Global green bonds news from a range of financial institutions indicates that while the market is growing, only a small share of proceeds is allocated to adaptation.
The International Development Association raised US$1.5 billion with its first five-year bond issuance.
ADB secured US$190 million in funding from the GCF to provide support to ADB-financed climate change projects in Cambodia, Mongolia and Tajikistan.
The World Bank and the Nordic Development Fund approved financing of US$225 million and €13.1 million respectively for the West African Coastal Areas Program.
21 April 2018: The global green bond market is growing, and is expected to reach US$250-300 billion in 2018. However, reports released during March and April 2018 find that adaptation and land use continue to benefit the least from green bonds proceeds. This Update presents adaptation projects that have received support during these months, and recent initiatives to promote sustainable finance and provide guidance on related definitions and international standards.
EIB and IFC Support Green Bonds in Emerging Markets
In March, the European Investment Bank (EIB) announced its investment of US$100 million in the ‘Amundi Planet – Emerging Green One’ Fund. This fund is dedicated exclusively to emerging markets and focuses on investing in green bonds issued by private sector financial institutions. It was set up by Amundi, the leading European asset manager, in partnership with the International Finance Corporation (IFC). In addition to its investment, the EIB will contribute its know-how as one of the largest issuers globally. [EIB Press Release]
On 21 April, in Washington, DC, US, Switzerland signed an agreement with the IFC to support green bond markets for climate finance in emerging markets. Switzerland will provide up to US$7.5 million to IFC for implementing IFC’s Green Bond Technical Assistance Program, which contributes to developing green bond policies, providing training programmes for bankers and facilitating the adoption of green bond principles and international best practices in emerging markets. [IFC Press Release]
Green Bond Markets: How Much is Used for Adaptation?
Huarong Xiangjiang Bank, China, issued a three-year bond of US$396 million for allocation to clean energy, energy saving, pollution prevention and climate change adaptation, including projects such as maintaining the holding capacity of a reservoir and construction of sewage treatment infrastructure. However, according to the Climate Bonds Initiative, adaptation still constitutes only a small share in the use of proceeds in China’s green bond issuance. [Huarong Xiangjiang Bank Green Bond Fact Sheet] [Climate Bonds Initiative China Green Bond Market Newsletter]
In the context of the Netherlands, a report by the International Union for Conservation of Nature (IUCN) on green bonds and integrated landscape management also shows that adaptation constitutes a small share in the use of proceeds from green bonds. The report stresses that collaborative landscape approaches align stakeholders to resolve complex issues including adaptation of farmers to climate change. [Green Bonds and Integrated Landscape Management: Options for Innovative Financing of Landscape Initiatives]
The five-year bond issuance by IDA marked the launch of its borrowing program, which will contribute to IDA’s work towards the SDGs.
In March, the UK and the Lima Stock Exchange (BVL) advanced the development of a Peruvian securities market that includes green bonds within its portfolio. The joint initiative released a green bonds guide in Spanish, which presents the basic principles that must be met in order to issue green bonds to finance projects for mitigation of and adaptation to climate change, and summarizes international best practices. [UK Government Press Release] [Green Bonds Guide]
A report by Climate Policy Initiative (CPI) analyzes 132 eligible climate finance submissions to the Global Innovation Lab for Climate Finance and the Fire Awards that target developing countries. The report finds that: the submissions are primarily mitigation-focused, with only 28% focusing on adaptation; the most common barriers are access to finance and skill gaps among investors; and, with regard to adaptation-focused ideas, barriers include the lack of suitable financial services and of data to assist investment decision making. [Supporting the Momentum of Paris: A Systems Approach to Accelerating Climate Finance]
Projects in Asia, Africa, LAC Secure GCF, AF Funding
On 9 March, the Asian Development Bank (ADB) secured US$190 million in funding from the Green Climate Fund (GCF) to provide support to ADB-financed climate change projects in Cambodia, Mongolia and Tajikistan. In Cambodia, the GCF will provide US$30 million in grant and US$10 million in loan to complement ADB’s loan of US$90 million to help develop climate-friendly agribusiness value chains. GCF funds will be used for enhancing the resilience and productivity of target crops, rehabilitating production and post-harvest infrastructure to climate-resilient condition, and for reducing the carbon footprint along the value chains by promoting solar and bioenergy.
In Mongolia, GCF funding of US$50 million in grant and US$95 million in loan will supplement the US$399 million from ADB and other partners to provide Ulaanbaatar’s peri-urban areas with 100 hectares of eco-districts that are low-carbon, climate-resilient and liveable, and 10,000 green housing units that are energy efficient, affordable and utilize renewable energy.
In Tajikistan, a GCF grant of US$5 million, combined with an equivalent grant from ADB, will support capacity building of the national weather forecasting entity, the State Agency for Hydrometeorology, to produce timely and accurate forecasting of climate-related extreme weather events. [ADB Press Release]
Also in March, the GCF approved financial support of a US$20 million grant for a four-year project aimed at strengthening the resilience of Antigua and Barbuda, Dominica and Grenada to climate change-related threats. The project will focus on improving hurricane resilience of community buildings, homes and businesses, and flood prevention measures. [GCF Project in Antigua and Barbuda, Dominica and Grenada]
The GCF also approved a US$32.8 million grant for a six-year project aimed at strengthening climate resilience of rural communities in Northern Rwanda by targeting a range of integrated adaptation interventions. The project will: restore and enhance ecosystems in degraded watersheds; increase the capacity of communities to sustainably manage forest resources; and follow an integrated landscape management model. [GCF Project in Rwanda]
US$26 million in GCF financial support will go to the Acumen Resilient Agriculture Fund (ARAF) project. Spanning 12 years, the project aims at improving climate resilience to ensure long-term sustainable increases in agriculture productivity and incomes for smallholder farmers in Uganda, Ghana and Nigeria. Its objective is to shift the pattern of investment in climate change adaptation activities in Africa from grants to a long-term capital approach, enabling smallholder farmers to respond to climate change more efficiently and effectively. [GCF ARAF Project]
Mexico and FAO Create Fund for Adaptation and Resilience in Caribbean
Mexico and the Food and Agriculture Organization of the UN (FAO) agreed to work together to strengthen Caribbean government agencies and institutions involved in climate change adaptation and resilience. Mexico will allocate US$4.3 million to create a cooperation fund that will work with the 20 member and associated countries of the Caribbean Community (CARICOM) and with Mesoamerican nations on climate change matters. Mexico and FAO will support the design and implementation of projects to obtain resources from the GCF and the Global Environment Facility (GEF), among others. FAO will support Caribbean small island developing States (SIDS) to access climate financing.
Enhancing access to GCF funding continues to be the focus of the Caribbean Community Climate Change Centre (CCCCC, or 5Cs), which is seeking proposals from regional private and public sector organizations to develop ideas for climate change resilience building into successful projects. The Centre aims to help organizations access GCF grants for climate adaptation and mitigation projects of up to US$50 million per project, including through developing operational procedures for governments and the private sector to engage effectively with the GCF, and a pipeline of potential project concepts for submission to the Fund. [FAO Press Release] [5Cs Press Release]
IDA Launches Borrowing Program to Advance SDGs
On 19 April, the International Development Association (IDA) announced that it has raised US$1.5 billion with its first five-year bond issuance. The five-year bond marked the launch of IDA’s borrowing program, which will contribute to IDA’s work towards the SDGs. Under IDA 18, financing instruments are expanded to promote resilience, crisis preparedness, and assistance for refugees and their host communities. [IDA Press Release]
Also in April, IDA approved a grant of US$30 million for a Burundi Landscape Restoration and Resilience Project. The project will help restore land productivity in targeted degraded landscapes, and provide immediate and effective response in the event of an eligible crisis or emergency. [IDA Landscape Restoration and Resilience Project]
West African Coastal Areas Program Receives Financial Boost
During the International Monetary Fund (IMF) and World Bank Spring Meetings in Washington, DC, US, the World Bank and the Nordic Development Fund (NDF) approved financing of US$225 million and €13.1 million respectively for the West African Coastal Areas (WACA) Program. NDF signed a credit agreement with Benin for €4 million for the country’s WACA investment, and a €5 million agreement with the World Bank for support to the WACA Platform.
The aim of WACA is to strengthen the resilience of targeted communities and areas in coastal West Africa. The Platform’s functions include: assisting regional integration and joint action; testing innovative financial instruments; and involving the private sector [NDF Press Release]
On coastal adaptation projects that involve the private sector, a report by the Global Climate Forum, an alliance of organizations based in Berlin, Germany, finds that long-term contracts offer opportunities for learning and efficiency gains, which can reduce costs for public actors. Opportunities to increase efficiency in projects are also shown to arise from flexibility in public-private partnership (PPP) contracts in terms of service delivery. [Leveraging Public Finance for Coastal Adaptation]
North American Actors Promote Adaptation Finance
Governor of Massachusetts Charles Baker, US, filed an Act Promoting Climate Change Adaptation, Environmental and Natural Resource Protection and Investment in Recreational Assets and Opportunity. The legislation provides for over US$1.4 billion to be invested in an integrated approach to climate change adaptation and resilience, and protection and maintenance of environmental assets. [Massachusetts Governor Press Release]
Canada signed bilateral agreements with its provinces and territories under the Investing in Canada Infrastructure Plan. Nova Scotia stands to receive a total of CA$828 million from 2018-2028. Over CA$382 million will be allocated to: supporting greenhouse gas (GHG) emission reductions; enabling greater adaptation and resilience to the impacts of climate change and climate-related disaster mitigation; and ensuring provision of clean air and safe drinking water. [Government of Canada Press Release]
AFB Approves US$14 Million in New Project Funding, Aims to Focus on Action, Innovation, Learning
During its March meeting in Bonn, Germany, the Adaptation Fund Board (AFB) approved an implementation plan for its five-year Medium-Term Strategy that calls for the creation of new grant funding windows that support the strategy’s pillars of action, innovation, and learning and sharing. The Board also: approved US$14 million for new adaptation projects in the Cook Islands, Federated States of Micronesia (FSM) and Iraq; and endorsed another six project concepts and pre-concepts.
The Board approved US$60 million in new funding in the next fiscal year (July 2018 to June 2019) for its innovative program of regional projects aimed at helping countries collaboratively address climate change issues that cross borders, while simplifying the regional project pipeline by merging categories of funding levels.
The AFB also agreed on steps to enhance the efficiency and effectiveness of the application process for organizations seeking accreditation with the Fund as implementing entities, and decided to advance complementarity and coherence with the GCF by continuing to explore options and concrete steps. [Implementation Plan for Medium-Term Strategy] [AF Press Release]
Technical and Financial Support Sought for Low-Carbon, Resilient Infrastructure Projects in Cities
During the EU’s High-Level Conference on Financing Sustainable Growth in Brussels, Belgium, representatives from intergovernmental organizations, international finance and EU institutions, and the Global Covenant of Mayors for Climate & Energy (GCoM) announced an Invest4Cities Call to the global investment community to deliver on the commitments announced at the One Planet Summit.
The EIB and GCoM also announced a Call for Interest to the GCoM network to provide access to technical support and financing for low-carbon and resilient infrastructure projects in cities. The Call for Interest will be piloted starting at the Global Climate Action Summit in San Francisco in September 2018. [EU Press Release on High-Level Conference on Sustainable Finance] [EU Press Release on Invest4Cities] [SDG Knowledge Hub Climate Finance Institutional Update Addressing European Commission Action Plan: Financing Sustainable Growth] [SDG Knowledge Hub Climate Finance Institutional Update on One Planet Summit] [SDG Knowledge Hub Story on Global Covenant of Mayors Launching Agenda for City Research and Innovation]
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The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past IISD climate finance updates can be found under the tags: Finance Update: Climate Change; and Finance Update: Sustainable Energy.