91309 Green Bond SIXTH ANNUAL INVESTOR UPDATE 2014 Highlighted In This Issue Water & Energy Efficiency Page 3 More In This Issue Green Bonds | PAGE 2 World Bank Green Bond Issuances Reach $6.4 billion as Green Bond Market Soars Use Of Proceeds | PAGE 2 Reporting by Sector and Regional Split World Bank Green Bonds In The News | PAGE 2 What Makes Our Green Bonds "Green"? | PAGE 4 What Green Bond Investors Said | PAGE 4 “Water is critically “Energy efficiency related to climate will be critical to the Photos (L-R): © Arne Hoel/The World Bank; © Yosef Hadar/The World Bank change. If carbon competitiveness of is the currency of cities as well as to climate change, water their economic profile. is the teeth. Fights Finding ways to achieve over water and food efficiency in transport, are going to have energy and real estate significant direct will make cities cleaner impacts on climate and more livable and will change in the next five help attract jobs and to 10 years.” investment.” Jim Yong Kim Rachel Kyte President Climate Change Vice President The World Bank Group and Special Envoy The World Bank Group 1 THE WORLD BANK GREEN BOND | SIXTH ANNUAL INVESTOR UPDATE 2014 WORLD BANK GREEN BOND PORTFOLIO UPDATE WORLD BANK GREEN PROJECTS Green Bonds Green Project Approved Amounts Highlighted In This Issue World Bank Green Bond BY SECTOR Water & Energy Efficiency Issuance Reaches $6.4 billion World Bank Green Bonds support projects that address mitigation and adaptation solutions for climate change. In this edition, we highlight projects from a sector in each category: Water and Energy Efficiency, respectively. For a list of more projects, please see as Green Bond Market Soars Other1/ 15% http://treasury.worldbank.org/cmd/htm/MoreGreenProjects.html. The World Bank had a record year for green bond issuances raising a total of almost $3 billion in FY14 (July 2013 to June 2014). With its first green bond issued for FY15 – a green bond Infrastructure, Energy & Built Water & Wastewater ADAPTATION projects help countries develop while protecting people and assets linked to a sustainable equity index – World Bank’s total issuance reached $6.4 billion through 68 bonds in 17 currencies, supporting Adaptation 23% Environment 16% Systems 49% from climate change impacts. Agricultural 62 projects in 20 countries. Recent issues also include more than $1 billion issued through two U.S. dollar transactions, an inaugural World & Ecological Resources Water and Wastewater Systems need to be better planned and built to help communities and 20% countries become more resilient to climate change. This means increasing capacity to achieve and sustain food and Bank Euro 550 million 3-year benchmark, and the Australian market’s first Mitigation 77% water security in an environment of increasingly scarce water resources. World Bank Green Bonds support investments AU$300 million "Kangaroo" Green Bond. in water management to prevent and reduce climate related impacts and better recover from extreme weather events, The strong demand for World Bank green bonds comes in tandem with including floods, storms, heat waves, and prolonged drought. a significant increase in the overall green bond market. By July 2014, green bond issuances well exceeded $20 billion – twice the amount as DOMINICAN REPUBLIC TUNISIA CHINA those issued in 2013. This growth comes as more issuers and investors Renewable Upgrading the safety and Improving irrigation systems to Overhauling wastewater Cross-Sector Activities and Others/2, 3% Energy are joining the market. 25% reliability of water storage, save water. management and drainage Waste & Waste Water, 3% irrigation and sanitation affected systems of Bengbu City Several developments and initiatives underway are adding more clarity Energy Agriculture & Land Use, 3% by storms and hurricanes. (Anhui Province). for investors as corporate entities have started to join the existing green Efficiency bond issuers. These developments include the Green Bond Principles;  Forestry, 4% 30% Expected Impacts: Expected Impacts: Expected Impacts: the Expert Network on Second Opinions, or ENSO, launched by Cicero; Sustainable Wastewater treatment Water saved across 3 months water an investor initiative led by Ceres; and the Climate Bonds Initiative (CBI). Transport plant serving 550,000 25,000 hectares reserve provided 32% Further, green bond indices which help increase liquidity have begun to people restored appear in the market. For example, both Solactive and Standard and 10,000 households Flood protection to Poor’s recently launched a Green Bond Index, and a MSCI/Barclays 11,600 hectares with access clean water 95% of city land area Green Bond Index is coming soon. 1/ Other adaptation activities include projects improved irrigation like catastrophe risk insurance facilities, and Pollution discharges modernization of hydrometeorological services. 200 MW of hydropower reduced by 11% Outstanding World Bank Green Bonds 2/ Other mitigation activities include facilities restored (As of July 31, 2014) strengthening governments’ renewable energy + 152 km transmission Photos: © Eric Miller/The World Bank; © SchulteProductions /iStock by Getty Images; © jmcreation/iStock by Getty Images and energy efficiency policies. lines restored BY CURRENCY BY REGION AUD MITIGATION projects help countries develop while reducing their carbon footprint. Energy Efficiency investments are considered the "low hanging fruit" of affordable options to reduce 14% BRL MXN RUB EUR 9% 2% 2% 16% COP NZD 3% 2% carbon emissions. Yet, energy users face many barriers in introducing more efficient technologies, including lack of Other 17% NOK 1% ECA up-front capital for initial costs, insufficient information about the benefits and savings of efficient technologies and 17% SEK ZAR PLN EAP products, and underdeveloped markets for energy management services and products. World Bank Green Bonds 17% 3% 34% TRY MYR MNA support projects that tackle these barriers in different ways. 4% CAD USD 5% SAR HUF 27% JPY 13% CHINA MONTENEGRO MEXICO LAC Helping Shandong Province Upgrading public schools and Promoting energy efficient light Of the US$eq. 6.4 billion issued, US$eq. 5.3 billion is outstanding in 17 currencies 31% finance energy intensive hospitals with new windows, bulbs and appliances and helping industries through leasing and insulation, lighting, and controls. poor households afford them. performance contracting. WATCH A VIDEO about this project: http://www.youtube.com/ World Bank Green Bonds in the News worldbanktreasury In Equiv. US$ billion Approved Expected Impacts (annual): Expected Impacts (annual): Expected Impacts (annual): CNBC, “A scarce global resource fighting climate change” by East Asia & Pacific 3.5 646 GWh 18,750 MWh 2,000 GWh Constance Gustke (July 1, 2014). www.cnbc.com/id/101796340# Europe & Central Asia 1.8 of energy saved of energy saved of energy saved The Economist, “Green grow the markets, O” (July 5, 2014). www.economist.com/news/finance-and-economics/21606326-market- Latin America & Caribbean 3.3 175,000 tons 7,600 tons 1.03 million tons green-bonds-booming-what-makes-bond-green-green-grow of CO2 reduced of CO2 reduced of CO2 reduced Middle East & North Africa 0.5 Monitor Global Outlook, "Green bonds slowly sprouting in Equivalent to avoiding Equivalent to avoiding Equivalent to avoiding emerging markets” (August 13, 2014). South Asia 1.4 the CO2 emmissions of the CO2 emmissions of the CO2 emmissions of http://www.monitorglobaloutlook.com/Strategic-Outlook/2014/08/Green- Total as of June 30, 2014 10.5 37,000 cars annually* 1,600 cars annually* 217,000 cars annually* bonds-slowly-sprouting-in-emerging-markets Note: Amounts may not add up due to rounding. *Calculated using the Environmental Protection Agency (EPA) Greenhouse Gas Equivalency Calculator at http://www.epa.gov/cleanenergy/energy-resources/calculator.html 2 THE WORLD BANK GREEN BOND | SIXTH ANNUAL INVESTOR UPDATE 2014 3 THE WORLD BANK GREEN BOND | SIXTH ANNUAL INVESTOR UPDATE 2014 WORLD BANK GREEN BOND PROCESS What makes a World Bank Green Bond "Green"? All World Bank bonds support sustainable development, poverty reduction and inclusive growth. They fit well with investment strategies that incorporate Environmental, Social and Governance factors into the decision-making process. The World Bank’s Green Bonds are a subset of our sustainable investment Project Selection Criteria opportunities focused specifically on climate change mitigation and adaptation. Examples of Eligible Projects The World Bank Green Bond symposium helped focus on the characteristics of the green bond market that are most important to investors including the key characteristics of our Green Bond’s summarized below. For more information Mitigation • Solar and wind installations; about other sustainable investment opportunities offered by the World Bank see: • Funding for new technologies that permit significant reductions in http://treasury.worldbank.org/documents/IBRDInvestorPresentation.pdf greenhouse gas (GHG) emissions; Project Selection Criteria • Rehabilitation of power plants and transmission facilities to World Bank Green Bonds support the transition to low-carbon and climate resilient reduce GHG emissions; development and growth. Our selection criteria underwent an independent • Greater efficiency in transportation, including fuel switching and review by the Center for International Climate and Environmental Research at mass transport; • Waste management (methane emissions) and construction of the University of Oslo (CICERO). energy-efficient buildings; Process for Selecting Eligible Projects • Carbon reduction through reforestation and avoided World Bank projects undergo a rigorous review and approval process including deforestation. early screening to identify environmental and social impacts and designing concrete mitigation actions. Then environment specialists identify approved Adaptation projects that meet the green bond eligibility criteria. • Protection against flooding (including reforestation and watershed management); Ring Fencing Green Bond Proceeds • Food security improvement and stress-resilient agricultural Green bond proceeds are earmarked to support only eligible green projects. They systems (which slow down deforestation); are credited to a separate Green Cash Account and are invested in accordance • Sustainable forest management and avoided deforestation. with IBRD’s conservative liquidity policy until allocated for eligible green project disbursements. Monitoring & Reporting List of Select World Bank Green Bond Investors The progress, outcomes and impacts of projects are monitored throughout • Aberdeen Asset Management • Mirova implementation and the ultimate effectiveness of the operation is evaluated in • ACTIAM (Formerly SNS AM) • MISTRA terms of the objectives they were set to achieve. Project information is available • Adlerbert Research Foundation • Natixis Asset Management on the main World Bank website and summaries and key impact indicators are • Aegon Asset Management • New York Common Retirement Fund provided on the World Bank’s Green Bond website. • AMP Capital • Nikko Asset Management  For more information on our green bond implementation guidelines, please see • AP2 and AP3 – Swedish National • Pax World Balanced Fund http://treasury.worldbank.org/cmd/pdf/ImplementationGuidelines.pdf Pension Funds • Pictet • Australia Local Government Super • QBE Insurance Group Ltd • Australian Ethical Investment Ltd • Rathbone Greenbank What Investors Said • Barclays Treasury • Sarasin • BlackRock  • SEB Ethos rantefund / SEB Fonden / “In line with its mission and vision, ACTIAM is very committed to responsible • Breckinridge Capital Advsiors SEB TryggLiv investment and green bond investing in particular. ACTIAM is very pleased to participate in this particular World Bank deal to continue to assist its • Caisse Centrale de Reassurance • Skandia Liv  clients like Zwitserleven in their search for responsible investments.” • California State Treasurer’s Office • Sonen • CalSTRS • Standish Mellon Asset Management Erik Jan van Bergen, Chief Investment Officer ACTIAM • Calvert Investments • State Street Global Advisors  • Church of Sweden • TIAA-CREF  “The green bond issued by the World Bank fits within our existing • Colonial First State Global AM • Trillium Asset Management mandate guidelines and our impact investing approach in which we select • Deutsche Asset & Wealth • UN Joint Staff Pension Fund investments that meet our existing risk and return requirements, but also Management • UniSuper have the intent to create a measurable social or environmental impact.” • Everence Financial • WWF-Sweden Hendrik-Jan Tuch, Senior Portfolio Manager • FMO (Netherlands Dev. Fin.) • ZKB (Zürcher Kantonalbank) Aegon Asset Management • Ikea Group • Zurich Insurance “UniSuper welcomes the partnership with the World Bank for this inaugural • LF Liv • Zwitserleven Australian dollar green bond. This transaction demonstrates the World Bank’s leading role in further developing the green bond and SRI debt About the World Bank: The World Bank (International Bank for Reconstruction and Development, capital markets overall. UniSuper is committed to the sustainable finance IBRD), rated Aaa/AAA (Moody’s/S&P) operates as a global development cooperative owned by 188 member countries. The World Bank has two main goals: to end extreme poverty and promote shared effort and is proud to contribute to it through this transaction.” prosperity. It provides its members with financing, expertise and coordination services so they can Talieh Williams, Manager, Governance and Sustainable Investment achieve equitable and sustainable economic growth in their national economies and find effective UniSuper solutions to pressing regional and global economic and environmental problems. About the World Bank Group: The World Bank Group consists of five separate legal organizations working towards a common mission to eradicate extreme poverty and promote shared prosperity. DISCLAIMER: This investor update has been prepared by the World Bank (International Bank for Reconstruction and It includes International Bank for Reconstruction and Development (IBRD), the International Development, IBRD) for information purposes only, and the IBRD makes no representation, warranty, or assurance of any kind, Development Association (IDA), the International Finance Corporation (IFC), the Multilateral express or implied, as to the accuracy or completeness of any of the information contained herein. This newsletter may include information relating to certain IBRD securities. Any such information is provided only for general informational purposes and does Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment not constitute an offer to sell or a solicitation of an offer to buy any IBRD securities. The securities mentioned herein may not be Disputes (ICSID). Both IBRD and IFC are issuers of green bonds. eligible for sale in certain jurisdictions or to certain persons. Email: debtsecurities@worldbank.org Tel: +1 (202) 477 2880 Web: http://treasury.worldbank.org/greenbonds Address: Investor Relations, Capital Markets Department 1818 H Street NW, Washington, DC 20433, USA Published in September 2014 4 THE WORLD BANK GREEN BOND | SIXTH ANNUAL INVESTOR UPDATE 2014 Please join in to make a difference. Think before you print.