Bonds for Sustainable Development INVESTOR NEWSLETTER • MAY 2016 In 2015, the global community reached historic agreements Dignity on the new Global Goals for Sustainable Development End poverty and and the Climate Change fight inequality Convention in Paris. The Global Goals represent a commitment to a more ambitious agenda for international development in the next 15 years. They reflect a Planet dream for a world in which everyone, Prosperity Protect our everywhere can reach their full potential, and they seek to preserve Grow a strong, the planet for all future generations. inclusive & ecosystems for transformative all societies and economy our children “Working together, we can promote inclusive and sustainable growth, as well as opportunity for the poor and the vulnerable. We can be the People generation that ended extreme poverty.” ensure health, knowledge, & Jim Yong Kim inclusion of women President & children The World Bank Group “Buying World Bank Sustainable Development Bonds means you do good and Photos: © Curt Carnemark / The World Bank you do well – you're investing in Justice Partnership education, health and essential infrastructure, and you're Promote safe & Catalyse global changing the world.” peaceful societies, solidarity for & strong institutions sustainable Arunma Oteh development Vice President and Treasurer The World Bank 1 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • MAY 2016 WORLD BANK BONDS SUPPORT SUSTAINABLE DEVELOPMENT The World Bank will play a World Bank Commitments key role in helping countries FY15 Commitments, totaling US$23.5 billion BY SECTOR achieve the Global Goals Governance (Public Finance, The International Bank for Reconstruction and Development Administration and Law) Industry & Trade 18% 22% (IBRD), also known as the World Bank, anchors its mission in two goals: ending extreme poverty and promoting shared prosperity in a sustainable manner. Transportation & In 2015, the global community agreed to accelerate development Information and Education Communications 6% progress in the next 15 years by improving the conditions that Technology 14% affect people’s livelihoods and the sustainability of the planet. The shared commitment is to work towards 17 goals that Agriculture & address poverty, lack of opportunity, poor health and education, Food Security Health & Social 3% Services inadequate access to basic services, unequal opportunity to 13% prosper, among other areas. Energy Water & Sanitation 13% 11% At the same time, the world is being confronted by considerable challenges from more frequent and severe natural disasters, BY REGION greater climate risk, natural resource degradation and unprecedented levels of forced displacements – threatening development progress and heightening the urgency and importance of boosting global growth, resilience and opportunity. ECA 28% The World Bank is a committed partner in these global efforts EAP 19% and will play a key role in helping countries achieve the Global MNA Goals and leveraging the private sector as a critical partner in 14% SAR financing this ambitious agenda. Its bonds offer investors the 9% opportunity to support the financing of projects and programs that AFR help countries achieve their sustainable development objectives LAC 5% 24% by bringing the best global development knowledge to tackle the world’s toughest challenges. It has over 50 years of development experience helping countries grow their economies, invest in their people and insure them against falling into poverty. Africa (AFR) US$1.2 billion; East Asia & Pacific (EAP) US$4.5 billion; Europe & Central Asia (ECA) US$6.7 billion; Latin America & Caribbean (LAC) US$5.7 billion; Middle East & North Africa (MNA) Summary Lending and Borrowing Information US$3.3 billion; and South Asia (SAR) US$2.1 billion (in US$ billion) FY13 FY14 FY15 Annual Commitments 15.2 18.6 23.5 Loans Outstanding 143.8 154.0 157.0 Annual Debt Issuance 26.6 50.6 58.0 Total Debt Portfolio* 135.0 152.6 158.9 * After derivatives Photo: © Curt Carnemark / The World Bank Recent World Bank Bond Issues NZD 600 million 3.5% global bond due 01/2021 AUD 550 million 2.8% global bond due 01/2021 USD 5 billion 0.875% global bond due 07/2018 USD 1 billion 1.75% global bond due 04/2023 USD 3 billion 1.375% global bond due 03/2020 USD 185 million 1.75% callable Italian retail bond due 03/2026 2 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • MAY 2016 ADDRESSING THE TOUGHEST DEVELOPMENT CHALLENGES In FY15, IBRD committed $23.5 billion through 115 projects to help developing countries find solutions to the toughest global and local development challenges. The World Bank works across intersecting and complex sectors. Highlights of main themes and sectors and examples of individual projects include: Promoting growth, jobs and the private sector: Kazakhstan (P150183) Helping countries grow by seeking more effective ways of enhancing the Skills and Jobs Project provides investment climate, improving competitiveness, boosting the volume and training to unemployed or under- value of trade, and fostering innovation and entrepreneurship. World employed people that is aimed at Bank supported projects that: improving employment outcomes • Create jobs. and skills for better jobs to transition • Strengthen the business environment. the country towards a knowledge • Build resilient and inclusive financial systems and develop local based economy. capital markets. • Support agricultural growth. IBRD’s commitment: $100 million Investing in critical infrastructure: Lebanon (P125184) Developing infrastructure to create growth opportunities and to reduce Photos (From Top): © Maxim Zolotukhin / The World Bank; © The World Bank; © The World Bank; © Dominic Chavez / The World Bank; © Dominic Chavez / The World Bank poverty. World Bank supported projects that: Water Supply Augmentation Project • Expand access to energy and accelerate energy efficiency gains. addresses the impact of drought, • Build livable, resilient cities. depleted infrastructure and rapid • Increase access to water & sanitation and manage increasingly population growth on the sustainable scarce water resources. development of the water sector • Improve transportation and information and communication benefiting 1.6 million people. technology (ICT). IBRD’s commitment: $474 million • Support public-private partnerships (PPPs). Confronting climate change and sustaining natural resources: China (P133017) Working on climate change, strengthening natural resources Guilin Integrated Environment management, reducing pollution, ensuring food security, and helping Management Project to support countries make sustainable development choices. World Bank water management and anti-pollution supported projects that: efforts for the Lijiang River to provide • Build low-carbon, climate-resilient cities. 248,000 people with improved water • Accelerate energy efficiency and renewable energy investment. access and remove 1,113 tons of • Support climate-smart agriculture and nurture forest landscapes. BOD* pollution per year. • Manage air-, land- and water-based pollution and its impacts on IBRD’s commitment: $100 million health. Advancing inclusive development and opportunities for all: Ukraine (P144893) Helping countries to build healthier, more-equitable, and inclusive Serving People, Improving Health societies, with opportunities for everyone to achieve his or her potential. Project to improve the quality and World Bank supported projects that: availability of health services to • Provide quality, affordable health care. millions of Ukrainians in selected • Prevent HIV/AIDS and other communicable diseases. regions, and contributing to more • Scale up support for early childhood nutrition. efficient use of resources in the • Expand access to education. healthcare system. • Lift constraints and empower women and girls globally. IBRD’s commitment: $215 million • Expand financial access. Building resilience and managing risks: Egypt (P145699) Building societies’ resilience by addressing the challenges of fragility, conflict, and violence where they occur, mitigating and managing the Strengthening Social Safety Nets effects of natural disasters, and ensuring that adequate social safety Project to support the Government’s nets are in place. World Bank supported projects that: plan to provide income support and • Identify and reduce the causes of fragility, conflict and violence. expand social inclusion to almost 1.5 • Develop the private sector and job opportunities in fragile and million poor Egyptian families with conflict-affected situations. young children, elderly, and persons • Mitigate the risks of natural disasters. with severe disabilities. • Provide social protection programs and social safety nets. IBRD’s commitment: $400 million * Biochemical Oxygen Demand 3 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • MAY 2016 OFFERING INVESTORS FINANCIAL AND SOCIAL RETURNS Through the World Bank’s bonds, investors support the financing of sustainable development projects and, at the same time, benefit from IBRD’s financial strength. It’s triple-A credit rating is based on its solid financial structure, conservative financial policies, strong capital adequacy and liquidity, and support and capital backing from its sovereign shareholders. The World Bank has an established process for selecting and monitoring projects. I. Project eligibility criteria All World Bank projects are anchored in two goals: ending extreme poverty and promoting shared prosperity in a sustainable manner. See page 3 for examples. II. Process for selecting projects Priorities identified through a systematic country diagnostic (SCD) study performed to identify the biggest constraints and opportunities for reducing poverty and inequality, the country’s development goals, and the Bank’s comparative advantage determine the development program in each country which is laid out in a Country Partnership Framework (CPF). III. Management of bond proceeds Working in partnership with client countries, individual projects and programs are Bond proceeds are invested in accordance with IBRD’s conservative liquidity identified, assessed and appraised with the country including feasibility studies of policy until they are used for project disbursements, which take place in the environmental, social and financial sustainability. accordance with IBRD’s established policies and procedures often over a period Projects must demonstrate consistency with the agreed CPF and the World of years. Bank’s twin goals in order to be approved by the Board of Executive Directors. Government agencies implement the projects and report on progress; and the IV. Monitoring and reporting on impact of projects World Bank monitors the agreed milestones towards achieving the project’s The progress, outcomes and impacts of projects are monitored throughout objectives through formal reviews that are conducted at least twice a year. implementation and the ultimate effectiveness of the operation is evaluated in terms of the objectives they were set to achieve. Project information is available This country engagement approach is supported by reviews that identify lessons on the main World Bank website. learned, steer midcourse corrections, and capture end-of-cycle learning. These reviews contribute to the World Bank Group’s knowledge base and enhance the For more information see: development effectiveness of future programs. http://treasury.worldbank.org/cmd/htm/about_sustainable.html Four Pillars of the World Bank’s Triple-A Credit Rating • Global diversification • Statutory lending limit: • Prudential minimum • 189 sovereign members/ • Lending only to sovereign outstanding loans must liquidity is equal to shareholders and sovereign guaranteed be less than paid-in highest six months of • In addition to paid-in Prudent Risk Management Substantial Liquidity Strong Capital Base Quality Loan Portfolio projects and callable capital plus projected debt service capital, shareholders reserves over next 18 months plus have committed additional • Borrowing clients are also • Equity-to-loans ratio half of net approved loan callable capital to satisfy shareholders; increased remains above the disbursements debt holder claims incentive to repay minimum of 20% set • Actual liquidity exceeds • Shareholders responsible • Preferred creditor status by the Board excluding minimum to increase for the full amount of their recognized by rating callable capital financial flexibility callable capital regardless agencies and financial market participants • Policies are designed to • Liquid assets of others' ability to fulfil minimize the need for a conservatively managed their obligations • Concentration limits for call on capital against strict guidelines: • Largest shareholders as individual borrowing • Foreign currency and highly rated (AA- or of June 30, 2015: USA countries interest rate risks better) fixed income (17.1%); Japan (7.9%); • Policy of freezing government and agencies managed carefully to China (5.1%); Germany additional lending if securities and AAA minimize risks (4.6%); France (4.1%); repayments not on time corporate bonds and ABS and UK (4.1%) 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 May 2016 4 WORLD BANK BONDS FOR SUSTAINABLE DEVELOPMENT | INVESTOR NEWSLETTER • MAY 2016