African Development BankGreen Bonds Framework:
Portfolio Selection, Allocation of Proceeds and Monitoring

October 2013

I. Portfolio Selection
ELIGIBLE PROJECTS"Eligible projects" for the Bank’s Green Bonds Portfolio means a pool of projects that have been selected
firstly based on the Bank’s methodology for tracking climate change mitigation and adaptation finance andsecondly based on additional criteria to be applied for the specific purpose of the Bank’s Green Bonds
Portfolio.
The guiding principles of the Bank’s methodology for tracking climate change mitigation and adaptation financeare:
For climate change mitigation
Eligible projects include projects that target a reduction in emissions of Greenhouse Gases (GHG) into theatmosphere or absorption of them from the atmosphere (reductions are measured against a “no-project”baseline) (“Mitigation Projects”).
A type of activity can be labeled as contributing to climate change mitigation if it is one among a set of options
available to decision-makers and if it leads (according to the available information) to a relatively significant
emission reduction as compared to the other options. As further experience is accumulated (in particular bymeans of emission impact assessments), activities may be included or excluded. Furthermore, an activity may
be mainstreamed to such an extent that it may become virtually the only option, in which case it will no longer
be considered as contributing to climate change mitigation. The methodology needs to be dynamic, in order tocapture these changes over time.
For climate change adaptation
Eligible projects include projects that target the reduction in the vulnerability of human or natural systems tothe impacts of climate change related risks by maintaining or increasing adaptive capacity and resilience(“Adaptation Projects”).
It is purpose, context and activity based: A project activity must fulfil three design process criteria for financeto be reported as adaptation finance. It must:Include a statement of purpose or intent to address or improve climate resilience in order todifferentiate between adaptation to current and future climate change and good development;
Set out a context of climate vulnerability (climate data, exposure and sensitivity), considering both theimpacts from climate change as well as climate variability related risks;
Link project activities to the context of climate vulnerability (e.g., socio-economic conditions andgeographical location), reflecting only direct contributions to climate resilience.

Activities that do not explicitly meet all the above three criteria are not included. An activity can be a project, aproject component, or a proportion of a project.
The Bank’s methodology for tracking climate change mitigation and adaptation finance contains an extended
list of illustrative activities as a way to raise general awareness about climate change mitigation and adaptation
among key stakeholders. The tracking of climate finance will however be based on the application of theprinciples highlighted above, which means that an activity might be on the list and not qualify as climate
finance if it doesn’t meet those principles.
Additional selection criteria to be applied for the specific purpose of the Bank’s Green Bonds Portfolio include:Projects that are eligible for financing under the African Development Bank. Projects eligible forfinancing under the African Development Fund and Nigerian Trust Fund will be excluded.

Projects whose financing by the Bank can be qualified in full as promoting either low-carbon orclimate resilient development. Projects whose financing by the Bank can be qualified only partially as
promoting either low-carbon or climate resilient development will be excluded.

Projects that will lead to significant accumulated GHG emissions reduction over the lifetime of theasset.

Examples of Typical Eligible Projects include: Greenfield Renewable Energy Generation (e.g. solar, wind, geothermal and ocean power)
 Demand-side Brownfield and Greenfield Energy Efficiency (e.g. energy efficiency improvements inlighting and equipment; retrofit of transmission lines, substations or distribution systems to reduce
technical losses)
 Vehicle energy efficiency fleet retrofit or urban transport modal change Biosphere conservation projects (reduce emissions from deforestation and degradation ofecosystems)
 Solid Waste Management (e.g. incineration of waste, landfill gas capture and landfill gas combustion)
 Industrial Processes (reduce GHG emissions from industrial processes improvements and cleaner
production)
 Fugitive emissions and carbon capture (e.g. carbon capture and storage, reduction of gas flaring ormethane fugitive emissions in the oil and gas industry, coal mine methane capture) Urban Development (e.g. rehabilitation and upgrade of urban water drainage systems in areas
vulnerable to frequency and/or severity of flash floods and storm surges brought by climate change) Water Supply and Access (e.g. water saving measures such as introduction of less water intensive
crops or preservation of soil moisture and fertility)
SELECTION OF ELIGIBLE PROJECTSThe selection of eligible projects will be done in two phases as follows:Phase 1: the Energy, Environment and Climate Change Department will identify and categorize among
all projects approved in any given fiscal year the climate change projects using the Joint MDB andAfDB’s climate finance tracking methodologies.
Phase 2: the Energy, Environment and Climate Change Department will apply the additional selection
criteria under the AfDB’s Green Bonds Program and categorize the projects that can be part of thethat program. The final list of projects to be part of the portfolio for any Green Bonds issuance will beagreed upon jointly by the Bank’s Energy, Environment and Climate Change Department and Treasury
Department based on the proposed list by the former.
Figure 1. Illustration of the AfDB’s Green Bonds Project Portfolio Selection Process

II. Allocation of Proceeds
An amount equal to the net proceeds of the issue of the Notes will be allocated within the AfDB’s treasury to a
sub-portfolio that will be linked to the AfDB’s lending operations in the fields of climate change adaptation andmitigation (“Eligible projects”). So long as the Notes are outstanding, the balance of this sub-portfolio will bereduced, at the end of each semi-annual period by amounts matching the disbursements made during suchsemi-annual period in respect of Eligible projects. Pending such disbursements, the net proceeds of the issueof the Notes will be held in the AfDB’s liquidity portfolio.

III. Monitoring
To enable investors to follow the implementation of the AfDB’s Green Bonds Program, the Bank will establish a
dedicated website which will include, among other things:
1) key documents related to the AfDB Green Bonds Program and links to other relevant Bank documents
such as the Long-Term Strategy or the Environment Policy;
2) Key information about the AfDB’s Green Bond Program and Framework, including project selectioncriteria;3) progress status report on the selection and implementation of the projects which are part of theGreen Bonds portfolio (e.g. information on implementation status, disbursement status and otherrelevant indicators as they are collected as part of the Bank’s project monitoring procedures).
In addition, the Bank will produce an annual newsletter for investors which will include a summary of theinformation under points 2) and 3) above.