The World Bank (International Bank for Reconstruction and Development, IBRD) has issued bonds that for the first time directly link returns to the performance of companies advancing global development priorities set out in the Sustainable Development Goals, including gender equality, health and sustainable infrastructure.
The equity-index linked bonds raised a total of EUR163 million from institutional investors in France and Italy. The World Bank will use the proceeds to support the financing of projects that advance its goals of eliminating extreme poverty and boosting shared prosperity, and that are aligned with the Sustainable Development Goals or SDGs.
The return on investment in the bonds is directly linked to the stock performance of companies included in the Solactive Sustainable Development Goals World Index. The index includes 50 companies that, based on methodology developed by Vigeo Eiris’ Equitics, dedicate at least one fifth of their activities to sustainable products, or are recognized leaders in their industries on socially and environmentally sustainable issues. Solactive applies volatility and diversification filters to reach the final index composition. Vigeo Eiris is a global provider of environmental, social and governance research to investors and public and private corporates.
The bonds were arranged by BNP Paribas as part of the “SDGs Everyone” initiative. Under the initiative, the World Bank will issue bonds that raise funding to support the financing of projects that support the SDGs, and investors benefit from the performance of companies included in the equity index. The initiative is an innovative solution and new financial model that supports the SDGs, as called for by the UN Secretary-General’s Financial Innovation Platform (FIP) launched in October 2016.
Arunma Oteh, World Bank Vice President and Treasurer, said: “The global community has made an ambitious commitment to achieve the Sustainable Development Goals, and this requires a new way of looking at development finance. This bond is an innovation that demonstrates the powerful role of capital markets in connecting savings with development priorities, while offering investors an attractive risk-reward profile. Looking ahead, we anticipate coming to market with similar issuances that would attract a range of investors across the globe.”
Amina J. Mohammed, UN Deputy Secretary-General, said: “The 2030 Agenda for Sustainable Development is a transformative agenda which aims to make our world more inclusive, peaceful and prosperous. There is a momentous opportunity to change incentive structures in financial markets, shape consumer preferences as well as shareholder interest so that they reflect sustainability. Collaboration between the public and private sector will help to leverage innovative financial solutions that can deliver on the SDGs.”
Investors in the bond include AGPM VIE, AREAS VIE, BNP Paribas CARDIF France, BNP Paribas CARDIF Italy, Fideuram Asset Management Ireland, Generali France, MGEN, Prevoir VIE, Sella Gestioni SGR and Suravenir.
Olivier Héreil, Chief Operating Officer and Head of Asset Management, BNP Paribas Cardif, said: “We are proud to be part of the SDGs Everyone initiative which will support the United Nations’ Sustainable Development Goals. Since 2014, BNP Paribas Cardif in France has invested more than 4 billion euros in SRI. Today we are delighted to announce that our Italian subsidiary joins our French entity in investing in this new sustainable bond. These innovative products combine financial performance with environmental and social impacts, and as a responsible investor, we are pleased to have played an active role in their development.”
Pietro Calati, Head of Investments, Fideuram Asset Management Ireland, said: "We are pleased to have been part of this initiative. Fideuram's participation in the transaction reflects the dual mandate of our Ethical fund: to pursue financial opportunities and, at the same time, to have a positive impact on the community.”
Nicola Trivelli, Chief Investment Officer, Sella Gestioni SGR, said: “We are enthusiastic to invest in this initiative in support of the SDGs and look forward to more issues like this.”
Bernard Le Bras, President and Chief Executive Officer, Suravenir, said: “We are very proud to participate in this innovative initiative which supports the UN's Sustainable Development Goals. Innovation and responsible investments are at the heart of the strategies of Suravenir and Credit Mutuel Arkea. We see this as an opportunity to promote innovative investment products that combine performance with sustainable investments, together with the great satisfaction that comes with contributing to the development of these new solutions.”
Olivier Osty, Executive Head of Global Markets, BNP Paribas, said: “We are delighted to collaborate with the World Bank on this innovative program of structured issuance to satisfy increasing investor focus on the SDGs. Innovation and sustainability are key foundations of our strategy at BNP Paribas and we are pleased to bring our expertise and commitment to the UN’s financing platform for SDGs. We are confident that we can replicate the success of the World Bank’s Green Growth Bonds with this new program.”
Learn more about World Bank Sustainable Development Bonds here
Transaction Summary for th 15-year Bond:
About BNP Paribas
BNP Paribas is a leading bank in Europe with an international reach. It has a presence in 75 countries, with more than 189,000 employees, including more than 146,000 in Europe. The Group has key positions in its three main activities: Domestic Markets and International Financial Services (whose retail-banking networks and financial services are covered by Retail Banking & Services) and Corporate & Institutional Banking, which serves two client franchises: corporate clients and institutional investors. The Group helps all its clients (individuals, community associations, entrepreneurs, SMEs, corporate and institutional clients) to realise their projects through solutions spanning financing, investment, savings and protection insurance. In Europe, the Group has four domestic markets (Belgium, France, Italy and Luxembourg) and BNP Paribas Personal Finance is the leader in consumer lending. BNP Paribas is rolling out its integrated retail-banking model in Mediterranean countries, in Turkey, in Eastern Europe and a large network in the western part of the United States. In its Corporate & Institutional Banking and International Financial Services activities, BNP Paribas also enjoys top positions in Europe, a strong presence in the Americas as well as a solid and fast-growing business in Asia-Pacific.
About the World Bank
The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization created in 1944. It operates as a global development cooperative owned by 189 nations. It provides its members with financing, expertise and coordination services so they can achieve equitable and sustainable economic growth in their national economies and find effective solutions to pressing regional and global economic and environmental problems. The World Bank Group has two main goals: to end extreme poverty and promote shared prosperity. The World Bank (IBRD) seeks to achieve them primarily by providing loans, risk management products, and expertise on development-related disciplines to its borrowing member government clients in middle-income countries and other creditworthy countries, and by coordinating responses to regional and global challenges. The World Bank has been issuing bonds in the international capital markets for over 60 years to fund its sustainable development activities and achieve a positive impact. Information on bonds for investors is available on the World Bank Treasury website.
About the United Nations and the Sustainable Development Goals (SDGs)
World leaders agreed to implement a new plan for the future of people and the planet that has the potential to make our world more inclusive, peaceful and prosperous. The plan reflects three agreements adopted by the United Nations Member States in 2015: the Addis Ababa Action Agenda on Financing for Development, the 2030 Agenda for Sustainable Development, and the Paris Agreement on climate change. The financing required to bring about the global transformation needed to realize the aspiration captured in the 17 Sustainable Development Goals (SDGs) are estimated to be in the order of trillions of dollars annually. The United Nations is evolving to build the capacity that will deliver sustained partnerships that bring together businesses, science, civil society, and government that deliver on the Sustainable Development Goals. In October 2016, the UN Secretary-General announced the launch of a financial innovation platform (FIP) for scaling the financing of the Sustainable Development Goals (SDGs). The goal of the platform is to drive investment for catalytic SDG interventions and build momentum from governments, as well as the business and investment community for achieving the 2030 development agenda.