IBRD Funding Program

I. Project selection criteria: how the World Bank defines "green"

Projects defined as eligible for the World Bank’s Green Bond program are selected by World Bank environment specialists and support the transition to low-carbon and climate resilient development and growth in client countries. This includes both mitigation of and adaptation to climate change—all while observing the World Bank's safeguard policies for environmental and social issues. 

World Bank eligibility criteria underwent an independent review by the Center for International Climate and Environmental Research at the University of Oslo (CICERO). CICERO concurred that, combined with the governance structure of the World Bank and safeguards for its projects, the World Bank eligibility criteria provide a sound basis for selecting climate-friendly projects.

Use of Proceeds

"Eligible Projects" means all projects funded, in whole or in part, by IBRD that promote the transition to low-carbon and climate resilient growth in the recipient country, as determined by IBRD. Eligible Projects may include projects that target (a) mitigation of climate change including investments in low-carbon and clean technology programs, such as energy efficiency and renewable energy programs and projects ("Mitigation Projects"), or (b) adaptation to climate change, including investments in climate-resilient growth ("Adaptation Projects").The below table provides some examples of Mitigation Projects and adaptation projects that meet the Green Bond eligibility criteria and thus are eligible to be supported by the World Bank’s Green Bond program (hereafter “Green Bond Projects”):

Examples of eligible Mitigation Projects are:

• Solar and wind installations;
• Funding for new technologies that permit significant reductions in greenhouse gas (GHG) emissions;
• Rehabilitation of power plants and transmission facilities to reduce greenhouse gas emissions;
• Greater efficiency in transportation, including fuel switching and mass transport;
• Waste management (methane emissions) and construction of energy-efficient buildings;
• Carbon reduction through reforestation and avoided deforestation.

Examples of eligible Adaptation Projects are:

• Protection against flooding (including reforestation and watershed management);
• Food security improvement and implementing stress-resilient agricultural systems (which slow down deforestation);
• Sustainable forest management and avoided deforestation.

The above examples of Mitigation Projects and Adaptation Projects are for illustrative purposes only and no assurance can be provided that  disbursements for projects with these specific characteristics will be made by IBRD during the term of the Notes.

II. Selecting projects that are eligible for financing by World Bank Green Bond process

World Bank green projects, like all World Bank projects, are designed to reduce poverty and improve local economies. But green projects specifically focus on tackling climate change issues that directly impact developing countries. > More

In addition to meeting the Green Bond eligibility criteria, these projects, like all World Bank projects, undergo a rigorous review and approval process to ensure that the projects meet client countries’ development priorities. The process includes early screening to identify potential environmental or social impacts and designing policies and concrete actions to mitigate any such impacts in accordance with the World Bank’s environmental and social safeguard policies. Every World Bank project is approved by its Board of Executive Directors – a resident Board with 25 chairs representing its member countries. 

The lifecycle of a project financed by the World Bank (IBRD) follows six stages as shown in the graph below. World Bank- Green Bond Projects not only follow the same stages as other World Bank financed projects, including the due diligence and monitoring process throughout the project cycle, but in addition undergo three more steps as shown in the outer circle of the graph below. From the outset of the Green Bond Project cycle, environmental specialists get involved in order to identify projects that meet the Green Bond eligibility criteria. Go to https://www.worldbank.org/projectcycle for more information on the World Bank project cycle.

World Bank (IBRD) Green Bond Project Cycle

The Project Selection Criteria are applied to screen projects resulting in a list of eligible mitigation and adaptation projects. Once approved, these projects disburse over several years during the implementation stage. Corresponding amounts are deducted on a quarterly basis from the account created to support the allocation of World Bank Green Bond proceeds to eligible projects.

III. Earmarking and allocating World Bank Green Bond proceeds

The proceeds are credited to a separate Green Cash Account and are invested in accordance with IBRD’s conservative liquidity policy until used for the support of the World Bank’s financing of eligible Green Bond Projects. Disbursement requests for eligible projects take place in accordance with IBRD’s established policies and procedures. Disbursements are often made over a period of several years, depending on when each project milestone is reached. As disbursements are made for Green Bond Projects, corresponding amounts from the Green Cash Account are allocated to the general lending pool on a quarterly basis.

IV. Monitoring and reporting on impact of supported project

The World Bank supervises the implementation of all projects it supports –including the Green Bond Projects. Client countries implement the development projects in accordance with the project loan agreement.

The supervision process comprises regular reports by the implementing government agency on project activities, including a mid-term review of project progress. The project's progress, outcomes and impacts are monitored by the government and the World Bank throughout the implementation phase in order to obtain data to evaluate and measure the ultimate effectiveness of the operation in terms of the objectives it was set to achieve. World Bank project information is available on the main World Bank website and includes documents with detailed information about the projects (e.g., Project Appraisal Documents). In addition, summaries and key impact indicators of the Green Bond Projects are provided on the World Bank’s Green Bond website with links to relevant documents with more detailed project information. Green Bond newsletters also provide highlights of these projects.

V. Ensuring compliance

Projects: Projects eligible under the Green Bond program comply with World Bank safeguards, procurement policies and other procedures addressing project integrity.

Compliance is assessed at the individual project level and through independent reviews of about a quarter of all projects. Project level reviews by the Bank’s specialists in environment, social aspects, financial management, and procurement ensure that adequate controls and management capacity are in place at the country/project level. In addition, the World Bank’s Independent Evaluation Group (IEG) assesses the performance of about one out of four projects, measuring outcomes against original objectives, sustainability of results and institutional development impact. 

Green Bond Process: The World Bank Treasury follows procedures specific to its Green Bond program including selecting and reporting on eligible projects, maintaining the separate Green Cash Account and reviewing portfolio implementation progress to provide updated information for impact reporting purposes.

World Bank Green Bonds support projects that are vetted by World Bank climate and sector specialists and meet specific criteria for development activities that help lower carbon emissions. World Bank Green Bond projects, like all World Bank projects, are designed to reduce poverty and improve local economies. And they specifically focus on addressing climate mitigation and adaptation challenges that directly impact developing countries.

The World Bank’s impact report summarizes the list of eligible projects for which green bond proceeds are used to support disbursement financing. It also summarizes select results indictors for each project that demonstrate their environmental and social impacts. The indicators are intended to illustrate the type and scale of expected results in a variety of sectors and country contexts.

The World Bank develops products that meet investors’ specific demand. Many investors are concerned with the effects of climate change, and, with their investments, they want to specifically make a difference by supporting climate change related projects. The urgency of this issue has led to the emergence of a climate asset class to which institutional and retail investors are increasing allocations.

For investors, World Bank Green Bonds are an opportunity to invest in climate solutions through a triple-A rated fixed income product. The credit quality of the Green Bonds is the same as for any other World Bank bonds. Repayment of the bond is not linked to the credit or performance of the projects, and investors do not assume the specific project risk. Investors benefit from the AAA/Aaa credit of the World Bank, as well as from the due diligence process of the World Bank for its activities.

World Bank Green bonds are just like regular World Bank bonds, except that the proceeds are dedicated specifically to support World Bank-funded projects addressing climate change solutions. To inquire about World Bank green bonds available for purchase you can contact any financial institution in your vicinity that operates in the international financial markets.

What Investors Have Said

"IBRD’s effort in moving forward robust impact reporting on its green bond program is impressive. We view this as an important component of our green bond evaluation. Blackrock has been a strong supporter of World Bank Green Bonds in the past, and this pioneering work on reporting standards was a key factor behind our involvement in today's 10-year bond," said Ashley Schulten, Director, Portfolio Manager, Blackrock.

“These investments make sense for the environment and California taxpayers. The return for our pooled money account is outstanding, and we’re financing projects that help make a difference in the fight against global warming,” said Bill Lockyer, former Treasurer for the State of California.

"If established on firm footing, Mirova is convinced that the green and social bond market can become an essential tool for financing solutions to the challenges of sustainable development. IBRD's green bond is of particular interest considering its focus on climate change. We not only appreciate IBRD's green bond for its ability to fight climate change, but also because it features good practices that remain rare in the market. An adequate level of transparency is notably essential for maintaining the value-added of sustainability bonds for investors, which resides in the measure of impact that they offer. IBRD provides a regularly updated report, which allows investors to maintain visibility on the list of financed projects," said Marc Briand, Head of Fixed Income at Mirova.

"The last 7 years collaboration with investors is giving the World Bank a platform to offer investors a possibility to learn about climate challenges and support climate related solutions at the same time as it allows the World Bank to broaden their investor base among institutional investors. From SEB it’s a privilege to be joining this path and we appreciate the insight the World Bank has brought, not only in respect to understanding global challenges but primarily in how we through our partnership can assist in addressing these challenges,” said Christopher Flensborg, Head of ESG & Climate-Financial Solutions at SEB.

Green Bond Investor Newsletters

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