Bonds for Sustainable Development INVESTOR NEWSLETTER • SUMMER 2017 Highlights Celebrating 70 Years in the Capital Markets | page 2 Project Impact Highlights | page 2 First-ever Pandemic Bonds for Investors | page 3 FY17 Funding Program Highlights | page 4 SDG-Linked Notes | page 4 World Bank Green Bond Update | page 4 Photos: © The World Bank 1 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • SUMMER 2017 World Bank Celebrates 70 Years Connecting Capital Markets to Development The International Bank for Reconstruction and Development (IBRD), also known in the capital markets as the "World Bank," issued its first bond on July 15, 1947. Since then, the World Bank’s history and track record of innovation show the evolution of capital markets as a force for good. From the first currency swap in 1981, and first global bond in 1989, to SRI-themed bonds in 2005, green bonds in 2008, and bonds linked to the Sustainable Development Goals in 2017, IBRD has been developing products that use financial markets to reduce lending costs for its member countries and connect investors with the impact of their investments. World Bank products also help manage risks like natural disasters and pandemics. Read more: treasury.worldbank.org/cmd/ htm/70-years-in-capital-markets.html Offering Investors Financial and Social Returns World Bank projects are focused on investing in people, fostering inclusive growth and helping countries building resilience to crises. Through investments in World Bank bonds, investors support sustainable development programs and, at the same time, benefit from IBRD’s financial strength as a triple-A issuer. Read more about IBRD as an issuer: treasury.worldbank.org/cmd/htm/ about_capital.html Supporting Sustainable Development Photos (L-R): © Mariana Ceratti/World Bank; ArmineGrigoryan/World Bank; Gerardo Pesantez/World Bank; Mohamed Azakir/World Bank; Arne Hoel/World Bank; World Bank In fiscal year 2017, IBRD committed USD 23 billion in new lending for 133 projects to help developing countries find solutions to the toughest global and local development challenges (see map). Examples of IBRD-financed projects with expected impacts include: Jamaica Armenia IBRD Financing: $42 million IBRD Financing: $15 million Improving Urban Infrastructure Improving Education Readiness and Services and Quality • >50,000 people have improved solid • 2,400 preschool enrollees waste management services • 120 community-based preschools • >10,000 people have electricity • 107 high schools with improved • 1,200 families with water pipe access education resource • 4,500 people have jobs training http://projects.worldbank.org/P130182/ http://projects.worldbank.org/ education-quality-project?lang=en P146460?lang=en Panama Jordan Botswana China IBRD Financing: $40 million IBRD Financing: $300 million IBRD Financing: $146 million IBRD Financing: $120 million Connecting rural mothers and children Providing employment opportunities to Improving water security and efficiency Promoting renewable energy in with quality health services Jordanians and Syrian refugees in drought vulnerable areas educational institutions • 200,000 people have access to • 130,000 work permits issued to • 460,000 people benefit from • 100MW of renewable capacity mobile health units Syrians by 2019 augmentation/rehabilitation of installed serving 650,000 students in • 96% of babies <1 year of age with • 1,000 officially established household existing water supply systems 1,000 schools complete vaccination records enterprises, including 100 Syrian- • 177,000 people benefit from • 89,590 tons of CO2eq. emissions • 93% of births attended by trained owned improved wastewater treatment and reduced annually personnel • 30% reduction in private sector sludge management systems http://projects.worldbank.org/P125022/ http://projects.worldbank.org/P106445/ regulatory burden http://projects.worldbank.org/ cn-beijing-energy-efficiency-emission- health-equity-performance-improvement- http://projects.worldbank.org/ P160911?lang=en reduction-demo?lang=en project?lang=en P159522?lang=en Read more about the World Bank’s process for selecting and monitoring projects: http://projects.worldbank.org/ 2 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • SUMMER 2017 Investing for Impact Proceeds raised through all World Bank bonds are used to support the financing of sustainable development in IBRD’s member countries. Global Bond Snapshot First-ever On January 18, 2017, an oversubscribed transaction raised USD 5 billion that offered investors a 5-year USD benchmark Pandemic Bond Launched bond at 25.45 basis points over US Treasury bonds. The order book was more than USD 7.3 billion with 137 orders. Read more: bit.ly/2unzsMf On June 28, 2017, the World Bank launched specialized Summary Terms and Conditions bonds aimed at providing financial support to the Issuer Rating: Aaa/AAA Pandemic Emergency Financing Facility (PEF), a facility created by the World Bank to channel surge funding to Tranche: 5-year developing countries facing the risk of a pandemic. Total Amount: USD 5 billion Settlement Date: 1/26/2017 This marked the first time that World Bank bonds are being used to finance efforts against infectious diseases, Maturity Date: 1/26/2022 and the first time that pandemic risk in low-income Coupon: 2.00% per annum countries is being transferred to the financial markets. Coupon Payment Dates: Paid semi-annually on January 26 and July 26 of each year The PEF will provide more than USD 500 million Issue Price: 99.457% to cover developing countries against the risk of pandemic outbreaks over the next five years, through a Issue Yield: 2.115% combination of bonds and derivatives, a cash window, and future commitments from donor countries. Use of Proceeds. The bond proceeds are used by IBRD in order to provide financing, risk management products, other Read the press release: bit.ly/2u7ph3h financial services, access to experts and a pool of knowledge in development-related disciplines to the governments of IBRD’s borrowing members so that they can achieve equitable and sustainable economic growth in their national economies and find sustainable solutions to pressing regional and global With this new facility…we are economic and environmental problems. Projects supported by leveraging our capital market IBRD undergo a rigorous review and approval process aimed at expertise... to serve the world’s safeguarding equitable and sustainable economic growth. IBRD integrates five cross cutting themes into its activities helping its poorest people. This creates Photos: © Rama George-Alleyne/World Bank borrowing members create sustainable development solutions an entirely new market for to end extreme poverty and promote shared prosperity: climate pandemic risk insurance. change, gender, jobs, public-private partnerships and fragility, Jim Yong Kim conflict and violence. World Bank Group President Administrative expenses are covered by the World Bank’s net income, i.e., revenues the World Bank earns from the financial services it provides to its member countries (lending, risk management and advisory services), and earnings from investments and equity management. 3 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • SUMMER 2017 Using Capital Markets to Link Investors to Sustainable Development Funding Program for Fiscal Year 2017 World Bank Recognized for Leadership in Annually, the World Bank raises USD 50-60 billion to support its Sustainable Investing lending to middle income countries for sustainable development In April 2017, Heike Reichelt, Head of programs. In fiscal year 2017, IBRD raised USD 56 billion across Investor Relations & New Products at 22 currencies and 579 transactions. Read more: bit.ly/2fc5AR9 the World Bank, received the Ceres USD AUD and Trillium Asset Management 74% 3% Joan Bavaria Award for Building EUR 7% Sustainability into the Capital Markets. Structured Notes GBP The award is given annually to honor $16.2 4% inspiring global leaders working to Benchmark/ Global Bonds INR 2% move capital markets toward a system $28.9 JPY that balances economic prosperity Other Plain Vanilla Bonds 2% with social and environmental issues. Reichelt accepting the 2017 Joan $10.9 OTHER Read more at www.ceres.org and at Bavaria Award in San Francisco 8% bit.ly/2vsBPBG The Joan Bavaria Award adds to the list of the World Bank's World Bank Issues First SDG-linked Bonds milestones in connecting capital markets to sustainable development. In October 2016, mtn-i recognized the World In March 2017, the World Bank issued Bank’s EUR 50 million Green Equity Index-Linked Notes as bonds that for the first time directly link SRI Deal of the Year and awarded the Pilot Auction Facility returns to the performance of companies Emission Reduction Notes with its Editor's Award. KangaNews advancing global development priorities also recognized the World Bank with several awards for deals set out in the Sustainable Development in Australian and New Zealand dollars. For more on these and Goals. Read more: bit.ly/2vwsw4t other awards: treasury.worldbank.org/awardspublications The Sustainable Development Goals-linked bond is an innovation that demonstrates the powerful role of capital markets in connecting savings with development priorities, while In April 2017, the World Bank surpassed the USD 10 billion offering investors an attractive risk-reward (equivalent) in green bond issuance, with a USD 350 million profile. Looking ahead, we anticipate coming private placement for Folksam, a Swedish insurance company to market with similar issuances that would known for its long-term commitment to sustainable social development. Read more: bit.ly/2v1IikR. Since 2008, World attract a range of investors across the globe. Bank has raised over USD 10 billion in green bonds through Arunma Oteh more than 130 transactions covering 18 currencies. More on World Bank Vice President and Treasurer World Bank Green Bonds: treasury.worldbank.org/greenbonds US Government Investors Change Legislation for World Bank’s Triple-A Rated Bonds US government investors in search of high quality credit investments have been increasingly interested in World Bank bonds. Several have amended their investment rules to include World Bank and other supranational bonds as eligible securities for their portfolios. For example, in 2014, several local investors from the State of California introduced changes to their investment guidelines, following an amendment to the state investment code for local investors. Similar changes have been made around the US, allowing more treasuries from counties, cities and towns to benefit from financial and social returns offered by triple-A rated World Bank bonds. About the World Bank: The World Bank (International Bank for Reconstruction and Development, About the World Bank Group: The World Bank Group consists of five separate legal organizations IBRD), rated Aaa/AAA (Moody’s/S&P) operates as a global development cooperative owned by 189 member working towards a common mission to eradicate extreme poverty and promote shared prosperity. countries. The World Bank has two main goals: to end extreme poverty and promote shared prosperity. It It includes International Bank for Reconstruction and Development (IBRD), the International Development provides its members with financing, expertise and coordination services so they can achieve equitable and Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency sustainable economic growth in their national economies and find effective solutions to pressing regional and (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). Both IBRD and IFC are global economic and environmental problems. issuers of bonds. DISCLAIMER: This investor update has been prepared by the World Bank (International Bank for Reconstruction and Development, IBRD) for information purposes only, and the IBRD makes no representation, warranty, or assurance of any kind, express or implied, as to the accuracy or completeness of any of the information contained herein. This newsletter may include information relating to certain IBRD securities. Any such information is provided only for general informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy any IBRD securities. The securities mentioned herein may not be eligible for sale in certain jurisdictions or to certain persons. Email: debtsecurities@worldbank.org Tel: +1 (202) 477 2880 Web: http://treasury.worldbank.org/capitalmarkets/ Address: Investor Relations, Capital Markets Department 1818 H Street NW, Washington, DC 20433, USA Published in August 2017 4 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • SUMMER 2017