt in September 2014, the program aims to develop 2,300MW of solar PV capacity and 2,000MW of wind power. Green Bond Impact Report | Financial Year 2018 20 Green Bond Eligible Project Commitments for FY18 climate sector rehabilitated constructed/ Climate loan annual GHG RE capacity short name Green bond description committed Project ID reduction produced Expected Country savings Annual Annual Project Project energy energy Type M$ MWh kWh MW tCO2eq/yr Waste Fenglin III 39801 China Other Financing of a new particle board plant that will use an 40.00 N/A N/A N/A 329,210 Management Mitigation innovative technology that requires less fiber density while being lighter and physically stronger than traditional particle boards. This new technology will reduce the carbon footprint of particle boards. Transport Antalya 38506 Turkey Other Construction of Phase III of Antalya’s urban rail transport 93.04 N/A N/A N/A 931 Tramway Mitigation system that includes a new 18.2 km tramway line and procurement of 20 tram vehicles to connect Antalya’s populated but underserved northern neighborhoods. The project will support additional tramway ridership of 78,000 riders per weekday by 2023 and reduce GHG emissions. Transport Cordoba 40793 Argentina Adaption Financing climate adaptation solutions such as drainage 6.79 N/A N/A N/A N/A Infra II and flood management in connection with the construction of road transport infrastructure in Cordoba. Green Schwarz EE V 39573 Eastern EE Financing of new store expansion of Kaufland supermarkets 213.50 N/A 237,863 N/A 5,094 Buildings Europe in target countries across Eastern Europe. The stores, Region committed to obtaining EDGE certification, will showcase green building best practices and will have energy efficiency features including efficient envelope design, controlled glazing and energy-efficient lighting systems. Green Tropicalia 38846 Dominican EE Financing of a hotel and residences in Miches, Dominican 45.50 N/A 3,915,240 N/A 1,835 Buildings Republic Republic. The project will get EDGE certification once built. Green features include energy-efficient HVAC and lighting systems, use of natural ventilation, higher performance glass, low-flow plumbing fixtures, a better recycling system, and walls made of in-situ concrete with greater than 30 percent pulverized fly ash, a recycled material. Green Hystead 39423 Eastern EE Financing of upgrades and expansion of shopping malls 59.58 N/A 9,019,630 N/A 6,299 Buildings Europe into BREEAM certified green building facilities in Serbia, Region Montenegro and Macedonia to improve water and energy efficiency. Green Bond Impact Report | Financial Year 2018 21 Green Bond Eligible Project Commitments for FY18 climate sector rehabilitated constructed/ Climate loan annual GHG RE capacity short name Green bond description committed Project ID reduction produced Expected Country savings Annual Annual Project Project energy energy Type M$ MWh kWh MW tCO2eq/yr Green Santo Tomas 40421 Colombia EE Financing expansion of the country’s oldest university in 25.00 N/A 230,800 N/A 51 Buildings five cities. The university is committed to obtaining EDGE certification as well as net zero carbon on its campuses. The university will also implement energy efficiency measures compliant with some of the best global practices, anticipating that the new measures will help it become carbon neutral by 2026. Green Genomma 40144 Mexico EE Construction of a pharmaceutical manufacturing facility 29.35 N/A 1,659,650 N/A 729 Buildings Lab in Mexico. The project is committed to obtaining EDGE certification and will incorporate resource efficiency criteria in the design of its new facility to reduce energy and water consumption. Green NEPI Bond 38149 Romania EE Investing €50 million in a €500 million 7-year senior 58.15 N/A - N/A - Buildings unsecured Eurobond issued by a real estate company. IFC’s funds are earmarked for green property development and acquisitions in Romania. This was the first 7-year Eurobond issued by a non-sovereign issuer listed on the Bucharest Stock Exchange, and is still one of the few listed corporate bonds available for trading in Romania’s emerging corporate bond market. Green GREI Bond 41142 Romania EE Investing €50 million in a €550 million 7-year senior 61.09 N/A - N/A - Buildings unsecured Eurobond issued by a fully integrated real estate developer of high-quality commercial properties in Romania and Poland. IFC’s funds are earmarked for the construction of green commercial buildings in Romania. The bond is the largest listed Eurobond issued by a non-sovereign issuer to date in Romania’s emerging capital market. Green FHIPO Loan 39740 Mexico EE Financing of a Mexican real estate investment trust to grow 53.69 N/A - N/A 3,300 Banking its mortgage portfolio that will be consolidated into the first green mortgage REIT, a unique asset class in the Mexican capital market. It will increase liquidity of residential mortgage originators focused on the low- and middle-income segment. Green DCM BDO 40419 Philippines RE Financing of renewable energy, energy efficiency and green 150.00 - N/A - 93,000 Banking Green buildings. Green Bond Impact Report | Financial Year 2018 22 Green Bond Eligible Project Commitments for FY18 climate sector rehabilitated constructed/ Climate loan annual GHG RE capacity short name Green bond description committed Project ID reduction produced Expected Country savings Annual Annual Project Project energy energy Type M$ MWh kWh MW tCO2eq/yr Green DCM TMB 41118 Thailand EE/RE Financing of renewable energy, energy efficiency and 60.00 - - - 59,528 Banking SMEGreen green buildings. Green TSKB Climate 39330 Turkey EE/RE/Other Financing of sustainable energy generation and green 65.00 - - - 78,565 Banking Mitigation/ buildings in Turkey. Adaptation Green DCMIs 39403 Turkey EE Financing of green residential mortgage portfolio of 50.40 N/A - N/A - Banking Mortgag DPR certified green buildings. Green DCM Akbank 39781 Turkey Other Financing of green residential mortgage portfolio of 77.42 N/A N/A N/A - Banking Cbond Mitigation certified green buildings. Green DCM-YKB 39501 Turkey Other Financing of green mortgage portfolio of certified green 22.90 N/A N/A N/A - Banking CovBond Mitigation buildings. Green SocGen EF 39086 Brazil EE Financing that will enable businesses to replace outdated 20.12 N/A - N/A 218,409 Banking Brazil machinery with more energy efficient and eco-friendly equipment reducing their carbon footprint. Green DCM Gaucho 41090 Argentina EE/RE Financing of sustainable energy projects. 100.00 - - - 157,515 Banking GB Green DCM- 40005 Lebanon EE/RE/Other Financing of energy efficiency, renewable energy and 45.00 - - - 25,058 Banking FransaGreenB Mitigation green infrastructure projects in Lebanon. Green ONE Bank 41420 Bangladesh EE/RE Financing of rooftop solar PV and energy efficiency 20.00 - - - 49,176 Banking Green projects in Bangladesh. Green Co-op Bank III 41133 Kenya EE/RE/Other Financing of climate-related projects in Kenya, including 30.00 - - - 61,140 Banking Mitigation biomass, rooftop solar PV and energy efficiency. Green DCM ABFL 40557 India RE Financing of solar energy projects in India. 153.41 - N/A - 120,104 Banking GreBond Total 2,204.55 8,213,881 15,063,183 2,235.5 6,328,011 Green Bond Impact Report | Financial Year 2018 23 Green Bond Impact Report | Financial Year 2018 24 Appendix A IFC Green Bond Commitments Reconciliation In FY18, we have undertaken an internal review and reconciliation of commitments and disbursements towards a portfolio of FY14-FY17 Green Bond Eligible Projects. Adjustments to Disbursements Hereunder we outline corrections and adjustments with respect to commitment FY17: and disbursement numbers reported by IFC in prior years (FY15, FY16 and FY17). • Total disbursements: corrected to $1,356 million. FY17 Green Bond Impact Report IFC Green Bond Commitments by Region and IFC Green Bond Commitments included only a subset of disbursements for newly-committed projects in the by Sector breakdowns on pp. 12-13 of this report reflect all these corrections and same year ($899 million). The total amount of disbursements for FY17 towards adjustments. Green Bond Eligible Projects is $1,356 million. FY16: Adjustments to Commitments • Disbursements to Multi Region: corrected to reflect zero disbursement. The disbursement of $18 million for FY16 reported in FY17 Green Bond Impact Report FY17: relates to disbursement in East Asia and the Pacific region in the same year. • Commitments to Renewable Energy sector and Commitments to Energy Efficiency sector: corrected to $845 million and $579 million, respectively. FY17 Green Bond Impact Report has the labels reversed. • Commitments to Multi Region: corrected to $24 million FY16: • Commitments in Latin America and the Caribbean region, Commitments to Renewable Energy sector and Total Commitments: corrected to $90 million, $306 million and $961 million, respectively. FY17 Green Bond Impact Report considered a potential project, not included in FY16 Green Bond Eligible Portfolio commitments FY15: • Commitments in Europe and Central Asia region, Commitments to Energy Efficiency sector and Total Commitments: adjusted from $382 million to $370 million; from $296 million to $284 million; and from $1,155 million to $1,143 million, respectively due to a subsequent commitment reduction for project #35012 Green Bond Impact Report | Financial Year 2018 25 Appendix B IFC Green Bond Program Process The IFC Green Bond Program follows best Projects eligible for green bond financing include the following sectors: market practices and is compliant with the Green Bond Principles. Energy efficiency (EE): investments in Renewable energy (RE): investments in Resource efficiency: investments to improve Cleaner technology production: equipment, systems equipment, systems industrial processes, investments in and services which and services which services and products manufacturing result in a reduced enable the productive that enhance the of components use of energy per use of energy from conversion efficiency of used in energy unit of product or renewable resources manufacturing inputs efficiency, renewable service generated, such as wind, hydro, (energy, water, raw energy or cleaner such as waste heat solar and geothermal materials) to saleable production, such as recovery, cogeneration, production outputs, including solar photovoltaics, building insulation, reduction of impact at manufacture of energy loss reduction source turbines, building in transmission and insulation materials distribution Financial intermediaries: lending to financial intermediaries with the requirement that IFC investments are on-lent to specific climate projects that fit IFC green bond eligibility criteria; and Sustainable forestry Stage 1: Stage 2: Use of Proceeds Evaluation and Selection Proceeds from IFC green bonds are allocated to a sub-portfolio that is linked to In addition to meeting the green bond eligibility criteria, all projects financed lending operations for climate-related projects (’Eligible Projects’). Only the loan by IFC comply with IFC Performance Standards on Environmental and Social portions of the projects are eligible for funding via green bond proceeds (equity Sustainability and the IFC Corporate Governance Framework and have undergone investments and guarantees are ineligible). a rigorous due diligence process. Eligible Projects are selected from the IFC climate-related loan portfolio, which The Center for International Climate and Environmental Research at the University comprises projects that meet IFC Definitions and Metrics for Climate-Related of Oslo (CICERO) has reviewed IFC’s project evaluation and selection criteria. Activities. In a few cases of back-to-back financing, net proceeds from a green CICERO’s Second Opinion is published on IFC’s website. bond are on-lent by IFC directly to an individual Eligible Project. Green Bond Impact Report | Financial Year 2018 26 Appendix B IFC Green Bond Program Process Stage 3: Stage 4: Management of Proceeds Reporting All proceeds from IFC green bonds are set aside in a designated Green Cash IFC’s Green Bond Impact Report follows the Green Bond Principles’ reference Account and are invested in accordance with IFC’s conservative liquidity framework for reporting ’Working Towards a Harmonized Framework for Green policy until disbursement to Eligible Projects (except a few cases when the Bond Impact Reporting’, which aims at ensuring integrity of the market through proceeds are on-lent directly to an Eligible Project). The Green Cash Account increased transparency. tracks the difference between the balance of outstanding green bonds and The report provides a list of projects that received funding from green bond outstanding Eligible Project loans. The Green Cash Account balance decreases proceeds and subject to confidentiality considerations, it also provides a as disbursements are made towards Eligible Projects or the green bonds mature brief description of each project, the climate loan amount, and the expected and increases as new green bonds are issued or Eligible Projects are repaid. environmental impact. The report only covers projects eligible for green bond Disbursement requests for Eligible Projects take place in accordance with IFC’s financing. established policies and procedures and are often made over a period of time depending on project milestones. For more information on IFC’s climate business visit www.ifc.org/climatebusiness. In some cases, the climate-related component of a project supported by green bonds may be a part of a larger investment. In such cases, the green bond portfolio only finances the eligible portion of the project. Monitoring of the projects comprises regular reports by the investee company on project activities and performance throughout the lifetime of investment. Green Bond Impact Report | Financial Year 2018 27 Appendix C IFC Impact Reporting Approach IFC Access to Information Policy IFC’s GHG Methodology and Climate-Related Definitions and Metrics are available at IFC Climate Business website.5 The Access to Information Policy is the cornerstone of the IFC Sustainability Reporting allows for quantification of a few core indicators, but it is important to Framework and articulates our commitment to transparency. appreciate the limitations of data reported. The main considerations to interpret We seek to provide accurate and timely information regarding our investment and results are: advisory activities to clients, partners and stakeholders, and we disclose relevant Scope of results: Reporting is based on ’ex-ante’ estimates at the time of project information pertaining to project, environmental and social implications, as well appraisal and mostly for direct project effects. as expected development impact prior to consideration by our Board of Directors. Uncertainty: An important consideration in estimating impact indicators is This commitment also applies to projects funded by the Green Bond Program. that they are often based on a number of assumptions. While technical experts aim to make sound and conservative assumptions that are reasonable, based on information available at the time, the actual environmental impact of the projects Impact indicators may diverge from initial projections. In general, behavioral changes or shifts in baseline conditions can cause deviations from projections. IFC reports on a number of core indicators for projects included in the Green Bond Program in accordance with the Harmonized Framework for Comparability: Caution should be taken in comparing projects, sectors, or whole Impact Reporting developed by a group of multilateral development banks portfolios because baselines (and base years) and calculation methods may vary including IFC. The four core indicators are as follows: significantly. In addition, the cost structures between countries will also vary, so 1. Annual energy savings that developing cost-efficiency calculations (results per unit of amount invested in 2. Annual Greenhouse Gas (GHG) emissions reduced or avoided eligible projects) could place smaller countries with limited economies of scale at a 3. Annual renewable energy produced disadvantage and not take into consideration country-specific context. 4. Capacity of renewable energy plant(s) constructed or rehabilitated. Omissions: Projects may have impact across a much wider range of indicators than captured in the reporting and may have other important development impacts. Furthermore, there may be some projects for which the proposed core Interpreting impact indicators indicator is not applicable or the data are not available. The impact indicators are tracked on a project-level basis and have not While IFC takes efforts to improve the consistency and availability of reported been prorated for the portion of IFC’s contribution. Investments in financial metrics over time, projects with climate impact can span over a wide diversity of intermediaries ensure that climate finance is available for smaller clients that sectors and sub-sectors making complete harmonization of reporting metrics IFC cannot reach directly, such as small-sized and medium-sized enterprises. It is challenging. important for IFC that our partner financial intermediaries assess climate impacts of their investment portfolio, and therefore, IFC has developed the application CAFI (Climate Assessment for FI Investment) which enables financial intermediary clients to monitor results for relevant climate-related investments. 5 https://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/Climate+Business Green Bond Impact Report | Financial Year 2018 28 Green Bond Impact Report | Financial Year 2018 29 Authors and Contacts Authors This report was prepared by IFC’s Climate Business and Treasury Market Operations Departments. The authors are Zauresh Kezheneva, Sophie Peeters, Berit Lindholdt-Lauridsen, Maria Paraan, Olga Khlebinskaya, Emma-Kate Symons, Elena Panomarenko, Arielle Nicole Alexander, and Rebecca Ann Menes. The report’s design is by Frank Schroeder. Contacts IFC Investor Relations International Finance Corporation 2121 Pennsylvania Avenue NW Washington, DC 20433 Email: investors@ifc.org Twitter: @IFC_Investors ifc.org/investors Green Bond Impact Report | Financial Year 2018 30 Disclaimer This report has been prepared for information purposes only. IFC does not make any warranties or representations as to the completeness or reliability of the information, opinions or conclusions expressed herein. The reports and any other information contained or otherwise accessible through the websites mentioned in this report are historical and only speak as of their respective date. IFC is under no obligation to update these materials. This report is not intended to provide the basis for the evaluation of any securities issued by IFC. This report should not be construed and does not constitute an invitation, recommendation or offer to subscribe for or purchase any of IFC’s securities. Under no circumstances shall IFC or its affiliates be liable for any loss, damage, liability or expense incurred or suffered which is claimed to have resulted from use of this report, including without limitation any direct, indirect, special or consequential damages, even if IFC has been advised of the possibility of such damages. For additional information concerning IFC, please refer to IFC’s current Information Statement, financial statements and other relevant information available at www.ifc.org/investors. Green Bond Impact Report | Financial Year 2018 31 October 2018 Green Bond Impact Report | Financial Year 2018 32