The International Finance Corporation (IFC) and HSBC Global Asset Management have established the first global green bond fund targeting “real economy” issuers in emerging markets.
The fund is also aimed at increasing access to climate finance and promoting the further development of green bond markets.
The Real Economy Green Investment Opportunity (REGIO) Fund is expected to catalyse at least $500 million to $700 million in multilateral and private sector capital to support well-diversified climate-smart investments in developing countries around the world largely through green bonds issued by non-financial, or real sector, companies.
“This innovative fund will provide new opportunities for an important class of borrowers in green bond markets,” said IFC’s CEO, Philippe Le Houérou.
Le Houérou added: “The capital raised by REGIO will make a vital contribution to the fight against climate change and further promote sustainability-oriented capital markets.”
Non-financial borrowers represent an untapped opportunity in the global green bond market, IFC noted.
REGIO will increase access to climate finance for these borrowers by targeting a mix of manufacturing, agribusiness, services, infrastructure, and sub-sovereign bonds, in addition to a smaller allocation of financial-sector bonds.
The IFC will provide a $100 million anchor investment in the fund. HSBC will invest up to $75 million. The fund will have a total life of up to 15 years, including a seven-year investment period.
“HSBC Global Asset Management has deep expertise and experience in investing in global emerging markets and a strong commitment to playing its part in mobilising capital to deliver on the UN Sustainable Development Goals and transition to a low-carbon global economy,” said Sridhar Chandrasekharan, Global CEO at HSBC Global Asset Management.
REGIO draws on IFC’s leadership in the green bond market—as an issuer, investor, and standard setter. Since 2010, IFC has issued 143 green bonds in 16 currencies, totalling over $9 billion.
REGIO aims to attract private capital by helping institutional investors attain their goals of allocating resources to developing economies, while achieving long-term sustainable growth and meeting fiduciary obligations.
In particular, the fund will help address the demand for climate finance by providing an innovative, sectorally diversified vehicle to investors who currently lack the capability to invest in individual green bond transactions.
A proprietary green impact framework and clear sustainability governance policies will ensure that REGIO adheres to measurable green impact objectives, both for targeted issuers and transparent impact reporting.
To bolster the supply of green bonds issued by real sector borrowers, REGIO’s investment activities will also be complemented by a Technical Assistance Facility, managed by IFC.
