World Bank renews U.N. Sustainable Development Goals bonds partnership

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The World Bank, BNP Paribas and Swiss private bank SYZ have renewed their partnership for an equity bond offering that will link investment returns to the performance of companies advancing priorities set out in the United Nations' Sustainable Development Goals (SDGs).

Under the renewed partnership, announced Sept. 10, BNP Paribas will arrange the bond, with Banque SYZ the sole distributor of the note in Switzerland which will directly connect private investors to the SDGs. All investments will be used to finance World Bank development projects.

It follows "great interest" from investors after SYZ first offered SDG-focused investment opportunities to private clients last year, according to the Swiss bank, prompting the decision to renew its partnership with the World Bank's International Bank for Reconstruction and Development (IBRD) on another equity-linked bond offering.

The return on investment of the bond is directly linked to the stock performance of companies included in the Solactive Sustainable Development Goals World MV Index, according to the World Bank.

The Index includes 30 firms which dedicate at least one-fifth of their activities to sustainable projects, or are recognized leaders in their industries on social or environmentally sustainable issues.

World Bank vice president and treasurer Arunma Oteh said the active participation of private investors was key to the shift in development finance in support of the SDGs.

"Thanks to our deepening partnership with Banque SYZ and BNP Paribas who arranged the bond, Swiss private investors will have a new opportunity to participate in a product that demonstrates the powerful role of capital markets in connecting savings with development priorities," she said.

The move comes the same day as new research was released by S&P Global Ratings highlighting the continuing growth of investor demand for fixed-income environmental social governance (ESG) products — a trend which it expects to continue as millennials inherit an estimated $30 trillion of wealth from older generations in the coming years.

Since the U.N.'s Principles for Responsible Investment were launched in 2006, ESG has become a mainstream investment category, according to the research, which estimated assets managed according to ESG strategies reached $23 trillion in 2016, up 25 percent from 2014.

The rise in investor demand also has led to an acceleration in new fixed income markets dedicated to ESG themes, the report added. It points to the rapid growth in green bonds over the past five years, and forecasts the green bonds market to hit $200 billion in new issuances in 2018.

Separately, ratings provider MSCI announced Sept. 11 the complete integration of ESG across its entire suite of risk and portfolio analytics systems. The move came in response to increasing demand for ESG data from investors, it said.

S&P Global Ratings credit analyst Corinne Bendersky said institutional investors such as pension funds and insurers were particularly interested in ESG because it captures long-term and existential risks such as climate change, a trend set to grow as the younger generation inherits more wealth.

"We expect ESG demand to continue on a growth trajectory as millennials, who by 2025 will collectively comprise 75 percent of the workforce, place greater emphasis on integrating these values into their investment choices," she explained.

In further green finance news, the City of London Corporation announced $2.61 million funding over three years for the Green Finance Institute, with the move matched by $2.61 million of support from the U.K. government.

The new body is being launched next year to champion green and sustainable finance in the United Kingdom and overseas, bringing the private and public sector together in a bid to make London a global leader in the field.

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