IFC and HSBC Green Bond Targeting Climate Finance in Emerging Markets

IFC and HSBC have announced the creation of the first global green bond fund targeting “real economy” issuers in emerging markets.

IFC, a member of the World Bank Group, and HSBC Global Asset Management recently announced the creation of the first global green bond fund targeting “real economy” issuers in emerging markets, increasing access to climate finance and promoting the further development of green bond markets. 

The Real Economy Green Investment Opportunity (REGIO) Fund is expected to catalyse at least $500 million to $700 million in multilateral and private sector capital to support well-diversified climate-smart investments in developing countries around the world—largely through green bonds issued by non-financial, or real sector, companies. 

“This innovative fund will provide new opportunities for an important class of borrowers in green bond markets,” said IFC CEO Philippe Le Houérou. “The capital raised by REGIO will make a vital contribution to the fight against climate change and further promote sustainability-oriented capital markets.” 

Non-financial borrowers represent an untapped opportunity in the global green bond market. REGIO will increase access to climate finance for these borrowers by targeting a mix of manufacturing, agribusiness, services, infrastructure, and sub-sovereign bonds, in addition to a smaller allocation of financial-sector bonds. 

IFC will provide a $100 million anchor investment in the fund. HSBC will invest up to $75 million. The fund will have a total life of up to 15 years, including a seven-year investment period. 

“HSBC Global Asset Management has deep expertise and experience in investing in global emerging markets and a strong commitment to playing its part in mobilising capital to deliver on the UN Sustainable Development Goals and transition to a low-carbon global economy,” said Sridhar Chandrasekharan, Global CEO, HSBC Global Asset Management. 

The fund aims to attract private capital by helping institutional investors attain their goals of allocating resources to developing economies while achieving long-term sustainable growth and meeting fiduciary obligations. In particular, the fund will help address the demand for climate finance by providing an innovative, sectorally diversified vehicle to investors who currently lack the capability to invest in individual green bond transactions. 

Talking on the sidelines of the launch event of the fund. Vivek Pathak, Director for East Asia & Pacific Department at the IFC said, “Opportunities in India are huge. Look at infrastructure and amount of urbanisation and the level of agriculture (projects). There is increasing awareness. The solar and wind sector have done very well in India and I think the opportunities are going to be huge in India.”