The fund, a joint venture between Amundi and the International Financial Corporation (IFC), closed in March at $1.42 billion. A cooperative arrangement between both public and private sectors, it is in the process of deploying funding for projects. Called the Amundi Planet Emerging Green One (AP EGO)*, it aims to deploy around $2 billion into emerging markets green bonds by the end of its seven-year investment period by reinvesting proceeds.
“The model is based on public money invested by multilateral development banks providing a guarantee to help de-risk the investment opportunity to onboard institutional investors,” said Jean-Jacques Barbéris, Co-Head of Institutional Clients Coverage at Amundi. He explained that the IFC’s participation helps to de-risk and provide guarantees, while Amundi gives fund-raising support and manages the fund. AP EGO has a $256 million cornerstone commitment from the IFC and aims to increase the capacity of emerging market banks to fund climate-smart investments.
The Sustainable Development Goals (SDGs), otherwise known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. There are 17 goals and among them are clean water and sanitation, affordable and clean energy and climate action.
“The proof of concept has been done through this fund, and it is a robust model that may also be applied to help achieve other climate issues or SDGs,” said Barbéris.
GREEN BONDS ISSUANCE WEAK IN EMERGING COUNTRIES
While the global market for green bonds has expanded rapidly in recent years, totalling more than $155 billion in 2017, few banks in developing countries have issued such bonds. Amundi and IFC’s $2 billion project is aimed at stimulating demand and supply to create a sustainable green bond sector in emerging markets.
The fund is split into three tranches, junior, mezzanine and senior. The mezzanine tranche is a mixture of public and private money, while the senior tranche mostly consists of private investors. The mix is about 80% private and 20% public money.
The expected yield for the portfolio is around 5% with investors receive an expected return of around 4%. Barbéris explained the difference between the two as being administrative costs.*
The potential greenhouse gas impact from AP EGO is estimated to be about 3.7 million tonnes carbon dioxide equivalent over the investment period of the fund. The actual impact will depend on a variety of factors including the types of projects for which the bond proceeds are deployed, and the countries in which the investee projects operate. A recent analysis by IFC shows that 21 emerging market economies alone hold $23 trillion in climate-smart investment opportunities through to 2030.
COMPLIANCE AND CRITERIA
To ensure compliance and transparency and to ensure funding is channelled towards genuine green projects, an IFC-managed technical assistance program will support the development of green bond policies, provide training programs for local bankers and facilitate the adoption of the Green Bond Principles and international best practices in emerging markets. A dedicated ESG (Environmental, Social and Governance) charter is also incorporated into the fund. During the investment process, every issuer will be screened to uphold a high ESG as well as green bond integrity level.
*Past performance does not prejudge future performance