Nov review 2/7: benchmark-issuing pathbreaker IFC does 2nd $1bn in a year

From new issuer to an old faithful, the IFC issued the second bond of the month, which was also their second USD1bn bond in 2013. The first USD1bn bond was a watershed moment in the green bonds market as its size stirred a great deal of interest from both investors and underwriters. This second bond was apparently priced and sized in response to market demand – which is a great signal of market demand for this type of product. Rumour has it that they’re planning a further few billion per year in the future.

 

IFC have been issuing green bonds for some time and although their reporting could still be even better, they are a great role model with their criteria published online and a third party review provided by CICERO.

Having said that, we do still find their general criteria a bit vague (for example, they have ‘biofuels’ in there without specifying further criteria to address worrying issues around feedstock etc.). However, their guidance notes explain that all of their projects also go through a carbon accounting and must achieve certain hurdle rates in order to be included as ‘climate lending’. That would, we believe, would exclude a lot of biofuels projects and other controversial areas.

The guidance notes also indicate they use a 15% hurdle rate for energy efficiency projects, which is much better than the ‘any improvement is better than nothing’ approach that is still the norm. (FYI: If we’re to achieve needed emission reduction targets from energy efficiency measures we have to be ambitious in our efforts; because people tend to only make improvements periodically, if you only do a small improvement you may lock out further improvements for a long period).

Unfortunately these quite important IFC guidance notes are hidden deep within the IFC website (we had to get help from the IFC to find them). Would be good to link them more directly to the IFC Green Bonds web pages.