Green Bond Impact Report FINANCIAL YEAR 2019 Green Bond Impact Report FINANCIAL YEAR 2019 Contents 2 FY19 Highlights 3 6-Year Cumulative Program Highlights 4 Letter from the Treasurer 5 Directors’ Corner 6 The ABCs of IFC’s Climate Business 8 IFC Climate Business Overview for FY19 9 IFC Green Bond Program Overview for FY19 12 Featured Project: Diversifying Jordan’s Energy Mix by Crowding in Private Capital for Wind Energy 15 IFC Green Bond Commitments by Region 16 Featured Project: Delivering Low-Cost, Low-Carbon Energy to Power Further Economic Growth in Vietnam 19 IFC Green Bond Eligible Project Commitments by Sector 20 7 Facts about IFC’s Role in the Green Bond Market 22 Shining a Light on Green Bonds Transparency: A Guide to IFC’s Climate Assessment for Financial Institutions Platform 24 Keeping up with EGO: An update on the Amundi Planet Emerging Green One Fund 25 Real Economy Issuers, the Next Frontier: Showcasing the Real Economy Green Investment Opportunity Fund 26 Green Bond Eligible Project Commitments for FY19 34 Appendix A: IFC Green Bond Commitments and Disbursements Reconciliation 35 Appendix B: IFC Green Bond Program Process 37 Appendix C: IFC Impact Reporting Approach 38 Authors and Contacts 38 Disclaimer 1 FY19 Highlights 37 GREEN BONDS totalling 24 new projects committed across 6 sectors Energy Efficiency $1.6 billion 11 in Biomass Expected to reduce: Green Banking 137,056 MWh in energy Green Buildings CURRENCIES consumption per year, equivalent to electricity use of 16,900 homes over one year Solar Energy Wind Energy IMPACT 1 Expected to construct: 1,251 megawatts in renewable energy capacity Expected to reduce: Expected to generate: greenhouse gas emissions by 3,053,627 megawatt 2.6 million metric tons of hours in renewable Co2-equivalent per year, energy in one year, equivalent to the energy equivalent to 113.5 million use of 260,000 homes trash bags of waste recycled (the size of Luxembourg)2 instead of landfilled over one year 1 https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator 2 2 https://statistiques.public.lu/catalogue-publications/luxembourg-en-chiffres/2018/luxembourg-figures.pdf Celebrating Transparency: Between FY14-19 133 6-year Cumulative Impact Highlights IFC’s green bond program began in 2010 and although IFC had previously been reporting on the use of proceeds for its Green Bond Program, in FY14 we began reporting in accordance with the Harmonized Framework for Impact Reporting. GREEN BONDS This change represented a response to investor requests for more robust reporting. IFC set a precedent by upholding a higher standard of transparency totaling $7.1 billion through the provision of more data points and information per project. 6-YEAR IMPACT SUMMARY 18 in Expected to reduce: 721,223 megawatt hours in energy consumption per year, sufficient to CURRENCIES5 Expected to power 89,000 homes (the size of reduce: the Isle of Man, UK)3 for one year greenhouse gas emissions by 18.4 million metric tons of 200 projects CO2-equivalent per year, Expected to generate: committed totaling 20,468,892 megawatt hours of renewable energy in one year, $7.7 billion equal to taking 3.9 million equivalent to the energy use of a passenger cars off the road country the size of Ireland4 for one year 3 https://www.gov.im/media/1355784/2016-isle-of-man- census-report.pdf 4 http://www.seai.ie/Publications/Statistics_Publications/ Expected to construct: Energy_in_Ireland/Energy-in-Ireland-1990-2014.pdf 7,558 megawatts in 5 These numbers specifically refer to bond issuances in the period FY14-FY19 and exclude $2.2 billion issued in green renewable energy capacity bonds in FY10-FY13. As at end of FY19, IFC’s overall green bond program issuance was $9.23 billion raised from 148 bond in FY10-FY19. 3 Letter from John Gandolfo IFC VICE PRESIDENT AND TREASURER John Gandolfo IFC Vice President and Treasurer I am pleased to share with to below 2°C above pre-industrial levels. At IFC, $1.6 billion through 37 green bonds in 11 currencies. you IFC’s Green Bond we know green bonds are critical to stimulating We actively seek to issue green bonds in new Impact Report for fiscal the supply and demand of funding needed to currencies to provide supply in new markets. For year 2019. IFC Treasury achieve these goals. Green bonds give investors the example, in October 2018, we issued our inaugural has been at the forefront of creating sustainable opportunity to contribute positively to the mitigation Indonesian Rupiah Komodo green bond, raising capital markets, and this report is a cornerstone of and adaptation of climate change, while gaining $134 million for climate projects in Indonesia. our green finance endeavors. financial returns. In FY19, we also launched initiatives to encourage When I first joined IFC, the Corporation was just To this end, we continue to lead crucial discussions mainstream investors to consider Environmental, beginning to embark on obtaining its first credit and take practical steps toward expediting the Social, and Governance factors in their investment rating and funding itself in the global capital markets. growth of green bonds. We do this through active decisions. Notably, in our recently established Thirty years later, IFC has built on its foundation market engagement and our Green Bond Program. partnership with the Government Pension within the capital markets and positioned itself In partnership with the Climate Bonds Initiative, Investment Fund of Japan, GPIF’s multiple asset at the intersection of finance and sustainability. we have completed periodic research on Green managers included Environmental, Social, and We have achieved this unique position through Bond Pricing. This report, now in its seventh Governance bonds in portfolios traditionally tracked innovation and strategy, resulting in outcomes iteration, reveals that green bonds achieve larger to sovereign bond indices. The new approach led to from the legacy of being the first issuer of a billion- oversubscription than vanilla equivalents. This finding GPIF’s first investment in IFC green bonds. dollar green benchmark bond and being a founding illustrates the growth in the market for impact member of the Executive Committee of the Green investing within fixed-income and the increase Our role in developing the green capital market Bond Principles, the most referenced framework for in investors seeking green bonds to incorporate goes beyond our bond program to other financial green bond issuance in the world. sustainability in their investments. products. This year, IFC began offering its investment clients the option to structure loans in accordance Extreme weather events throughout the world As an issuer, IFC has raised close to $10 billion in with the Green Loan Principles. Fiscal year 2020 will underscore the urgency of tackling climate change. green bonds since the launch of its Green Bond mark ten years since the launch of our Green Bond We need trillions of dollars to finance the transition Program in 2010. The proceeds of these bonds are Program, and I am excited to build and expand on to a low-carbon economy that allows us to meet invested exclusively in climate-smart projects in the achievements of the previous decade. ■ the goal of lowering global average temperatures emerging markets. This fiscal year, 2019, we issued 4 Directors Corner Tom Ceusters Alzbeta Klein Director, IFC Treasury Market Operations Director, IFC Climate Business Five years ago, the public green bond market Climate change is an acute threat to global took off. It was in 2013 that IFC’s landmark public development and efforts to end poverty. To trades created a precedent for subsequent green effectively deal with climate change, IFC invests in benchmark bonds. Now, IFC is close to hitting a new climate business—in companies in emerging markets milestone in its Green Bond Program. Over the next to foster climate mitigation and in projects that fiscal year, we expect our cumulative green bond issuance to reach $10 billion. make companies more resilient to climate change. It is this ability to invest, Over the past nine years, since we began the Green Bond Program, we have bringing co-investors with us, which makes IFC well positioned to make a paved the way for responsible investing and encouraged issuers and investors difference. Over the past couple of years, about one-third of all IFC investments from different countries and sectors to participate. were in climate business. Our program remains flexible to investor needs. We issued more green bonds In FY19, we continued to broaden our strategic priority areas to include this year than ever before. Our program also remains rigorous in setting a climate-smart agribusiness, green finance, green buildings, climate-smart cities, standard of integrity. We believe that annual impact reporting on both our and clean energy. We have seen a continuous shift from primarily renewable thematic bond programs is critical to ensure transparency on the use-of- energy investments to other areas of climate business. proceeds and show our investors where we put their investments to work. We are constantly interacting with our investors to encourage feedback on As climate risk continues to gain attention from corporates and regulators, other data points investors want. This year, for the first time in our Green we believe it is essential to disclose our climate-related financial risk to our Bond Impact Reports, we are mapping eligible projects to the UN Sustainable partners and investors. IFC was the first multilateral development bank to Development Goals. This implements the work IFC led, along with the Social disclose an approach to handling this risk, using the guidelines of the Task Force Bond Working Group, in drafting the High-Level Mapping to the SDGs for on Climate-related Financial Disclosures. Green & Social Bonds. We see carbon pricing as an effective way to alter behavior in favor of low- One of the benefits of our Green Bond Program has been the increased carbon choices. In FY19, IFC started applying carbon prices to the economic cooperation across internal departments, towards strengthening our role analysis of project finance transactions, with annual emissions of more than in the green bond market as an issuer, investor and advisor. We were very 25,000 metric tons of carbon dioxide equivalent in thermal power generation, honored that the Climate Bond Initiative named IFC the 2019 Green Bond cement and chemicals. Development Bank of the Year. The award is testament to our collective work as an institution and motivation to scale up our activities in the Looking at the year ahead, we will continue to develop climate business years ahead. ■ initiatives that build on previous successes and expand these initiatives to other partners and clients. ■ 5 The ABCs of CBD Getting to know IFC’s Climate Business Department (CBD) A CHAT WITH MARCENE MITCHELL, GLOBAL HEAD, CLIMATE STRATEGY AND BUSINESS DEVELOPMENT Why is climate of strategic importance to IFC? approaches to public policies to spur private sector investment opportunities at the project level. CBD also builds and maintains IFC and the World Bank Group recognize climate change as IFC’s leadership role in the global climate dialogue, while an acute threat to global development and economic stability managing stakeholder and climate partner relations, as well as and a contributing factor to poverty, fragility, and migration. critical international public and private advocacy coalitions. Climate change must be addressed to sustain development gains, reduce global poverty and increase shared prosperity, As early as the 1980s, IFC became involved in climate business all elements of IFC’s mandate. Climate action presents an with engagement in clean energy projects. In 2005, IFC began enormous business opportunity to innovate and invest in clean, to track its climate business and, that year, climate business renewable technologies that support economic growth, while accounted for 4 percent, or $212 million, of IFC’s total own- decarbonizing the global economy. Since the Paris Agreement account commitments. In 2010, IFC created CBD to help IFC Marcene is responsible for in December 2015, IFC clients—including in low-income and scale its impact in climate finance. growing IFC investments in middle-income countries—have sought rapid, concerted action. sustainable business and leads As the largest global development institution focused exclusively Over the years, IFC’s climate business has expanded from IFC initiatives to transform on the private sector in developing countries, it is our duty at predominantly renewables, such as solar, wind, and hydro, into green building practices in IFC to find the solutions to this global challenge. other sectors, including green buildings and climate-smart developing markets, expand agribusiness. The business has also evolved from project finance clean energy investments to working with client banks and on-lend to climate projects. beyond the power grid and What does work in climate business entail? We expect further growth, with IFC’s recent capital increase aggregate energy efficiency The key role of CBD is to specialize in everything climate, and and the commitment to increase the share of IFC climate investments for institutional to provide cross-cutting expertise to all parts of IFC. It works investments to 32 percent on average over FY20-30. investors. internally with IFC operations departments to support the growth of climate business by identifying new key areas in What are CBD’s current priorities? which to invest and supports business development efforts and the appraisal of climate projects. CBD also collaborates with Today, IFC’s climate business is focused on five strategic investment colleagues in syndications, blended finance, and focus areas: clean energy, climate-smart cities, climate-smart treasury, among others, to establish innovative platforms and agribusiness, green buildings, and green finance. Energy products, such as IFC’s award winning Forests Bond. It develops efficiency and resilience, as well as new technologies and and implements climate metrics and climate risk methodologies innovations, cut across all five focus areas. Although the bulk to support our pipeline and portfolio and identifies new 6 of IFC’s climate business focuses on climate mitigation, some stakeholder groups on important global issues, such as carbon climate sectors include opportunities to increase resiliency and pricing and climate-risk disclosure. IFC is a member of the encourage adaptation. For example, as rainfall and drought World Bank Group’s Carbon Pricing Leadership Coalition, which patterns become more extreme and less predictable, IFC green includes leaders from government, private sector, academia, buildings certified by a globally-respected certification process and civil society to promote the use of effective carbon known as EDGE, or Excellence in Design for Greater Efficiencies, pricing systems and policies. IFC was also the first multilateral use 20 percent less water than other buildings, improving development bank to disclose the management of its climate- climate resiliency. related financial risk, using the Task Force on Climate-related Financial Disclosures guidelines. IFC is engaged with the Task In addition to supporting investment opportunities in the five Force on Climate-related Financial Disclosures, Standard & IFC strategic focus areas, other priorities include creating and Poor’s, and BlackRock as they develop standards for voluntary scaling climate markets, working with peer institutions and corporate climate disclosures. other stakeholders to support commitments made under the Paris Agreement, and mobilizing private sector capital to finance and develop climate-smart infrastructure in priority areas. What is the next phase of work for CBD? Between now and 2030, most of the growth in these markets CBD always looks around the corner to identify the next will be largely concentrated in 21 emerging markets with over transformational sectors and new technologies for climate $23 trillion in investment potential. business growth. We are currently exploring exciting opportunities in electric vehicle transportation, offshore wind, How does CBD work with other institutions and digital and drone applications for agribusiness, as well as towards meeting IFC’s climate business goals? blockchain in distributed energy generation, just to name a few. We will continue to work with our partners on climate metrics, Working with partners, including other international finance climate risk disclosure, and the greening of the financial sector. institutions, is a key strategic priority for IFC. This work helps to Most importantly, IFC will continue its mission to create new increase IFC’s impact in addressing climate risks and growing markets for climate business through investments, innovative the markets for climate business. IFC is working with other financing, and advisory services. multilateral development banks to develop consistent metrics to measure climate impacts and align investments with the goals of the Paris Agreement. IFC also participates in key multi- 7 IFC Climate Business Overview for FY19 Since 2005, IFC has invested $24.8 billion in climate- doubling the volume of its current 5-year investments smart financing and directly mobilized $18.9 billion to around $200 billion, a total that includes about 29% of IFC’s own account through partnerships with investors for climate-related $67 billion in mobilized private capital. As part of projects, including renewable power, energy efficiency, these targets, IFC aims to achieve an average of commitments in FY19 are sustainable agriculture, green buildings, waste and at least 35 percent of its own commitments being climate-related private sector adaptation to climate change. climate-related. During FY19, 29 percent of IFC’s total own-account Our investments are often directed toward companies commitments were climate-related. This translates incorporating climate-smart technologies into their to $2.6 billion in climate-smart investments on IFC’s operations. IFC has also strategically supported This translates to over $2.6 billion own-account while an additional $3.2 billion was countries to attract private investment to help in climate-smart investments on realized through core mobilization efforts. implement their Nationally Determined Contributions (NDCs) to achieve the goal of the Paris Agreement. IFC’s own account Joining a number of entities that are taking steps to Governments recognize that much of the financing identify and mitigate climate-related financial risk, in needed to meet their climate pledges will have to 2018, IFC became the first multilateral development come from the private sector. IFC will continue to institution to disclose climate-related risk under help emerging economies to turn climate pledges into With an addition of $3.2 billion the guidelines of the Task Force on Climate-related business opportunities and work with them to guide Financial Disclosure (TCFD), and in FY19 we issued regulation, provide financing and creative innovative in core mobilization a second disclosure. Under the TCFD guidelines, solutions that mobilize external capital and create IFC’s disclosure is focused on the following areas: sustainable markets for climate-smart solutions. strategy and governance; risk management (including physical and transition risks); and targets and related IFC continues to assess the potential of new disclosures. Going forward, IFC will continue to refine technologies to tackle climate change, such as For a total of $5.8 billion in its analysis, working with partner institutions and offshore wind and floating solar photovoltaic climate-smart projects banks to develop tools and processes that better help installations to scale up solar generating capacity, manage these risks and identify related opportunities. especially in countries where land is scarce, expensive, and difficult to secure. With a global estimated In December 2018, the World Bank Group announced potential of 400 gigawatts (GW), floating solar could new climate business targets for the FY21-25 period, double the current installed capacity for solar power. 8 IFC Green Bond Program Overview for FY19 Since the launch of the IFC Green Bond Program in 2010, IFC has raised billions of dollars to finance projects that combat climate change. In FY19, we issued a record number of green bonds: 37 green bonds in eleven currencies for a total volume of over $1.6 billion. This year’s program brings IFC’s cumulative volume of green bonds raised to $9.2 billion across 148 bonds in 18 currencies. In July 2018, only two weeks into FY19, IFC marketed a British pound sterling 350 million green bond. This trade was IFC’s first sterling-denominated benchmark in five years and was also the first green bond issued by a multilateral development bank in the sterling market since 2015. The five-year fixed-rate bond pays a 1.25 percent coupon, and it was placed primarily foreign exchange risk. The bond’s proceeds will be IFC continues to welcome reverse inquiries to with investors based in the United Kingdom (52 used by the client to finance underlying infrastructure accommodate investor needs through private percent) and other European countries (29 percent). and climate-related projects in the country. placements in our green bond program. Throughout A month later, robust investor demand encouraged the year, fifteen such trades totaling $519 million, IFC’s prompt return to the market with an increase of The volume raised by IFC’s Green Bond Program were placed in U.S. dollars, Swedish krona, euros, as the bond by 150 million British pound sterling. in the U.S. and Japanese retail markets remained well as in three new currencies—Hong Kong dollars, relatively stable in FY19. Through its Impact Notes Japanese yen, and Colombian pesos. The Colombian Subsequently, in October 2018, IFC issued its Program, IFC sold $37.4 million of green bonds in peso-denominated green bond issued this year inaugural Indonesian rupiah Komodo green bond, step-up, callable format to U.S. retail investors. In marked the fourth Latin American currency in the the first such issuance by a multilateral development the Japanese retail market, we continued offering IFC Green Bond Program. Through these types of bank. The bond mobilized Indonesian rupiah 2 multiple currencies through Uridashi trades in South issuances, IFC raises awareness of the opportunities trillion, or $134 million, from offshore investors for African rand, Turkish lira, and Mexican peso for a of the asset class to emerging market investors. direct on-lending to Bank OCBC NISP, an IFC client total volume of $14 million. in Indonesia. The bond supports the local currency As of June 30, 2019, IFC’s outstanding green bonds market in Indonesia and is an example of managing totaled about $5.1 billion. 9 IFC Green Bond Program Overview IFC Historical Green Bond Issuance by Year IFC Cumulative Green Bond Issuance by Currency (%) Volume Number of IDR 1.4 Million $ green bonds NZD 1.4 issued PHP 1.0 ZAR 2,000 40 AUD 1.8 CNY 0.9 1.8 INR 0.5 EUR 1,800 2.6 MXN 0.5 35 TRY JPY 0.2 2.8 PEN 0.2 1,600 COP 0.1 30 BRL HKD 0.1 1,400 3.5 25 1,200 GBP 7.0 1,000 20 800 15 SEK 600 8.2 10 400 USD 5 65.9 200 0 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 10 IFC Cumulative Green Bond Issuance IFC FY19 Green Bond Issuance By Currency Volume $9.2 billion JPY 1.3 HKD 0.8 Number of green bonds issued 148 bonds COP 0.6 ZAR 0.6 Number of currencies 18 MXN 0.2 IDR TRY 0.1 8.2 USD 8.4 GBP 39.8 EUR 13.2 IFC FY19 Green Bond Issuance Volume $1.6 billion Number of green bonds issued 37 Number of currencies 11 SEK 26.9 11 F E AT U R E D P RO J E C T Diversifying Jordan’s Energy Mix by Crowding in Private Capital for Wind Energy Jordan’s GDP growth is projected to gradually identifies the private sector as an engine to boost Power, built by Abour Energy Company, and will increase, up to 2.6 percent over the medium-term. renewable energy development in the country and provide lower-cost power for consumers. It will This growth, coupled with an increasing population, improve energy efficiency. help reduce Jordan’s dependency on imported fossil will accelerate energy demand, which is expected fuels. The project also took a proactive approach to triple by 2030. Currently, imported natural gas IFC is supporting Jordan’s vision by providing to address biodiversity concerns by implementing powers 93 percent of the country’s electricity financing and investment solutions. IFC recently measures that mitigate risks that the wind farms generation, with renewable energy providing 7 delivered $80 million in financing to fund the might pose to bird migration paths above Jordan percent. This causes the electricity sector to be construction of a new wind power plant in the by monitoring highly threatened birds and shutting vulnerable to external shocks, which have caused south of the country, called the Abour Wind Farm, down turbines when necessary. supply disruptions in the past. Diversifying the near the town of Tafila. The financing package country’s energy mix with abundant domestic includes a $28 million loan from IFC’s own account, The Abour Wind Farm is one of many IFC clean renewable energy resources will help meet demand as well as mobilized parallel loans from the Islamic energy investments in Jordan. IFC’s participation in a secure, sustainable way. Development Bank. IFC structured the transaction in Jordan’s energy sector has helped create new using an Islamic financing transaction, Ijara, a first in markets for renewables – with more than $300 The government pledged to diversify energy sources the renewable energy sector in the Middle East and million cumulative clean energy investments over the in 2015 by putting in place a 10-year strategy – North Africa. past decade to support 13 projects. This has helped Jordan 2025: A National Vision and Strategy – which to mobilize over $1 billion in private sector capital for aims to increase the contribution of domestic The 51.75-megawatt Abour Wind Farm is a joint Jordan’s power distribution and generation sectors. sources to the total energy mix by 2025. The strategy venture between Xenel International and AMEA 12 © Dominic Chavez/IFC 13 14 Disbursements Commitments IFC Green Bond Commitments by Region FY14 FY15 936 1133* 242 956 FY16 961* 754 FY17 1555 1356* As of June 30, 2019, IFC green bond proceeds supported 200 green bond eligible FY18 2205 1914 projects. The total committed amount for these projects is $7.7 billion, of which FY19 885 1135 $6.4 billion has been disbursed. Total 7675 6357 in M$ Disbursements Commitments Disbursements Commitments Disbursements Commitments Disbursements Commitments FY14 178 66 FY14 618 156 FY15 370* 228 FY15 422 551 FY14 62 11 FY16 284 265 FY16 90* 210 FY15 239* 125 FY17 320 312 FY17 534 449 FY14 55 9 FY16 200 154* FY18 834 833 Disbursements Commitments FY18 406 357 FY15 59* 34 FY17 299* 194* FY19 121 183 FY19 252 208 FY16 119 86* FY18 297 200* Europe and Latin American and FY17 137* 184* FY19 122 248 Central Asia the Caribbean in M$ FY18 265 75* South Asia FY14 0 0 in M$ in M$ Disbursements FY19 45 148 Commitments FY15 0 0 Middle East and FY16 229 18 North Africa Disbursements Commitments FY17 204 179 in M$ FY18 340 427 FY14 23 0 FY19 325 306 FY15 43 19 39 East Asia and FY14 0 0 FY16 21 the Pacific FY15 0* 0 FY17 36 22 in M$ FY16 0 0* FY18 63 14 FY17 24* 17 FY19 20 42 FY18 0 7 Sub-Saharan Africa FY19 0 0 in M$ Multi Region in M$ * Volume market has been adjusted from the amount reported in a previous impact report. 15 Appendix A provides further details on the reconciliation. F E AT U R E D P RO J E C T Delivering low-cost, low-carbon energy to power further economic growth in Vietnam Vietnam, with a population nearing 100 million, Vietnam is meeting growing energy demand while publicly listed in Southeast Asia. IFC’s investment in continues to see strong economic prospects, also delivering on its climate ambitions with cleaner the five-year green bond will fund 360 megawatts delivering 7 percent growth in 2018. As this domestic renewable energy resources like wind of solar and wind farms. expansion continues, the country will experience a and solar. With their increasingly competitive cost, steady rise in demand for power: annual electricity renewables have the potential to become the lowest- This is only the beginning. Vietnam also has demand is estimated to be 8 percent for the next cost option for Vietnam to meet its energy needs. large potential for rooftop solar projects for 10 years. This stresses existing infrastructure, with commercial and industrial businesses. To tap into power shortages expected as early as 2021. According Responding to this opportunity, IFC has committed this potential, IFC is providing advisory services and to forecasts, power generation capacity in Vietnam an anchor investment of $75 million in the has already identified 60 megawatts of rooftop must more than double over the next decade. $300 million green bond issued by AC Energy solar opportunities in several factories in Vietnam’s The government has also committed to reduce Finance International Limited and guaranteed by AC manufacturing sector. greenhouse gas emissions by up to 25 percent by Energy, the power arm of Ayala Corporation. This 2030 as part of its Paris Agreement pledge. is the first infrastructure-focused green bond to be 16 © Dominic Chavez/IFC 17 IFC Green Bond Eligible Project Commitments by Sector COMMITMENTS BY SECTOR Renewable Energy Energy E ciency FY14 86 FY15 51 Other Mitigation Total M$ 936 94 Total M$ 1,134 Adaptation 275 808 756 FY19 Total M$ 885 65 FY16 134 FY17 131 Total M$ 961 306 Total M$ 1,555 579 845 264 521 11 556 FY18 281 Total M$ 2,205 1,129 784 19 7 Facts about IFC’s Role in the Green Bond Market An Update on IFC’s Engagement in the Green Finance Market BY ESOHE DENISE ODARO, HEAD OF INVESTOR RELATIONS 2 3 IFC has established a unique profile within A founding member of the Green Bond The Global Green Bond Partnership Principles, IFC has been continuously is a consortium of institutions including the green bond market as a one-stop re-elected to serve on the Executive IFC. Together, we have recently shop, offering a holistic approach to the Committee since its creation in 2014. We developed a roadmap for government have been instrumental in the dialogue representatives and others interested development of green bonds. Working to with other issuers, investors, and banks in better understanding green bonds. scale green bonds, IFC is an issuer, investor, in several working groups including: Our agenda for the upcoming year Green Projects Eligibility, Impact is to continue working on increasing and provider of advisory services, technical Reporting, Index and Database, and New awareness of the green bonds market, Esohe Denise Odaro assistance, and risk mitigation instruments. Markets, while chairing the Social Bonds standardizing qualifications for a green Head of Investor Overall, we constantly work on the front lines working group. bond, and providing technical assistance Relations, IFC and capacity building. and behind the scenes in several practical Through these collaborative ventures, ways to increase the market share of IFC contributed to recently published key documents, including: Green Projects sustainability bonds: Mapping, which provides greater clarity on green projects eligibility and 1 mapping to other green taxonomies and standards; Guidance Handbook IFC helps unlock private capital and updates to the previous Q&As for investment for climate smart projects the Green and Social Bond Principles; through its Green Bond Program. We and the Harmonized Framework for actively encourage traditional investors Impact Reporting, a consolidation of to green bonds by offering a flexible the impact reporting frameworks for private placement program. Our trading eligible green categories released since hubs in Washington, D.C., Singapore, 2017 and based on the initial framework and London allow for timely responses drafted by IFC, African Development to reverse inquiries. Bank, European Investment Bank, and the International Bank for Reconstruction and Development. 20 4 Through the Sustainable Banking Network, IFC works upstream with banking regulators to greening the © ICMA financial sector more broadly. The Sustainable Banking Network includes 85 percent of banking assets in emerging markets and represents 21 5 6 7 countries and 30 organizations with Also, in partnership with the Climate Another example of our upstream work In March 2019, we began offering green bond expertise to develop green Bonds Initiative, we have published is the IFC Green Banking Academy, IFC’s investment clients the option bond frameworks and catalyze local semi-annual research on Green launched in November 2018. The to structure loans in accordance with issuances. This fiscal year, in partnership Bonds Pricing since 2016. The Green concept of the academy came as a the Green Loan Principles. The with the Climate Bonds Initiative, the Bond Pricing in the Primary Market: result of the conclusions of IFC’s Green structuring, modeled on the Green Bond Sustainable Banking Network published July-December 2018 report analyzed Finance Latin-America Survey in 2017 Principles, specify how loan proceeds a report, “Creating Green Bond 24 euro-denominated and ten U.S. that identified the lack of knowledge should be used and how projects Markets,” report, which includes eight dollar-labeled green bonds issued in the and skills to understand and correctly should be selected to qualify for green country case studies, one regional case second half of 2018, totaling $29 billion. assess the risks and opportunities of loan status. This can help businesses study, and the first-ever Green Bond The report found that, 28 days after climate change as one of the main attract new financing and enhance their Market Development Toolkit. pricing, green bonds had tightened, on barriers to mainstream green finance. reputation among shareholders, clients, average, by more than matched indices. The Academy provides professional and communities. training to bankers to increase their willingness to participate in the use of financial instruments for renewable energy and energy efficiency projects. Its main goal is to accelerate the green transformation of banking sector towards a more environmentally sustainable model through various knowledge, sensitization and capacity building educational programs. 21 Shining a Light on Green Bonds Transparency A Guide to IFC’s Climate Assessment for Financial Institutions Platform BY GURSIMRAN ROOPRAI, FINANCIAL INSTITUTIONS GROUP ANALYST and sustainable growth of the green bond market. 33 countries have reported results in CAFI, with a Our vast experience in financing climate business total of $4.7 billion in disbursed loans from more than through financial institutions helps us define how 1,630 projects. Our client portfolios in CAFI report a to quantify impact of projects. This knowledge helps cumulative reduction in greenhouse gas emissions Gursimran Rooprai formulate a first-of-a-kind leading assessment and of 9.7 million metric tons of CO2-equivalent per Financial Institutions reporting platform for climate impact data. The annum. CAFI has helped IFC and its clients capture Group Analyst, IFC Climate Assessment for Financial Institutions the impressive impact their lending portfolios have is an online platform we built and operate achieved for the climate. collaboratively across various internal teams. IFC IFC promotes transparency in reporting staff and client financial institutions can access the CAFI covers seven categories: renewable energy, for green bonds and climate finance platform to verify whether a project is climate- energy efficiency, special climate, green buildings, friendly and measure its impact. transport, water efficiency and adaptation. It is a by providing tools to market players user-friendly platform that offers dashboard and within the financial services industry. To CAFI uses IFC’s climate definitions, the accounting analytics functionality and portfolio monitoring. successfully address climate change, we methodology for greenhouse gas emission and It is available in five languages, including Chinese, publicly available approaches, harmonized across English, French, Russian and Spanish. In FY20, we are educate stakeholders about the terms multilateral development banks. It has been in also planning to include two additional languages— and concepts they need to participate in operation for six years. To ensure its robustness, Arabic and Bahasa. IFC hired an external auditor last year to review the the green bond market. platform. CAFI received the “reasonable assurance” We constantly modernize CAFI, creating new certificate, a robust approval of its methodology and measurable climate categories and expanding One of the main obstacles to investing in green accuracy. the platform’s scope. For example, we are adding bonds and climate finance is that most of impact green buildings and climate-smart agriculture reporting by companies focuses on the priorities of To ensure our client financial institutions capture to our portfolio of categories. IFC also shares non-investor stakeholders, such as governments and high-quality data, we train their staff to use CAFI. CAFI beyond our own clients—with other NGOs, rather than the data investors find useful. This helps them actively manage their portfolios. multilateral development banks, international CAFI is also implementing validation flags to allow financial institutions, private institutions and fund We recognize that the need to accurately measure users to verify the project, based on climate eligibility managers—anyone who invests at scale in climate- impact is a critical component to ensuring the robust criteria. So far, 55 client financial institutions in friendly projects. 22 Keeping up with EGO: An update on the Amundi Planet Emerging Green One Fund Celebrating its first anniversary in FY19, we look back on the highlights and developments of the EGO Fund since its launch in March 2018. Mobilizing public and private institutional investors The Fund has a credit enhancement system, which To boost the supply of green bonds in emerging to deploy billions of dollars in capital for climate means that IFC and other developmental finance markets, IFC set up the Green Bond Technical investments is essential to alleviate the impact institutions invested in junior tranches, thereby Assistance Program (GB-TAP), a crucial addition of climate change. Launched in March 2018, the taking first losses in case of credit events. This risk to the Fund. The GB-TAP provides training on green Amundi Planet Emerging Green One (EGO) Fund cushion for investors ensures that they have an bonds to potential issuers, knowledge-sharing and does just that. As the largest green bond fund in the appropriate risk/return profile for their invested advisory services on green bond issuances and impact world, the Fund helps scale up climate finance in capital to the senior tranche, while targeting an reporting in line with the Green Bond Principles. The emerging markets. emerging market debt premium. GB-TAP is supported with funding from the Swiss State Secretariat for Economic Affairs, the Ministry of Limited green bond issuances from financial As of June 30, 2019, the Fund’s portfolio included Finance of Luxembourg and the Swedish International institutions in emerging markets encouraged IFC 15 green bonds. The issuers are diversified across Development Cooperation Agency. to partner with Amundi to create a Fund that could seven countries in Asia, Latin America, and the aid this untapped potential. The Fund is a financial Middle East. The use of proceeds spans five sectors: As part of this effort, in June 2019, IFC in partnership innovation that links investor capital to funding renewable energy, energy efficiency, green transport, with the Stockholm School of Economics Executive needs in emerging markets, and it represents an green building, and water management. Green Education and the International Capital Markets exciting public-private partnership initiative between bonds in emerging markets include a prime focus on Association established a training program development institutions and asset managers. renewable energy assets in an attempt to finance targeting senior staff from emerging market banks, infrastructure development. a landmark in sustainable finance education. The Fund closed at $1.42 billion but, as proceeds are reinvested over a seven-year period, the Within seven years, the Fund is expected to meet The Amundi-IFC partnership has been very Fund is expected to deploy $2 billion into green its goal of transitioning its diverse emerging market well received by the market as is evident by the bonds issued by financial institutions active in bond portfolio to a 100 percent green bond portfolio. multiple awards received in FY19, such as Initiative emerging markets. As of June end, green bonds make up 19.15 percent of of the Year and Green Bond Fund of the Year by the asset allocation in the overall portfolio. Environmental Finance Magazine, Green Finance Collaboration 2018 by Climate Bonds Initiative, and EBRD’s Annual Sustainability Award. 24 Real Economy Issuers, The Next Frontier: Showcasing the New REGIO Fund O n June 4, 2019, HSBC Global Asset Management and IFC partnered to launch an exciting new green bond fund, the Real Economy Green Investment Opportunity Fund. Our collaboration is the first global green bond fund targeting non-financial companies in emerging markets. It is an innovative way to fortify the green bond market through “real economy” companies operating in the industry, agribusiness, services, and infrastructures sectors. Just as climate change needs attention and action from different industries, the green bond market needs to reach a vast spectrum of industries. Tapping To enhance the supply of green bonds issued by scope and strategy is to target an increase in green into this new important class of borrowers, REGIO the non-financial borrowers, REGIO will provide bond issuances from this sector and region. will catalyze up to $1.5 billion in private sector capital a Technical Assistance Facility, managed by IFC. to finance new kinds of climate-smart investments This will assist these real-sector borrowers in The Fund’s portfolio will be a mix of manufacturing, and projects. participating in the green bond market for the first agribusiness, services, infrastructure, and financial- time through dedicated capacity building. sector bonds. Including more sectors in the green The Fund received a $100 million anchor investment bonds market will be crucial in the collaborative from IFC and $75 million from HSBC. This In emerging markets, real sector companies issued effort against the climate crisis. collaboration pairs HSBC expertise in global emerging just $6 billion of green bonds in 2018, representing markets and dedication to a sustainable, low-carbon only 3.5 percent of the year’s total issuance. REGIO’s global economy with IFC leadership in the green bond market as an issuer and standard setter. 25 Green Bond Eligible Project Commitments for FY19 The Impact Assessment table lists expected change and climate variability-related risks by climate results from projects eligible to be maintaining or increasing adaptive capacity and funded, in whole or in part, with IFC green resilience. bond proceeds. Reporting is based on ex-ante estimates at the The table includes only the projects committed time of project appraisal. Because the Impact in FY19. The projects are organized by sector Assessment table includes the estimated results and categorized by project type as renewable of projects that are still in the construction of energy (RE), energy efficiency (EE), climate implementation phase, there is no guarantee mitigation projects that do not fall under RE that these results will ultimately materialize. and EE (Other Mitigation), and Adaptation. Thus, the reporting is not intended to provide Adaptation means reducing the vulnerability actual results achieved in a specific year or of human or natural systems to climate reporting period. 26 Expected annual climate sector Development Project Climate Annual Annual RE capacity Green reduction Sustainable Green bond short Project loan energy energy constructed/ building Other in GHG name ID Country Type Project description committed produced savings rehabilitated impact impact emissions Goals Millions $ MWh kWh MW M2 tCO2eq/ year Xenel 35348 Jordan RE Jordan’s Tafila Governate is now realizing 28.00 158,250 N/A 51.75 N/A - 103,021 Wind its potential in wind energy with the construction, operation, and maintenance of WIND a 51.75-megawatt wind farm that will help add new generation capacity. It will meet the country’s growing demand for electricity, diversify Jordan’s fuel mix, and provide domestic energy security. Daehan 35349 Jordan RE Daehan Wind will be an independent power 10.20 133,300 N/A 51.75 N/A - 86,778 Wind producer and generate about 133 gigawatt hours annually for sale to the National Electric Power WIND Company under a 20-year Power Purchase Agreement. The construction, operation, and maintenance of the 51.75-megawatt wind farm contribute to providing a sustainable resource for the country. La 41190 Argentina RE IFC's loan will finance the construction, 30.00 349,100 N/A 88.20 N/A - 183,976 Genoveva operation, and maintenance of an WIND 88-megawatts wind power plant located close to Bahía Blanca in the province of Buenos Aires. This will increase the country's renewable energy component of its energy mix from 3 percent in 2018 to 20 percent in 2025. ACE 40227 Vietnam RE With renewable energy projects already 75.00 731,656 N/A 360.00 N/A - 351,195 WIND & SOLAR Green established in the Philippines and Indonesia, AC Bond Energy is looking to further develop Vietnam's generation capacity. IFC's investment will address the growing electricity demand- supply gap in Vietnam, while also displacing greenhouse emissions. The financing of wind and solar photovoltaic projects will provide a total of up to 360 megawatts to Vietnam's very nascent sustainable energy market. Clean 42694 India RE IFC's loan will finance the construction, 43.39 604,322 N/A 250.00 N/A - 530,594 Solar operation, and maintenance of a 250-megawatt SOLAR Power solar farm in Bhadla, Rajasthan, India. The (Jodhpur) project will help the county meet its energy demand by using an environmentally friendly source of energy that reduces greenhouse gas emissions. 27 Expected annual climate sector Development Project Climate Annual Annual RE capacity Green reduction Sustainable Green bond short Project loan energy energy constructed/ building Other in GHG name ID Country Type Project description committed produced savings rehabilitated impact impact emissions Goals Millions $ MWh kWh MW M2 tCO2eq/ year DCM 39800 Colombia RE The construction of multiple solar plants with 71.20 275,000 N/A 178.80 N/A - 76,450 EPSA a combined installed capacity of 178 megawatt Green peak will be Colombia's first large-scale Bond grid-connected solar park. It represents a major step toward overcoming the country’s SOLAR current reliance on hydropower generation. The project will increase access to renewable energy sources and is expected to have a demonstration effect in Latin America and the Caribbean. It will help smooth the path for the development of a regional and local green bond market to finance climate-related projects. Potrero 41297 Mexico RE The development, construction, operation, and 15.00 675,000 N/A 270.00 N/A - 340,000 Solar maintenance of a 297-megawatt peak solar photovoltaic power plant in Jalisco, Mexico, is expected to increase clean energy production SOLAR and diversify the country's energy mix. The plant will be one of the world’s largest solar photovoltaic plants with bifacial panels. It is also expected to be one of the largest solar photovoltaic plants, selling its total production to the spot market. DCM 42346 India RE/ IFC's loan will finance the expansion of a sugar 23.09 127,000 N/A NA N/A Biofuel 220,764 Sugar Other plant, further developing its sustainability generated Mitigation and climate-smart agricultural practices in a 63,000,000 BIOMASS low-income state in India. The expansion will liters p/a increase sugar production through climate- friendly processes, reducing wastewater. A cogeneration power plant with a capacity of 30 megawatts will be installed, as well as a 200-kiloliters-per-day distillery unit to help reduce the demand-supply gap in ethanol. 28 Expected annual climate sector Development Project Climate Annual Annual RE capacity Green reduction Sustainable Green bond short Project loan energy energy constructed/ building Other in GHG name ID Country Type Project description committed produced savings rehabilitated impact impact emissions Goals Millions $ MWh kWh MW M2 tCO2eq/ year LLP Peru 39427 Peru EE Financing the construction of the first 19.06 N/A - N/A - - - international-standard Class A logistics GREEN BUILDINGS warehousing facilities in Peru's market will enhance business infrastructure and productivity. Class A developments can be significantly more efficient with lower operating costs, given some of their characteristics, including higher ceilings, increased floor load capacity, column-free span areas, intensive docking ports with levelers for all types of trucks, and ample maneuvering yards for large vehicles. The project has committed to adopt EDGE standards. Hilton 40181 Angola EE IFC will provide a loan for the development 9.60 N/A 923,390 N/A 15,000 - 347 BUILDINGS Talatona of a full-service midscale business hotel in a GREEN fast-growing suburb of Angola. The project, managed by Hilton, has committed to a third- party green building certification within one year of construction. Trans 40677 Indonesia EE IFC's loan will help Trans Corpora expand retail, 60.00 N/A 8,764,000 N/A 95,436 Utility 4,676 BUILDINGS Corpora property, and tourism operations that are more cost GREEN energy efficient and located in less developed savings of regions of Indonesia. The project has committed $889,534 to adopt EDGE standards. per year BIM Land 42059 Vietnam EE BIM Land, a tourism property developer 27.77 N/A - N/A - - - BUILDINGS in Vietnam, will expand its properties and GREEN infrastructure in accordance with international design standards to minimize consumption of energy and water during operations. The project has committed to adopt EDGE standards. BIM Kien 42942 Vietnam EE BIM Kien Giang, a tourism property developer 11.90 N/A - N/A - - - BUILDINGS Giang in Vietnam, will expand its properties and GREEN infrastructure in accordance with international design standards to minimize consumption of energy and water during operation. The project has committed to adopt EDGE standards. 29 Expected annual climate sector Development Project Climate Annual Annual RE capacity Green reduction Sustainable Green bond short Project loan energy energy constructed/ building Other in GHG name ID Country Type Project description committed produced savings rehabilitated impact impact emissions Goals Millions $ MWh kWh MW M2 tCO2eq/ year Epyllion 42000 Bangladesh EE Epyllion Knit, a garment maker, will finance the 5.33 N/A - N/A - - - BUILDINGS Knit construction of a garment factory that will be GREEN certified by the most widely used green building rating system in the world, Leadership in Energy and Environmental Design. The project will adopt best practices in water, wastewater, and energy efficiency. MEG 37095 Egypt EE The loan to Middle East Glass Manufacturing, 7.29 N/A 127,369,000 N/A N/A - 29,655 Egypt's leading maker of glass containers, EFFICIENCY will support the firm’s three-year capital ENERGY expenditure program and refinance existing loans. Part of the investment will go toward resource efficiency, which includes efficient burners, insulation, compressed air systems, lighting, transformers, and cullet production, resulting in lower energy use and emissions. RBL 41811 India RE The loan to RBL Bank will finance climate-smart 50.00 N/A N/A N/A N/A - 29,518 BANKING Debt I projects that encourage sustainability through GREEN demonstration and replication channels. India's market has large climate financing needs but insufficient supply, so this project will support the growth of the market. Produbanco 40592 Ecuador EE/RE Financing to Produbanco, Ecuador's third- 32.00 N/A N/A N/A N/A - 107,550 Loan largest commercial bank, will support the growth of its loan portfolio for small and BANKING GREEN medium enterprises and is climate-smart portfolio. This is expected to improve climate sustainability in Ecuador, through reductions in greenhouse gas emissions, and contri¬bute to the country's objective of addressing its gap in green financing. Itau Arg 40916 Argentina RE Through IFC's debt financing, Banco Itaú 35.00 N/A N/A N/A N/A - 35,282 CL Argentina S.A. is able to expand its sustainable BANKING GREEN energy finance portfolio in Argentina. The project will promote long-term lending to energy efficient and renewable energy projects that have lower environmental impact and greenhouse gas emissions. 30 Expected annual climate sector Development Project Climate Annual Annual RE capacity Green reduction Sustainable Green bond short Project loan energy energy constructed/ building Other in GHG name ID Country Type Project description committed produced savings rehabilitated impact impact emissions Goals Millions $ MWh kWh MW M2 tCO2eq/ year DCM 41290 Philippines RE IFC’s investment in a green bond issued 150.00 N/A N/A N/A N/A - 40,054 CHIB by China Bank will increase access to new BANKING GREEN Green financing for climate-smart projects in the Philippines. The green bond is the second one issued by a local commercial bank in the country, opening up more financing for projects that combat climate change. Garanti 41800 Romania RE/EE IFC's loan to Garanti Bank Romania will be used 31.27 N/A N/A N/A N/A - 45,286 RO SEF for on-lending to small and medium enterprises BANKING GREEN in Romania for eligible sustainable energy finance projects. This is expected to increase the bank’s reach to small and medium businesses, with a focus on mitigating climate change impact. FHipo 42012 Mexico EE With IFC's financing, FHipo will grow its 14.77 N/A N/A N/A N/A - 990 Loan Ext mortgage portfolio and consolidate it into the BANKING GREEN first green mortgage real estate investment trust, a unique asset class in the Mexican capital market. This will increase liquidity of residential mortgage originators focused on the low- income and middle-income segment. PCH 42172 Southern EE/RE/ IFC’s subscription to a green bond of $90 million 90.00 N/A N/A N/A N/A - 376,644 GREEN BANKING Green Europe Other in two tranches will support green financing Bond Mitigation activities that focus on energy efficiency, renewable energy, and environmentally friendly measures. This will support the transition from high-carbon to low-carbon economies in the project's countries of operation, which are characterized by elevated levels of energy intensity, high-pollution levels, and an energy mix dominated by fossil fuels. 31 Expected annual climate sector Development Project Climate Annual Annual RE capacity Green reduction Sustainable Green bond short Project loan energy energy constructed/ building Other in GHG name ID Country Type Project description committed produced savings rehabilitated impact impact emissions Goals Millions $ MWh kWh MW M2 tCO2eq/ year Davivienda 40189 Costa EE/Other IFC's loan to the Banco Davivienda in Costa Rica 35.00 N/A N/A N/A N/A - 16,368 CR GB Rica Mitigation will help launch a pipeline of climate-finance projects, including green buildings, lower carbon BANKING GREEN technologies, and renewable energy projects that meet the green lending principles identified in the Green Bond Principles. This will increase access to climate finance and promote greater environmental sustainability and application of green standards for financing among banks. Republic 42193 Ghana RE/EE/ Climate finance is a relatively new concept for 10.00 N/A N/A N/A N/A - 14,698 Bank Gh Other banks in Ghana, with just a few banks in the Mitigation country exploring green building finance. IFC's BANKING GREEN loan provides financing to the Republic Bank to grow its climate finance business targeted at small and medium enterprises, which will benefit from access to longer-tenured facilities. IFC will also help the bank develop its green finance strategy and select eligible projects. 32 © Dominic Chavez/IFC 33 APPENDIX A IFC Green Bond Commitments and Disbursements: Adjustments and Reconciliation In FY18 and FY19, we have undertaken an internal review and reconciliation of commitments and disbursements towards a portfolio of FY14-FY17 Green Bond Eligible Projects. Here, we outline corrections and adjustments to commitment and disbursement numbers reported by IFC in prior years (FY15, FY16, and FY17). IFC Green Bond Commitments by Region and IFC Green Bond Commitments by Sector breakdowns on page 12 and page 13 of this report reflect these corrections and adjustments. Adjustments to Commitments: FY15: FY17: FY17: • Commitments to Europe and Central Asia • Total disbursements: corrected to $1,356 million. region, Commitments to Energy Efficiency FY17 Green Bond Impact Report included only a • Commitments to Renewable Energy sector sector and Total Commitments: adjusted from subset of disbursements for newly-committed and Commitments to Energy Efficiency sector: $382 million to $370 million; from $296 million projects in the same year ($899 million). corrected to $845 million and $579 million, to $284 million; and from $1,155 million to The total amount of disbursements for FY17 respectively. FY17 Green Bond Impact Report $1,143 million, respectively, due to a subsequent towards Green Bond Eligible Projects is has the labels reversed. commitment reduction for project #35012. $1.356 million. • Commitments to Multi Region: corrected to • Commitments to Multi region, Commitments • Disbursements to Middle East and North Africa $24 million to Energy Efficiency sector and Total region and South Asia region: corrected to • Commitments to Middle East and North Africa Commitments: corrected to $0, $275 million $184 million and $194 million, respectively, due region and South Asia region: corrected to and $1133 million, respectively, due to a project to Pakistan’s reclassification to South Asia. $137 million and $299 million, respectively, due change from loan to equity. to Pakistan’s reclassification to South Asia. • Commitments to Middle East and North Africa FY16: region and South Asia region: corrected to FY16: • Disbursements to Multi Region: corrected to $59 million and $239 million, respectively, due reflect zero disbursement. The disbursement of • Commitments to Latin America and the to Pakistan’s reclassification to South Asia. $18 million for FY16 reported in FY17 Green Bond Caribbean region, Commitments to Renewable Impact Report relates to disbursement in East Energy sector and Total Commitments: Adjustments to Disbursements: Asia and the Pacific region in the same year. corrected to $90 million, $306 million, and • Disbursements to Middle East and North Africa $961 million, respectively. FY17 Green Bond FY18: region and South Asia region: corrected to Impact Report included a potential project, not $86 million and $154 million, respectively, due to • Disbursements to Middle East and North Africa originally included in the Eligible portfolio in FY16 Pakistan’s reclassification to South Asia. region and South Asia region: corrected to Green Bond Impact Report and not considered $75 million and $200 million, respectively, due an Eligible Project at any time afterwards. to Pakistan’s reclassification to South Asia. 34 APPENDIX B IFC Green Bond Program Process The IFC Green Bond Program follows best market practice and complies with the Green Bond Principles. STAGE 1: Proceeds from IFC Green Bonds are allocated to a sub-portfolio that is linked to lending operations for climate-related projects Use of Proceeds (“Eligible Projects”). Only the loan portions of the projects are eligible for funding via Green Bond proceeds (equity investments and guarantees are ineligible). Eligible Projects are selected from IFC’s climate-related loan portfolio, which comprises projects that meet IFC Definitions and Metrics for Climate-Related Activities. In a few cases of back-to-back financing, net proceeds from IFC Green Bonds are on-lent by IFC directly to an individual Eligible Project. Projects eligible for Green Bond financing include the following sectors: • Energy efficiency (EE): investments in equipment, systems, and services, which result in a reduced use of energy per unit of product or service generated, such as waste heat recovery, cogeneration, building insulation, and energy loss reduction in transmission and distribution; • Renewable energy (RE): investments in equipment, systems, and services, which enable the productive use of energy from renewable resources such as wind, hydro, solar, and geothermal production; • Resource efficiency: investments to improve industrial processes, services, and products that enhance the conversion efficiency of manufacturing inputs (energy, water, raw materials) to saleable outputs, including reduction of impact at source; • Cleaner technology production: investments in manufacturing of components used in energy efficiency, renewable energy, or cleaner production, such as solar photovoltaics, manufacture of turbines, and building insulation materials; • Financial intermediaries: lending to financial intermediaries with the requirement that IFC investments are on-lent to specific climate projects that fit IFC’s green bond eligibility criteria; and • Sustainable forestry. STAGE 2: In addition to meeting the green bond eligibility criteria, all projects financed by IFC comply with IFC’s Performance Standards Evaluation and for environmental and social issues and IFC’s Corporate Governance Framework, and they have undergone a rigorous due Selection diligence process. The Center for International Climate and Environmental Research at the University of Oslo has reviewed IFC’s project evaluation and selection criteria. Its Second Opinion is published on IFC’s website. 35 STAGE 3: All proceeds from IFC Green Bonds are set aside in a designated Green Cash Account and are invested in accordance with IFC’s Management of conservative liquidity policy until disbursement to Eligible Projects (except several cases when the proceeds are on-lent directly Proceeds to an Eligible Project). The Green Cash Account tracks the difference between the balance of outstanding Green Bonds and outstanding Eligible Project loans. The Green Cash Account balance decreases as disbursements are made towards Eligible Projects or the Green bonds mature, and it increases as new Green bonds are issued or Eligible Projects are repaid. Disbursement requests for Eligible Projects take place in accordance with IFC’s established policies and procedures, and they are often made over a period of time, depending on project milestones. 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 projects includes regular reports by the investee company on project activities and performance throughout the lifetime of investment. STAGE 4: IFC Green Bond Impact Report follows the Green Bond Principles’ framework for reporting “Working Towards a Harmonized Reporting Framework for Green Bond Impact Reporting,” which aims to ensure integrity of the market through increased transparency. The report provides a list of projects that received funding from Green Bond proceeds and subject to confidentiality considerations. It also provides a brief description of each project, the climate loan amount, and the expected environmental impact. The report only covers projects eligible for Green Bond financing. For more information on IFC’s climate business, please visit www.ifc.org/climatebusiness. 36 APPENDIX C IFC Impact Reporting Policy IFC Access to Information Policy Interpreting impact indicators While technical experts aim to make sound and conservative assumptions that are reasonably The Access to Information Policy is the cornerstone The impact indicators are tracked on a project- based on the information available at the of the IFC Sustainability Framework and articulates level basis and have not been pro-rated for time, the actual environmental impact of the our commitment to transparency. the portion of IFC’s contribution. Investments projects may diverge from initial projections. in financial intermediaries ensure that climate In general, behavioral changes or shifts in We seek to provide accurate and timely information finance is available for smaller clients that IFC baseline conditions can cause deviations from regarding our investment and advisory activities to cannot reach directly, such as small and medium projections. clients, partners, and stakeholders, and we strive enterprises. It is important to IFC that our partner • Comparability: Caution should be taken to disclose the relevant information pertaining to financial intermediaries assess climate impacts of in comparing projects, sectors, or whole project, environmental, and social implications, their investment portfolio, and therefore, IFC has portfolios, because baselines (and base years) as well as expected development impact prior to developed the application Climate Assessment for and calculation methods may vary significantly. consideration by our Board of Directors. Financial Institution Investment, which enables In addition, cost structures between countries financial intermediary clients to monitor results for will also vary, so that developing cost- This commitment also applies to projects funded by relevant climate-related investments. efficiency calculations (results per unit of the Green Bond Program. amount invested in eligible projects) could IFC’s Greenhouse Gas Methodology and Climate- place smaller countries with limited economies Related Definitions and Metrics are available at the of scale at a disadvantage and will not take Impact indicators IFC Climate Business website.4 into consideration country specific context. IFC reports on a number of core indicators for • Omissions: Projects may have impact across a Reporting allows for quantification of a few core much wider range of indicators than captured projects included in the Green Bond Program in indicators, but it is important to appreciate the in the Impact Assessment table and may have accordance with the Harmonized Framework limitations of data reported. other important impacts on development. for Impact Reporting developed by a group of multilateral development banks, including IFC. Furthermore, there may be some projects The main considerations to adequately interpret for which the proposed core indicator is not results are: applicable or the data are not available. The four core indicators are: • Scope of results: Reporting is based on ex- 1. Annual energy savings While IFC takes efforts to improve the consistency ante estimates at the time of project appraisal 2. Annual greenhouse gas emissions reduced or and availability of reported metrics over time, and mostly for direct project effects. avoided projects with climate impact can span over a • Uncertainty: An important consideration 3. Annual renewable energy produced wide diversity of sectors and sub-sectors, making in estimating impact indicators is that they 4. Capacity of renewable energy plant(s) complete harmonization of reporting metrics are often based on a number of assumptions. constructed or rehabilitated challenging.  37 AUTHORS CONTACT This report was prepared by IFC’s Treasury Market Operations and Climate Business Departments. IFC Investor Relations International Finance Corporation The authors are Esohe Denise Odaro, Sophie Peeters, Maria Paraan, Olga Khlebinskaya, and Francisco Avendano with contributions from Farzona Comnas, Hlazo Mkandawire, Thomas Kerr, Eliana Tahiri, Bo-You 2121 Pennsylvania Avenue NW Ho, Bing Bing Yuliawati, and editorial review by Flora Chao, Anup Jagwani and Zauresh Kezheneva. Washington, DC 20433 The report was designed and typeset by World Bank’s GCS Creative Services. Email: investors@ifc.org DISCLAIMER Twitter: @IFC_Investors 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 Ifc.org/investors 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. 38 XXXXXX SEPTEMBER 2019