LONDON — The multilateral Climate Investment Funds (CIF) has issued a $500 million debut bond as part of a plan to diversify its funding sources and attract private sector investors to finance low carbon technologies in emerging markets, its CEO said on Tuesday.
The success of the bond, six times oversubscribed, underscores the growing importance of market-friendly issuances as nations and international agencies look to meet a $1.3 trillion climate finance goal at a time when development funds are becoming scarcer and amid uncertainty over future U.S. support.
Established in 2008, CIF has approved $7.4 billion of funding for projects in countries like Argentina, Brazil and India, channeled through six multilateral lenders including the World Bank. It is one of the world’s largest multilateral funds aimed at scaling climate solutions in developing countries.
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CIF’s Capital Markets Mechanism, a facility which issues bonds to fund CIF’s Clean Technology Fund, issued its debut bond on Tuesday. The three-year note was priced at 36.6 basis points over Treasuries and carried a coupon of 4.75% with investors placing orders of over $3 billion, Andrea Dore, global head of funding, capital markets and investments, at the World Bank which acts as mechanisms treasury manager told Reuters.
The impetus for the deal was to establish sustainable sources of funding for CIF at a time when overseas development assistance is reducing and amid increasing calls for multilateral institutions and climate funds to be more efficient with their capital, CIF Chief Executive Tariye Gbadegesin told Reuters.
The plan is for the Capital Markets Mechanism to become a regular issuer in the capital markets, subject to World Bank controls, to bring in more private sector investment for CIF’s Clean Technology Fund, which spans battery storage, coal transition and clean technology, Gbadegesin said.
Regular market access will also help CIF shore up its access to capital against changes in political or economic conditions, Gbadegesin added.
U.S. president-elect Donald Trump is expected to pull the United States back from global efforts to fight climate change, raising questions about the ability of the IMF and the World Bank to ramp up funding for countries around climate-related issues.
“You will always have pendulum shifts, whether it’s political pendulum shifts or economic shifts,” Gbadegesin said.
“The challenge is on all of us to establish multiple sources of funding to tackle the climate challenge and to invest in the energy transition.”
The deal had around 80 investors in the book, the World Bank’s Dore said, adding that private sector investors took a higher allocation than in other comparable World Bank deals.
“The whole idea is to be able to crowd in private sector funding to fight climate change, so that was our hope and we were able to achieve it,” she said.
CIF is backed by countries like Britain, Japan and Canada, which have pledged $12 billion in funding to date.
(Reporting by Virginia Furness in London; Editing by Nia Williams)
