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  1. Who We Are

The 2023 report is a milestone in the journey of the World Bank as an asset manager to increase transparency and focus on positive impact for our trust fund clients, enabling an opportunity to align missions with investments.

The investment objective of the Sustainable Fixed Income Strategy is to have a positive development impact while maintaining capital preservation and liquidity.

The Strategy grew by over 60 percent from $440 million in June 2022 to $710 million in total assets under management by the end of 2023.

This growth in assets reflects the sustained need for investment solutions that offer a positive developmental impact, especially as countries around the world continue to rebound from the pandemic and markets grapple with uncertainty stemming from new and prolonged geopolitical crises as well as challenging macroeconomic conditions.

These investments support positive sustainable development outcomes across all 17 Sustainable Development Goals.

Some examples include:

  • the production of 3,498 electric vehicles, 
  • 3,346 students benefiting from education programs, 
  • the installation of 36 MW of renewable energy capacity, 
  • an increase of 338 people supplied by water and wastewater facilities, and 
  • 1,639 direct and indirect jobs created or maintained.

Managing the Sustainable Fixed Income Strategy requires not only conducting up-front, pre-investment due diligence on issuers, frameworks, and bonds, but also reporting on the impact of holdings after an investment is made. This impact report is an integral output of the strategy and will continue to evolve based on feedback from various stakeholders and as data collection, management, and aggregation improve and standards for impact reporting evolve.

2023 Year in Review

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$710 million of assets under management

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4.72% total return & 6 bps excess return

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44 bonds with impact spanning all Sustainable Development Goals

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100% engagement with issuers's bonds held in the strategy

About the 2023 Report

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  • Following the inflow of assets from an additional FIF, the Sustainable Fixed Income Strategy grew by over 60 percent from US$440 million in June 2022 to US$710 million in total assets under management by the end of 2023. This growth in assets reflects the sustained need for investment solutions that offer a positive developmental impact, especially as countries around the world continue to rebound from the pandemic and markets grapple with uncertainty stemming from new and prolonged geopolitical crises as well as challenging macroeconomic conditions.

    While addressing immediate, short-term needs, the markets and investors remain committed to financing solutions for generational challenges.

    For example, an increasing focus on the transition to low-carbon economies has spurred innovation in the capital markets with new types of fixed income instruments that are still evolving (see Sustainable Finance Instruments Highlight on page 21 for more on this topic).

    The strategy continues to address multiple development areas at the same time, touching upon all SDGs through the projects that the bonds in this strategy help to finance, ultimately helping issuers and countries meet their development objectives and climate goals.

  • Regular engagement with issuers, intermediaries, data providers, and key market actors is a critical element of the strategy, not only as a tool to communicate asset owners’ sustainability preferences and expectations and to use investor leverage to influence issuers’ behavior, but also to ensure full transparency and understanding of an issuer’s framework, encourage ambitious targets, discuss upcoming issuances, and inquire about impact reporting. This happens throughout the year and through a variety of channels. The team commits to regular engagement with issuers, at least annually, to stay abreast of developments from relevant issuers and the market in general.

    Many of the qualitative impact stories in this report were provided through tailored engagement with issuers, who are often keen to help investors communicate the impact of their bonds. Below is a selection of engagements that occurred in 2023, across a variety of topics.

    Engagement Type

    Context

    Outcome

    Pipeline of investable opportunities

    We engaged with several intermediaries and syndicates to discuss future growth of the strategy and the need for investable opportunities in the SSA universe as AUM rises.

    After understanding credit and sustainability requirements, intermediaries shared pipelines of future issuances as well as existing bonds that were available to tap. We use these engagements to provide feedback and specificity for investments in this strategy, including on currency, tenor, label vs. non-label, etc. These discussions remain continuous as inflows into the strategy continue into CY24.

    Issuer framework

     

    We engaged with a broker who was representing an issuer in the process of developing a new sovereign transition bond framework and requested feedback.

     

    We expressed interest in the new framework and described the verification process that we complete for eligibility into the strategy, including climate targets, a robust and ambitious transition timeline, commitments to impact reporting, etc. The feedback was appreciated and the issuer came to market a few months later.

    ESG data provider

     

    We re-engaged with an ESG data provider offering services related to impact reporting, interested to learn about updates to their product since the last engagement a year prior.

     

    We completed a trial of their platform and impact data services. While the product has developed significantly, we provided feedback on additional features that would be useful for investors providing a comprehensive impact report. We will continue to watch developments in this space.

     

    Market trends and updates

    We engaged with several dealers and research teams who provided with market data on SSA issuances to date as well as predictions on trends for the upcoming 6 to 12 months.

     

    These types of meetings are always helpful to better understand what the landscape of eligible issuances might look like in the medium-term, especially as assets continue to grow in the strategy. Predictions for 2024 include an increased focus on biodiversity and transition frameworks.

    Collective working group

    As a member of the United Nations Working Group on Common Treasury Services, we actively participate in regular meetings to discuss ways to realize savings and allow for economies of scale across the UN system through a combination of harmonized treasury services.

    This initiative intends to institutionalize best treasury management practices in the UN system and to explore the establishment of common treasury management for UN system organizations. To that end, we share, from the World Bank Treasury perspective, our best practices and experiences. One relevant area of collaboration and discussion over the past year has revolved around ESG and responsible investment (definitions, approaches, etc.).

  • Issuers have provided project stories through impact reporting or direct engagement. To provide a broader overview of intended impact, the expected or achieved impact noted below has not been prorated to holdings level or time-weighted. Below are several stories from the report.

    Brazil

    IDB Invest

    The Casablanca Project consists of the design, construction, commissioning and operation of six photovoltaic solar power plants in the state of Minas Gerais, Brazil. The project is the second power plant in Brazil with a long-term US dollar-linked PPA to be financed under a project finance modality, and the third solar project in Brazil to incorporate bifacial panels.

    With this project, IDB Invest is supporting Casablanca, a relatively small independent clean energy generator to add 297 MWac of zero-carbon electricity generation plants, expanding Brazil’s renewable energy capacity and contributing to avoiding GHG emissions.

    The project will help “green” the operations of the off taker, a large company operating in a heavy, highly energy-intensive industry. The project is expected to avoid over 3,000 ktCO2eq over a term of 15 years. Given the long-term life of the assets, it is likely that the annual energy generation will converge to 700,000 megawatt-hours (MWh).

     

    Egypt

    EIB

    The European Investment Bank provided EUR 600 million (of EUR 2.4 billion total cost) for construction of Cairo Metro Line 3, which is a crucial project to improve urban mobility and reduce traffic congestion for the more than 20 million people living in Cairo.

    The project is part of the Greater Cairo's Transport Master Plan and is expected to greatly reinforce the public transport system in this area, thus promoting a positive modal shift from private cars and therefore alleviating congestion and associated environmental problems, contributing to climate change mitigation. The extension of Line 3 (Phase 3) of the Cairo Metro includes 17 km to serve the main transportation corridors of urban greater Cairo.

     

    South Korea

    K-water

    In 2012, K-water commercialized the world’s first multipurpose dam floating solar power plant at Hapcheon Dam. After a thorough verification of structural stability and environmental safety issues of the aquatic ecosystem, Korea’s largest floating solar power plant of 41.5 MW was completed at Hapcheon Multipurpose Dam in 2022.

    Through supporting a resident participation business model that shares power generation profits with local residents, K-water has helped to create jobs and revitalize the local economy. Beginning with Hapcheon Dam as an exemplary case, K-water has initiated the resident-participatory floating solar power project at Imha Dam, Korea’s first integrated complex, with a plan for its nationwide expansion in the future.

  • In addition to continuous engagement with issuers, the World Bank is involved in several industry coalitions and networks with the aim of contributing positively to development of ESG products, standards, and collaboration. In addition to the two groups noted below, we have increased its ESG presence in the dealer community, and structuring desks request its feedback and input on future security structures, products, and industry development preferences.

    Network of Central Banks and Supervisors for Greening the Financial System (NGFS)

    At the Paris “One Planet Summit” in December 2017, eight central banks and supervisors established the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The network’s purpose is to help strengthen the global response required to meet the goals of the Paris Agreement and enhance the role of the financial system to manage risks and mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development. The World Bank is an official observer, and we participate in network events and activities.

    United Nations Working Group on Common Treasury Services

    The Working Group on Common Treasury Services targets an opportunity to realize savings and allow for economies of scale across the UN system through a combination of harmonized treasury services. This initiative intends to institutionalize best treasury management practices in the UN system and to explore the establishment of common treasury management for UN system organizations. We are part of the UN Treasury Community of Practice and members of the ESG Working Group subcommittee to advance investment practices within the UN system and collaboration.

Reports

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2023 Sustainable Fixed Income Strategy Impact Report

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2022 Sustainable Fixed Income Strategy Impact Report

Learn more at worldbank.org/asssetmanagement.