Will Green Bonds Incentivize More Direct Investments? - Interview with Andrea Dore, World Bank at TBLI CONFERENCE™ NORDIC 2015

Monday, 06 July 2015

Tagged under: nordic2015 impact investing climate change

Guest Blog Post written by Jonelle Maltay during TBLI CONFERENCE™ NORDIC 2015. Views and opinions are that of the writer and are not the official views of TBLI CONFERENCE™. 

Andrea Dore, Lead Financial Officer in the Capital Markets Department of the World Bank Treasury sat down with TBLI during the recent Nordic Conference in Copenhagen to discuss her role in the organization and how she has seen the Green Bond develop from an idea to an innovative market that is rapidly expanding.

The Capital Markets Department is the group that raises funds for the World Bank in the international bond market to finance the Bank's development mandate.  The World Bank finance projects focused on poverty reduction and inclusive growth across a range of sectors in the developing countries and the issue of climate change is important to the World Bank development mandate.

One of the key points that Andrea noted relates to the growth and diversity of issuers in the Green Bond market. The Green Bond market started with issuances from multilateral development institutions but there has been substantial growth in the Green Bond market with issuances coming from a wide range of issuers including government agencies, corporations and banks. Andrea noted that in the Green Bond market the World Bank has raised over US$8 billion with 100 transactions across 18 currencies. 

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Andrea reflected on the first meeting where the World Bank was approached by a group of Scandinavian investors through their Bank, SEB, who wanted to make a substantial investment in green projects.  They wanted to support projects that contributed positively to climate change.  

However those investors did not want to take the direct project risk because they did not have the in house expertise to evaluate those projects and take on the project’s country risk.  Given the World Bank’s proven expertise and extensive resources in developing economies, they were a natural fit to work with SEB.

Institutional Investors, who are well-known for their financial prowess, are gradually becoming recognized for their environmental and social conscientiousness. Andrea shared her perspective during the TBLI CONFERENCE™NORDIC 2015 Workshop Green Bonds: Transitioning to Green Energy and Energy Efficiency.

During the Q&A, skeptics of Green Bonds asked whether investors were only “dipping their toes in the water” with Green Bonds as it relates to climate change solutions rather than submerging themselves through direct investments. Andrea replied that Green Bonds have accomplished a great deal in a short space of time, especially within the last 2 years where the amounts of issuance have substantially increased as corporations and other types of issuers entered the market.

Andrea also made a strong point reminding the audience that a few years ago capital markets people weren’t talking about climate change as much as they are now.

Today it’s not just impact investors or development banks that are involved in ESG integration; there are so many more players that have joined the discussion on how they can incorporate climate issues in their investment strategies.

Look at this conference, for instance there are climate experts and investment bankers sitting at the same table. Besides the funding that it provides for development programs, Green Bonds have also started a wider conversation. The market is still in its early stages and The World Bank is playing an important role in the development of the market. However, there is hope that investors will start to invest directly in those green projects, taking on the direct project risk.  The incentive to get deeper involved will likely develop from the experience and understanding gained from the Green Bonds that are already out there. 

Like everything in life, things take time and the reason people “dip their toes in the water” is not because they plan to stay outside, but because they want to test it, to see how it feels, and to prepare themselves before fully submerging. For now, there are the Green Bond Principles and other governing and reporting standards in the works, as well as indices and a plethora of other tools that may help take this market to the next level, it will take time but it will reach its full potential.

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