REPORTEmerging
MarketGreen Bonds
IFC-Amundi Joint Report

MAY 2024

EMERGING MARKET GREEN BONDS

Page ii

About IFC

About Amundi

IFC — a member of the World Bank Group — is the largest

Amundi, the leading European asset manager, ranking

global development institution focused on the private sector

among the top 10 global players, offers its 100 million

in emerging markets. We work in more than 100 countries,

clients—retail, institutional and corporate—a complete range

using our capital, expertise, and influence to create markets

of savings and investment solutions in active and passive

and opportunities in developing countries. In fiscal year 2023,

management, in traditional or real assets. This offering is

IFC committed a record $43.7 billion to private companies

enhanced with IT tools and services to cover the entire

and financial institutions in developing countries, leveraging

savings value chain. A subsidiary of the Crédit Agricole groupthe power of the private sector to end extreme poverty

and listed on the stock exchange, Amundi currently manages

and boost shared prosperity as economies grapple with themore than €1.9 trillion of assets. With its six international

impacts of global compounding crises. For more information,

investment hubs, financial and extra-financial research

visit www.ifc.org.

capabilities and long-standing commitment to responsible
investment, Amundi is a key player in the asset management
landscape. Amundi clients benefit from the expertise andadvice of 5,400 employees in 35 countries.

EmergingMarketGreen Bonds
IFC-Amundi Joint ReportEMERGING MARKET GREEN BONDS

Acknowledgments
This report was prepared under the guidance of Susan Lund, International Finance Corporation (IFC)
Vice President of Economics and Private Sector Development, and Paolo Mauro, Director of IFC’s
Economic and Market Research Department.
José Abad, also at IFC, was the lead author. Working team members included Quentin Albert, Mohamed
Ben Slimane, Angge Roncal Bazan, Sylvia Chen, Charles Dupré, Eric Dussoubs, Joan Elbaz, Julien Foll,
Victor Hintzy, Timothée Jaulin, Esther Law, Molly Minton from Amundi, and Samed Hysa, Kaikham
Onedamdy, Selin Gonca Ozyurt, Jessica Stallings, and Imtiaz Ul Haq from IFC.
The update of the GSSS database was led by Jessica Stallings and completed thanks to Nimarjit Singhfrom IFC, while the green bond issuance forecasts were run by Mohamed Ben Slimane and Victor Hintzy
from Amundi.
We thank peer reviewers Jamie Fergusson, John Gandolfo, Kaikham Onedamdy, Laila Nordine, EmmanuelNyirinkindi, Ayelet Perlstein, and Tomasz Telma, all from IFC, and Timothée Jaulin from Amundi. We
are also grateful for the helpful comments and suggestions provided by Gonzalo Fernández at theInternational Monetary Fund.
Chris Vellacott at IFC edited the report with help from Brian Beary, while Irina Sarchenko was responsible
for graphics and design with help from Alison Heasley.

Page 2

Page 3﻿

Table of Contents

Foreword�������������������������������������������������������������������������������������������������������������������������������������������������������������������� 4
Key Messages������������������������������������������������������������������������������������������������������������������������������������������������������������ 6
Executive Summary������������������������������������������������������������������������������������������������������������������������������������������������ 7
Chapter 1: Introduction����������������������������������������������������������������������������������������������������������������������������������������� 9
Chapter 2: Market Developments in 2023����������������������������������������������������������������������������������������������������� 17
Chapter 3: GSSS Bond Outlook�������������������������������������������������������������������������������������������������������������������������� 33
Chapter 4: Concluding Remarks�����������������������������������������������������������������������������������������������������������������������38
Annex 1: Annual Emerging Market Green Bond Issuance by Market Segment������������������������������ 40
Annex 2: Key GSSS Bond Issues in 2023��������������������������������������������������������������������������������������������������������� 48
Annex 3: Recent Noteworthy Initiatives for Sustainable Finance in Emerging Markets�������������� 53

EMERGING MARKET GREEN BONDS

Page 4ForewordT

he sixth edition of the ‘Emerging Market Green
Bonds Report’ analyzes significant trends within

the green, social, sustainability, and sustainabilitylinked (GSSS)1 bond markets for the year 2023, andprovides projections for 2024 and beyond. Furthermore,
it encapsulates the latest advancements in policy andregulatory frameworks. Similar to previous editions,this year's report represents a collaborative effort

Amundi continues to dedicate itself to the growth of
the green bond market and other sustainable financeinstruments. Its partnership with IFC on initiatives suchas the Amundi Planet Emerging Green One and the BuildBack-Better Emerging Markets Sustainable Transaction
funds, launched in 2018 and 2021 respectively, aims toboost both the demand and supply of green bonds inemerging markets.

between Amundi, a prominent asset manager in Europe,

In 2023, issuance of GSSS bonds saw significant expansion

and the International Finance Corporation (IFC), part ofin developing economies, rebounding strongly fromthe World Bank Group.

the previous year's slump. This surge was driven by a

Collaboration with financial institutions, the private sector,
and governments is essential to IFC’s mission to mobilize
private capital for sustainable development and climaterelated objectives. As a pioneer in the green bond market,
IFC has issued, since 2010, more than $12.6 billion in green
bonds through 198 securities across 21 different currencies.
Moreover, IFC offers technical support to both issuers andinvestors in developed and emerging markets, enhancing
the integrity of the green bond market. IFC has also
contributed significantly through its leadership on theexecutive committee of the Green, Social, Sustainability, andSustainability-Linked (GSSS) Bond Principles, serving as chairfrom July 2020 to June 2022.

1

For a full description of each category of sustainable bond, see Box 1 in Chapter 1

confluence of factors including easing inflation concerns,
governmental and corporate initiatives to address climate
challenges, and more favorable financial conditions.
Regulatory progress in multiple jurisdictions supported
the market's expansion by establishing clearer guidelines
for sustainable finance in a number of regions which inturn is likely to make these assets more appealing tointernational investors.
Much of the growth in issuance seen in 2023 was driven
by sovereign borrowers seeking funds as they stepped up
efforts to meet climate targets. As a result of the increasein sustainable bond issuance, significant investment
flowed into green construction, renewable energy, andwater projects. Also, innovations in sustainability criteria,

Page 5

Foreword

SUSAN M. LUNDYERLAN SYZDYKOV

Vice President, Economics andGlobal Head of Emerging Markets,

Private Sector Development,

AmundiIFC

such as Chile's inclusion of a gender-based performance

criteria—pose significant threats to this rosy outlook forindicator in its sustainability-linked bond framework,

the market. Any downturn would severely impact global

underscored a broader trend of integrating social goals into

efforts to achieve the climate targets established by thefinancial strategies.

2015 Paris Agreements. Sustainable finance markets areOver the medium term, we anticipate continued growth ingreen bond issuance within emerging markets driven by anacceleration of the energy transition.

crucial for addressing the capital deficits in funding economicand energy transitions in emerging markets by directing
private sector investments to where they are most needed.
Consequently, substantial efforts must be made to ensure

Nevertheless, geopolitical tensions and the reputational

continued growth in the GSSS market, including enhancing

damage from still prevalent greenwashing—misstating theregulations, standardizing best practices, mobilizing policies,

extent to which financial instruments meet sustainability

and raising awareness.

EMERGING MARKET GREEN BONDS

Page 6

Key Messages
Bounceback in 2023

Issuance Outlook

Emerging market GSSS bond issuance surged 45 percent inIssuance of emerging market GSSS bonds is likely to grow2023 to reach $209 billion, an all-time high. Issuers outsideat an annual rate of 7.1 percent over the 2023–2025 period,

China increased transactions by around 65 percent to $111

with sales volumes rising to $240 billion, from $209 billion

billion while those within the country saw a 28 percent

currently. For the green bond sub-category, growth will

advance to around $98 billion.

be faster still, at 7.5 percent per year to reach $156 billion in

Outside China, GSSS bond issuance in emerging markets was
driven by green bonds, which increased by 81 percent. In the
Middle East and North Africa, most notably UAE and Saudi
Arabia, green bond issuance more than doubled.

Driven by Sovereigns
The acceleration in green bond issuance in emerging markets
in 2023 was partly driven by sovereigns which more thantripled their green bond sales. Their share of total emerging
market green bond issuance jumped to 17 percent from
7 percent in 2022. But financial institutions, which increased
sales of the securities by 52 percent, remained the biggest
issuers of green bonds, selling 58 percent of the total versus
51 percent in 2022. Corporates saw their share fall sharply to
21 percent from 32 percent.

Use of Proceeds
Renewables continue to claim the biggest share of theproceeds from emerging market GSSS bond issuance at
37 percent, flat from the previous year. Green buildings
claimed 29 percent, up from 9 percent in 2022, whilewater projects have also become increasingly important,representing 12 percent of issuance in 2023, up from
8 percent, on account of the emergence of “blue” bonds.

2025. This outlook, with a 70 percent probability, assumes noreversal in investor demand for sustainable assets alongside
emerging market sovereign and corporate borrowers
stepping up efforts to finance climate commitments.

Drivers of Market Growth
Easing inflationary worries and benign growth outlooks inmany emerging markets are behind much of the recovery
trend. But growth in GSSS bond sales can also be largely
attributed to governments and companies stepping up
efforts to confront climate challenges, alongside ongoing
improvements in regulation and maturing financial markets.

Page 7

Executive Summary

Executive SummaryS

But growth in GSSS bond sales can also be largely

in developing economies.

transforming economies and businesses to make them

Emerging market issuance of green, social, sustainability,

be funded and the international financial markets connect

and sustainability-linked (GSSS) bonds, which are eligible

these borrowers with a growing pool of portfolio capital

investments for funds focused on environmental and socialthat prioritizes environmental, social, and governancecriteria, surged 45 percent in 2023 to reach $209 billion, an

criteria when choosing assets to buy.

ustainable finance, the capital market used byborrowers to fund projects and initiatives withsound environmental and social credentials, is booming

all-time high.

attributed to governments and companies stepping up
efforts to confront the climate challenges they face,
more sustainable while building resilience. All this needs to

In short, rising financing needs to fund green transitions

For emerging markets outside China, growth was evenin emerging markets are meeting growing demand that isfaster, at 65 percent, reaching $111 billion over the year. In

capable of absorbing more growth in GSSS bond issuance.

China itself, meanwhile, GSSS bond issuance advanced by
28 percent to around $98 billion.

At the same time, financial and regulatory conditions areThis marks an impressive bounce back from the slump in sales

supported by ongoing progress by market supervisors inseen the previous year when inflation stifled demand among

establishing guidelines for categorizing, regulating, andinvestors who were worried about the declining value of theirtracking sustainable finance in multiple jurisdictions. Thisbond holdings, while rising interest rates prompted borrowers

means sustainable finance markets in developing economies

to put their capital raising plans on hold.

are becoming deeper, easing the way for more investment

The recent growth in emerging market GSSS bond issuancefavoring emerging market issuers. Market growth is being

capital to buy up debt issued in those markets.

is also set to continue, according to the central forecasts

This study also shows that the new investment is finding

outlined in this report, rising by around 7.1 percent each year

its way to where it is most needed, not just alleviating thethrough 2025. That means sales volumes will reach aroundperennial problem of capital scarcity in emerging markets$240 billion in 2025.

but targeting crucial economic sectors. Data on how the

There are multiple forces driving this upsurge that are likely
to stay in place over the next two years. Easing inflationary
worries, projected rate cuts by the U.S. Federal Reserve andother central banks, and benign growth outlooks in many
emerging markets are behind much of the trend.

proceeds of green bond sales are used show a rapidly rising
share going toward greener construction, a central pillarof many emerging economies as well as a major source ofgreenhouse gas emissions.

EMERGING MARKET GREEN BONDS

Page 8The largest slice of the money raised from the instruments

has limits. Nevertheless, there is room for issuance toin emerging markets during 2023 was designated forgrow from current levels and GSSS bonds still represent a

renewables, though at 37 percent the share was broadly

fraction—around 5 percent—of annual emerging market

stable relative to the previous year. The next biggest

bond issuance outside China where the proportion is smaller

destination for money raised from sales of green bonds, andstill, at 1.7 percent.

rapidly closing the gap, was buildings, claiming 29 percentof the total from 9 percent a year earlier. Water projects
have also become increasingly important, representing
12 percent of issuance in 2023, up from 8 percent. This isdue to a rise in sales of blue bonds, a sub-category of green
bonds used to raise money for water and ocean-related
sustainability. Low carbon transport saw its contribution fallto 11 percent from 18 percent in 2022.

This report starts by outlining the financial market trends
that underpin the new issuance market for GSSS bonds inemerging markets. A second chapter breaks down primarymarket performance during 2023 from several perspectives,
looking at issuance by region, trends in the use of proceeds
and other features. The third chapter sets out the forecasts
compiled by Amundi for issuance volumes over the next
two calendar years, and a concluding section sketches

Among the most significant innovations over the year withinsome potential considerations for policy makers, regulators,

the GSSS bond market, we also highlight the inclusion of ainvestors, issuers, and multilateral development bankssocial key performance indicator in Chile's Sustainability-

seeking to ensure the continued health of this market.

Linked Bond Framework that was updated in June. This
introduced a gender-based metric targeting an increase infemale representation on the boards of companies regulatedby the Financial Market Commission to at least 40 percent
by 2031.

Private investment is vital for covering the financing needs ofgovernments and corporations seeking to meet net-zero andother climate commitments made at international summits
such as COP28, as well as building resilience to ever more
frequent extreme weather events. The GSSS bond market

To be sure, a step up in GSSS bond sales could lead to moreis a key medium for channeling private funds toward thedebt on balance sheets and issuers’ capacity for borrowing

emerging markets where it is needed the most.

1
Introduction
Sustainable finance—the market for debt securities

growing pool of funds focused on investments that meet ESG

that raise money for sustainable projects andpriorities. This bodes well for governments and companies

initiatives—is in robust health in developing economies.

in developing economies that made commitments at

New issues by emerging market corporate andinternational summits such as COP28 in late 2023 to transition

sovereign borrowers during 2023 of green, social,their economies and businesses away from fossil fuels andsustainability, and sustainability-linked (GSSS) bonds—

build resilience to the consequences of climate change. Their

see Box 1 for definitions—are often encountering

funding needs are sizable but emerging market governments

orders that exceed the amount of debt being sold.2

typically have less fiscal firepower to meet those needs thanIndeed, demand for these securities means the yields

their counterparts in developed economies. That meanson such debt are similar or occasionally below thoseencouraging international portfolio capital to make up thaton conventional bonds in emerging markets, making it

shortfall is vitally important.

attractive for governments, corporations, and financial
institutions to raise more capital.

This sixth edition of the Emerging Market Green Bonds
Report outlines patterns in new issuance of GSSS securities

Several factors drive this. Firstly, 2023 saw a broadby emerging market borrowers throughout 2023 andimprovement in sentiment around debt capital markets withpresents forecasts for new sales through 2025, based onsustainable bonds enjoying an even more emphatic shift in

calculations by Amundi.

mood. The amount of new money flowing into investment
funds prioritizing environmental, social, and governance(ESG) issues continued to grow, albeit at a slower pacethan previous years,3 adding to global demand for new
GSSS bonds. Meanwhile, authorities in multiple emerging
economies are making progress toward implementing
guidelines and categorization systems for sustainable finance.
They are also ensuring that the new taxonomies are better

Issuance of emerging market GSSS bonds recovered in 2023
from the previous year’s slump, to match the $1 trillion record
sales set in 2021, a rebound described in detail in Chapter 2.
This reflected ongoing investor demand for emerging market
and green assets in contrast to the widespread nervousnessof 2022 amid peaking inflation and monetary tightening,
conditions that are unfavorable for bond market sentiment.4

aligned and comparable with those in other jurisdictions.

The momentum of 2023 is set to continue, meanwhile, asThis is a significant development. Investors need to be able

described in Amundi’s central outlook scenario in Chapter 3,

to estimate risk when considering adding an asset to theirwith the stresses that held back new GSSS bond sales in 2022

portfolio and this is difficult, inefficient, and costly whenreceding. The remainder of this chapter describes the market

dealing with multiple sets of rules and categorizations that aretrends underpinning this and how investor appetite for GSSS

incompatible with one another.

bonds has evolved over the past year. Indeed, it outlines how

Making emerging market assets easier to assess for risk andpotential returns by international investors unlocks a still

conditions in many emerging GSSS bond markets are favorable
to borrowers in comparison with developed economies.

2

Examples of oversubscribed bond issues during 2023 include sovereign green bond sales from India and Turkey, as outlined in Annex 2 of this report.

3

See Reuters, 2023, ”ESG funds suffer weaker demand despite help from tech-sector performance,” available at: https://www.reuters.com/sustainability/sustainable-finance-reporting/esg-funds-suffer-weaker-demand-despite-help-tech-sector-performance-2023-12-21/

4

See Annex 1 for details about the dataset, the sources used, and the methodology followed, as well as any changes compared to previous editions.

EMERGING MARKET GREEN BONDS

Page 10

BOX 1

Definitions and Guidelines
Green bonds: Fixed-income instruments with proceeds

a higher coupon. These bonds can also be structured

earmarked exclusively for projects with a positive

to reward better-than-expected performance with aenvironmental impact. The Green Bond Principles

lower coupon. Unlike social or green bonds, proceeds are(established in 2014 and last updated in June 2022)

not earmarked for specific projects. In June 2020, ICMA

developed by the International Capital Market Association

published the Sustainability-Linked Bond Principles (last(ICMA) have four components: use of proceeds, process for

updated in June 2023), providing guidelines on structuring

project evaluation and selection, management of proceeds,

features, disclosure, and reporting.

and reporting. Several countries and jurisdictions havedeveloped guidelines for green bond issuance, many ofwhich align with the Green Bond Principles.

Climate transition bonds: This category of debt aims
to finance the transition to a low-carbon economy.
The Climate Transition Finance Handbook published byBlue bonds: A sub-category of green bonds specifying

ICMA in December 2020 (and last updated in June 2023)

that proceeds are used for financing water-related

recommends disclosures for issuers marking either use-sustainable projects.

of-proceeds or sustainability-linked instruments withSocial bonds: Proceeds from social bonds are directed
toward projects that aim to achieve positive social
outcomes, especially, but not exclusively, for a target
population. ICMA's Social Bond Principles (introduced in2017, last updated in June 2023) have four components
analogous to the Green Bond Principles: use of proceeds,a climate transition label. There are four key elements
to the recommended disclosures: the issuer's climatetransition strategy and governance; the environmental
impact of its business model; the climate transition
strategy that must be science-based and include targets;and the transparency of implementation.  

the process for project evaluation and selection,

Other labels: Some issuers have used other labels for

management of proceeds, and reporting.

sustainable debt funding, such as “adaptation,” or “SDG”

Sustainability bonds: Sustainability bonds are debt
instruments that raise money to finance or refinancea combination of green and social projects. The
Sustainability Bond Guidelines established by ICMA
(last updated in June 2021) are aligned with the corecomponents of both Green and Social Bond Principles.  

(Sustainable Development Goals) bonds. Most of these
specify that proceeds from the bond must align withICMA principles but their branding has been adapted
to single out a specific feature. Some bonds labeled"sustainable development bonds" depart from ICMA
principles, as they are not "use-of-proceeds" bonds but
are general purpose securities from issuers who wish

Sustainability-linked bonds: These instruments are

to flag that their mission is inherently sustainable. The

performance-based bonds whereby their financial or

proliferation of labels requires vigilance from investors

structural characteristics, such as the coupon rate, arearound project eligibility, allocation, and impact reporting

adjusted depending on whether the issuer achieves

commitments.

predefined sustainability objectives. The objectives aremeasured through key performance indicators andassessed against sustainability performance targets.
Failure by the issuer to meet those goals may result inPage 11

Introduction

Emerging Market Green Bond
Market Performance

The comeback was more vigorous across emerging markets

The year 2023 saw a rebound in the market for sustainableinflationary pressures. As a result, they achieved significant

where policy makers in some jurisdictions had hiked
rates earlier than developed country peers in response toprogress in bringing price rises under control.5 In addition,

finance in developing economies and debt issuance more

economic growth also proved to be more resilient than

generally. These developments benefited from calmer

expected and recession was averted in the United States

financial markets with investors anticipating that lower

and elsewhere leading to corporate earnings that were

inflation would set the stage for central banks to startahead of forecasts.

easing interest rates (see Exhibit 1).

EXHIBIT 1

Financial Markets Staged a Recovery in 2023
Total return in 2023 versus 2022

2022

U.S. Equities-18.1%

World Equities-17.7%

60/40 Portfolio-17.0%

2023

24.5%

21.6%

15.2%

-11.2%

U.S. High Yield

10.9%
1.5%

USD Cash

4.9%-13.0%

U.S. Agg. Bonds

4.2%-10.2%

Commodities
-25%

16.1%
0%

25%

Source: JP Morgan Wealth Management

5

International Monetary Fund. 2023. "Global Financial Stability Report: Financial and Climate Policies for a High-Interest-Rate Era." Washington, DC, October.

EMERGING MARKET GREEN BONDS

Page 12

However, secondary market performance of green bonds

issuer. While this explains the divergence between the twofrom emerging market issuers lagged conventional bonds

types of assets in emerging markets, in developed markets,by around 200 basis points in 2023 after ending 2022

however, the opposite was observed, likely reflecting

around 450 basis points ahead on a total return basis (seethe longer duration of green bonds in a context of

Exhibit 2). Green bonds tend to outperform conventionalchanging interest rates. On average globally, green bonds

bonds in secondary markets during risk-off periods, andunderperformed in 2022 on the back of higher rates, only

to underperform when the market mood is more positive.

to outperform in 2023 driven by the expectations of lower

This reflects the higher quality of the average green bondrates down the road.

EXHIBIT 2

Emerging Market Green Bonds Marginally Underperformed
in 2023 Due to Structural Factors
Green bond performance in 2022–2023
Emerging Market Bonds

Global Bonds
25%

25%

Green Bonds, 10.7%
All Bonds, 9.1%
Green Bonds, 7.1%
All Bonds, 5.7%
0%0%-10.8%-15.3%-16.2%-22.7%
-25%

2022

2023

-25%

2022

2023

Source: Bloomberg, IFC
Note: Left panel compares the Bloomberg MSCI Global Green Bond Index USD against the Bloomberg Global Aggregate Bond Index USD; right panel compares the Bloomberg
MSCI EM Green Bond Index USD against the Bloomberg EM Aggregate Bond Index USD. In both cases, we compute the difference between annual growth rates over end-of-yearlevels in each index.

Page 13

Introduction

A closely-watched gauge of market sentiment aroundpoints on average, than developed markets where it was

sustainable finance is the green premium, sometimes

2.2 basis points on average (see Exhibit 3). Although thereferred to as a “greenium.” This refers to the yielddeveloped market green premium is statistically significant,advantage for issuers of GSSS bonds over conventional

the emerging market green premium is not owing tobonds whereby investor demand for green assets drives

the small number of observations and the relatively highdown borrowing costs. Amundi’s estimates suggest a wider

standard deviation compared to developed markets.

green premium in emerging markets in 2023, at 5.6 basis

EXHIBIT 3

Green Bond Yield Advantage
Developed versus emerging market green bond yield advantage, or “greenium,” over conventional debt
4
2

Basis points

0

Developed Markets-2

Developed Markets
Premium (Weekly)
Premium (Average)-4

Emerging Markets

Emerging
PremiumMarkets(Weekly)
Premium (Average)-6-8

Source: Amundi calculations, Bloomberg

12/7/2023

8/7/2023

10/7/2023

4/7/2023

6/7/2023

2/7/2023

12/7/2022

10/7/2022

8/7/2022

6/7/2022

2/7/2022

4/7/2022

12/7/2021

8/7/2021

10/7/2021

6/7/2021

2/7/2021

4/7/2021

12/7/2020

10/7/2020

8/7/2020

4/7/2020

6/7/2020-12

2/7/2020-10

EMERGING MARKET GREEN BONDS

Page 14

These estimates are based on secondary market information(Box 2) rather than the pricing of newly issued debt. However,secondary market valuations act as an indicator of investor
sentiment and influence the pricing of new bonds. A wider
green premium supports new issuance as it indicates investor
appetite and incentivizes borrowers, including those inemerging markets, to consider green bonds as an efficient
way to raise capital.
Several studies have examined the extent to which investor
preference for assets that meet ESG criteria drives yields
lower on green bonds, in both primary and secondary
markets.6 Other factors may influence the green premium,like the timing of the bond issuance and market sentiment,or the quality of issuers.
The relatively benign global market backdrop of the past
year is likely to prompt further issuance growth through2025, according to Amundi’s central scenario, to which
it gives a 70 percent probability. This outlook assumes acontext of easing inflationary pressures and lower nominalinterest rates, with emerging market GSSS bond issuancerising at a compound annual rate of 7.1 percent over
2023–2025, reaching around $240 billion by the end of 2025.
Green bond issuance will rise faster still, at 7.5 percent
per year over the period, to $156 billion, according to theAmundi outlook, up from $135 billion.

BOX 2

Methodology Used for Calculating
the ‘Green Premium’
Amundi used a bottom-up approach that focuseson the intra-curve green premium, aiming to assessthe difference arising from the green bond format.*Amundi collected weekly data (modified duration,
spreads) from April 2019 to December 2023 for thegreen bond constituents of the MSCI Global Green
Bond Index and for their related conventional bonds(i.e. from the same issuer) from the Bloomberg
Global Aggregate Bond Index.
The spread of the green bond is compared to the
spread of a theoretical interpolated conventionalbond of the same modified duration. The green
premium is therefore the difference in spread
between the green bond and a comparable bondof the same issuer, currency, seniority, andmodified duration.
*

Ben Slimane, M., Da Fonseca, D., and Mahtani, V., 2020, “Facts and Fantasies
About the Green Bond Premium,” Amundi working paper 102-2020, available
at https://research-center.amundi.com/files/nuxeo/dl/4f0aeb1b-b73e-4dbf8bf7-2eb9ff1f5dee?inline=

This report also presents two alternative scenarios. The
first, more pessimistic of these with a 20 percent likelihood,envisages persistent inflationary pressures and tighter
financial conditions as policy makers keep rates tight inIn the long run, GSSS bond issuance will probably continue

response. This leads to a global downturn and GSSS bondto be structurally supported by two related drivers. Firstly,issuance in 2025 at 15 percent below the central scenario

public investment in climate mitigation and adaptation

outlined above. This would imply a negative compoundis likely to increase as governments strive to reach net

annual growth rate of 1.4 percent across 2023–2025, with anzero targets by 2050. Secondly, investor demand for GSSS

even greater annual retreat of 2.6 percent for green bonds.

bonds is set to outpace supply. These factors will likely be

The second alternative scenario, to which Amundi assigns a
10 percent probability, is the most optimistic and assumes amore pronounced in emerging markets where investment
shortfalls around the energy transition are larger.

more stable geopolitical environment. GSSS bond issuanceis seen 30 percent above the central scenario, amounting toan annual issuance growth rate of 22 percent over the 2023–
2025 period, with green bond sales rising 25 percent per year.

6

See, for example, Zerbib, O., 2019, “The effect of Pro-Environmental Preferences on Bond Prices: Evidence from Green Bonds,” Journal of Banking & Finance vol. 98, issue C.

Page 15

Introduction

Most recent top-down7 and bottom-up analyses8 point

According to Bloomberg NEF, global spending on the green

to an increase in global temperatures of 2.7–2.8 degrees

energy transition reached $1.8 trillion in 2023, up 17 percent

Celsius above pre-industrial levels under existing policies,

year-on-year and an all-time high.10 China accounted for awell above the 1.5 degrees Celsius increase targeted inthird of overall investments, with another third evenly split

the Paris Agreement. The year 2023 was the hottest year

between the European Union and the United States. But thison record, according to some estimates, with the global

falls short of the $4.8 trillion that needs to be invested every

surface temperature reaching 1.5 degrees Celsius above

year for the remainder of this decade to remain on track

pre-industrial levels.9 The indications are, therefore, that

under the Net Zero Scenario outlined by Bloomberg (seethe spending needs for building resilience to the effects of

Exhibits 4 and 5).

a changing climate will accelerate which will in turn drive
further GSSS bond issuance.

EXHIBIT 4

Spending on Green Energy Transitions Advanced 17 Percent in 2023
Annual spend on transitioning to green energy in U.S. dollars$1,769 Billion

1,511

1,190

22

21

23
20

20

20

20

19

20

18

20

17

526 565

20

16

13

20

469

20

12

20

15

11

20

428

20

10

14

212

388

20

213

20

09

313

267 239

20

08

07

153

20

06

156

20

107

20

05

80

20

20

20

33

51

04

934

Source: BloombergNEF

7

Climate Action Tracker, December 2023, “No change to warming as fossil fuel endgame brings focus onto false solutions,” available at https://climateactiontracker.org/publications/nochange-to-warming-as-fossil-fuel-endgame-brings-focus-onto-false-solutions/?
China$675.9 Billion

8

CDP and
EUOliver Wyman, 2022, “Missing the Mark:341 2022 Analysis of Global CDP Temperature Ratings,” available at https://www.oliverwyman.com/our-expertise/insights/2022/sep/
cdp-temperature-ratings.html?

9Copernicus, January 2024, “Copernicus: 2023 is the hottest year on record, with global temperatures close to the 1.5°C limit | Copernicus,” available at https://climate.copernicus.eu/copernicus-2023-hottest-year-record
UK

10

These include investments to install renewable energy, buy electric vehicles, build hydrogen production systems and deploy other technologies. If we also included investments in building
Brazil34.8
clean energy supply chains, as well as $900 billion in financing, total funding in 2023 reached about $2.8 trillion. See Bloomberg NEF, 2024, “Energy Transition Investment Trends,”

US

303.1

73.9

Japan

32

India

31.4

934

20

23

22
20

21
20

20

19

Page 16

20

18

20

526 565

20

17

16

20

20

469

428

20

13
20

15

12

388

20

11

20

14

212

20

213

10

09

313

267 239

20

20

153

08

07

156

20

20

107

06

05

80

20

20

51

20

33
04

EMERGING MARKET GREEN BONDS

EXHIBIT 5

China Is the Biggest Market for Clean Energy Spending
Investments in green energy by jurisdiction, in U.S. dollars
China$675.9 Billion

EU

341

US

303.1

UK

73.9

Brazil

34.8

Japan

32

India

31.4

Source: BloombergNEF

While the need to raise finance for climate adaptation and

But the amount of new money flowing into ESG investment

green transitions alongside mounting investor demand

funds continued to grow in 2023, albeit at a slower pace thanfor emerging market GSSS bonds favor further growth in

the previous two years,12 suggesting that demand remains

issuance, there are challenges ahead. Investing aroundrobust. At the same time, progress in setting up taxonomies

ESG priorities is facing resistance amid political pushback,and guidelines, improving market supervision, and the self-

regulatory shifts, and changing market dynamics. In someregulating effect of a growing pool of sophisticated investors,

countries, legislative efforts have sought to curb ESG

all aim to curb greenwashing.

considerations in investment strategies, and there are signs
that support for shareholder proposals on environmental
and social issues may be declining.11

There is an ongoing effort within the finance andinvestment industry to recalibrate and focus on integrating
financial resilience with sustainability goals. This more

Moreover, skepticism toward ESG's effectiveness andnuanced approach points to the likelihood of a continued,

accusations of so-called greenwashing—or misstating thealbeit adapted, role for ESG principles in guiding investment

extent to which financial instruments meet sustainability

decisions amid a changing landscape.13

criteria—are increasingly entering public discourse.

11

Available data for the United States, for example, show that some U.S. states have increasingly adopted anti-ESG laws since 2021 (Pleiades Strategy’s 2023 Statehouse Anti-ESG Report;
Malone & Holland, 2024, "Seven Key Trends in ESG for 2023—and What to Expect in 2024") and that a declining share of ESG proposals are supported by shareholders (Diligent, 2023
"Proxy Season Review").

12

See Reuters, 2023, “ESG funds suffer weaker demand despite help from tech-sector performance,” available at: https://www.reuters.com/sustainability/sustainable-finance-reporting/esg-funds-suffer-weaker-demand-despite-help-tech-sector-performance-2023-12-21/

13

See Financial Times, 2024, “BlackRock stresses financial strength over ESG in company calls,” available at https://www.ft.com/content/b7c04084-68ee-4512-833b-0bba4f608a36

2
Market Developments
in 2023E

asing investor anxiety about inflation eroding theby borrowers in advanced economies who still account forvalue of debt securities alongside issuers stepping

about 70 percent of the $4.4 trillion of GSSS bonds issued

up efforts to raise money to fund green economic

since the first green bond transaction in 2012. Emerging

transitions helped fuel a surge in GSSS bond sales inmarket borrowers represent 15 percent, or $671 billion of2023 (see Exhibit 6). Investors bought more than $1

the tally, while supranational borrowers have sold a similar

trillion of new GSSS bonds over the year, matchingamount (see Exhibit 7).14

the record issuance reached in 2021 and marking aconvincing recovery from the slump seen in 2022 whenrising interest rates drove up borrowing costs and madeconditions more challenging for issuers.
Emerging market GSSS bond issuance surged 45 percent
in 2023 to reach $209 billion, an all-time high. The growth
was largely driven by issuers outside China who increasedtransactions by 65 percent to $111 billion while those within
the country posted a 28 percent advance to $98 billion.

Nevertheless, emerging market borrowers in developing
economies are increasing their use of GSSS bonds to meetfinancing needs which suggests the dominance of themarket by developed market issuers will wane over time.
GSSS bonds remain a small corner of the financial markets,
however. The asset class’s share of the wider fixed income
market stood at just 2.5 percent at the end of 2023, risingfrom 2.2 percent a year earlier. Trends in GSSS bond“penetration”— a measure of the asset class’s share of annual

Notwithstanding this acceleration in GSSS bond issuance insales expressed as a percentage—are discussed in more

emerging markets, the asset class remains dominateddetail later in this chapter.

14

The analysis of GSSS bond issuance in this report uses data consolidated from Bloomberg, the Climate Bonds Initiative, and Environmental Finance, according to the bond definitions in
Box 1. See Annex 1 for a full explanation of the sources and a complete data set showing issuance volumes by region.

EMERGING MARKET GREEN BONDS

Page 18

EXHIBIT 6

Issuance of GSSS Bonds Recovered From 2022 Slump
Annual global GSSS issuance 2012–23
1,200

120
111
1,013

1,012
98

96
913

77

Emerging Markets(excluding China)

604

Developed Markets

67$ Billion$ Billion

Emerging Markets

China

Supranational

45

37

326

172

4

12

37

49

23 23

195
16

85

0

Source: Bloomberg, CBI, Environmental Finance, IFC

1

0.3

2 1

5

12

14

21
13

7
0

Page 19

Market Developments in 2023

EXHIBIT 7

Borrowers Have Issued More Than $4 Trillion of GSSS Bonds
Global GSSS issuance 2012–23 (cumulative)$ Billion$0

Percentage of Overall
Fixed Income Issuance

Percentage of 2023 GDP$3,500

0%

6%

0%

50%

China

308

1.70%

0.49%

Emerging Markets(excluding China)

363

1.39%

1.29%

Supranational

635

Developed Markets

43.05%

0.61%
3,117

5.19%

0.71%

Source: Bloomberg, CBI, Environmental Finance, IFC

Structural Patterns in GSSS
Bond IssuanceGreen bonds remain the principal component of the GSSS

emerging markets where issuance grew by 47 percent in
2023. In Annex 1 we discuss why sustainability-linked bonds
may be falling from favor globally based on research by IFC
economists, and how weakening demand could be addressed.

bond market, accounting for around two thirds of sales andMeanwhile, supranational entities reduced their green

much of the analysis in this chapter focuses on this sub sector.

bond issuance by 20 percent in 2023 to $33 billion, marking

Nevertheless, one notable trend gathering pace in the GSSS
bond market in emerging markets is the rising share of nongreen bond issues, which increased from 30 percent in 2022
to 35 percent in 2023. Social bonds were the fastest growing
segment, posting 543 percent growth, though this jumplargely reflects a relatively low base in 2022.
Interestingly, sustainability-linked bonds performed better inemerging markets than elsewhere. They were the weakest

a reversal from the 46 percent increase the previous year.
However, this was offset by a shift toward sustainability
bonds with a 37 percent increase in issuance to $61.4 billion.
Overall GSSS bond sales by supranational entities saw amodest 1 percent advance in 2023.
Focusing on the dominant green bond sub sector, issuanceremained concentrated in 2023 with six countries accounting
for 87 percent of all emerging market green bond sales.

performing component of the primary GSSS bond market

Meanwhile, 13 countries account for 92 percent of the

globally in 2023, countering expectations that their focus on$466.2 billion in emerging market green bonds issued overslapping higher interest rates on borrowers who fail to meetthe 2012–2023 period. China alone accounts for $292 billion,

sustainability targets would boost demand among investors

or 63 percent of the cumulative tally. Other major issuers

disillusioned with so-called greenwashing. However, sales

include India with a cumulative total of $25 billion, Brazil withof sustainability-linked bonds remained relatively strong in$18.1 billion, and Chile, at $16.6 billion (see Exhibits 8 and 9).15

15

See Annex 1 for a discussion and dataset on regional patterns of issuance during 2023

EMERGING MARKET GREEN BONDS

Page 20EXHIBIT 8

Emerging Market Green Bond Sales Rose 34 Percent in 2023
Annual green bond issuance in emerging markets in 2012–23
China
Sub-Saharan Africa

160

135.3

Middle East and North Africa
Latin America and the Caribbean

120

101.2

Asia and the Pacific (excluding China)

100

77.1

80

40.0
20.1
1.1
2012

0.3

3.7

2014

2015

0.0
2013

25.1

28.2

$ Billion

Europe and Central Asia

140

60

33.9

40
20
0

2016

2017

2018

2019

2020

2021

2022

2023
0.6%

Total
0.3%

0.3%

0.24%
0.19%

0.07%

0.08%

0.08%

2016

2017

2018

0.11%

0.4%

0.2%

Percentage of GDP

0.5%

0.10%
0.1%

0.01%
0.0%

2012

2013

2014

2015

2019

2020

2021

2022

2023

5%
4%
3%

0.09%

0.04%

0.39%

0.55%

0.57%

0.69%

2016

2017

2018

2019

0.98%

1.31%

Total
1.67%

2%
1%

0.43%

0%

2012

2013

2014

2015

Source: Bloomberg, CBI, Environmental Finance, IFC

2020

2021

2022

2023

Percentage of Overall Fixed
Income Issuance6%

Page 21Market Developments in 2023

EXHIBIT 9

China Remains Dominant Among Emerging Market Issuers
Green bond issuance in emerging markets 2012–23 (cumulative)$ Billion$0

Sub-Saharan Africa
Middle East and North Africa

Percentage of 2023 GDP$320 0.0%

2.0%
0.27%

5.1

45.5

Asia and Pacific (excluding China)

47.2

Latin America and the Caribbean

48.1

China

Source: Bloomberg, CBI, Environmental Finance, IFC

0.55%
0.95%

27.8

Europe and Central Asia

Percentage of Overall Fixed
Income Issuance
0.0%
1.5%

0.81%

0.72%

1.36%

0.59%

0.47%

0.72%
292.5

0.86%
1.62%

0.69%

EMERGING MARKET GREEN BONDS

GSSS Bond Penetration
Penetration—a measure of the asset class’s share of totalbond sales in a given year—shows that GSSS bonds are more
firmly established in emerging markets than developed

Page 22from 1.1 percent in 2022. As with the broader GSSS bond asset
class, green bond penetration was highest for supranational
issuers, reaching 19 percent of their total fixed income sales
in 2023 versus 30 percent in 2022.

economies.

Issuance by Type of Borrower

In emerging markets outside China, GSSS bonds accounted

Looking at issuer profiles, the acceleration in green bondfor 5 percent of total fixed income issuance in 2023, up fromissuance in emerging markets in 2023 was driven by

3.6 percent in 2022. In developed markets and China, GSSS

sovereigns which more than tripled their green bond sales.

bond penetration was 2.1 percent and 1.7 percent respectively.

Financial institutions increased sales of the securities by

Overall, GSSS bond penetration was highest among

52 percent over the year.

supranational borrowers, reaching 60 percent of their total

Financial institutions were the largest emerging market

fixed income sales in 2023. This was, however, lower than atissuers in 2023 for the second consecutive year, responsible

any time over the last three years and a marked drop fromfor selling 58 percent of the total versus 51 percent in 2022.

the 85 percent peak reached in 2021.

Corporates saw their share fall sharply to 21 percent from

Focusing on green bonds, penetration reached all-time highs
across all regions. In emerging markets outside China, they

32 percent while sovereigns increased markedly to 17 percent
from 7 percent in 2022 (see Exhibit 10).

accounted for 2.1 percent of total fixed income issuanceThis deviates from the trend in developed markets wherein 2023, up from 1.4 percent the previous year. In China,

non-financial corporates were the biggest issuers of green

green bonds accounted for 1.6 percent of total fixed income

bonds with a 36 percent share while sovereigns and financial

issuance in 2023, up from 1.4 percent in 2022. Green bonds

institutions both claimed 23 percent of sales (see Exhibit 11).

in developed markets reached 1.3 percent penetration, up

Page 23

Market Developments in 2023

EXHIBIT 10

Emerging Market Green Bond Sales
Dominated by Financial Issuers
Emerging market green bond issuance by sector
100%

Government Agencies

90%
100%

Sovereigns
Government Agencies
Municipals
Sovereigns

80%
90%
70%
80%

Municipals

60%
70%

Financial Institutions

50%
60%
40%
50%

Financial Institutions

30%
40%
20%
30%
10%
20%
0%
10%

Corporates
2015 2016 2017 2018 2019 2020 2021 2022 2023

Corporates

0%2015 20162018 Finance,
2019 2020
Source: Bloomberg,
CBI, 2017
Environmental
IFC

2021 2022 2023

EXHIBIT 11

Corporates Claim Biggest Share ofDeveloped Market Green Bonds
Developed
market green bond issuance by sector
100%
Government Agencies

90%
100%

Government Agencies
Sovereigns

80%
90%
70%
80%

Sovereigns
Municipals

60%
70%

Municipals
Financial Institutions

50%
60%
40%
50%

Financial Institutions

30%
40%
20%
30%

Corporates

10%
20%
0%
10%

Corporates
2015 2016 2017 2018 2019 2020 2021 2022 2023

0%2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: Bloomberg, CBI, Environmental Finance, IFC

EMERGING MARKET GREEN BONDS

Page 24

Meanwhile, the energy sector saw its share of emerging market
green bond sales by non-financial corporates ease back to 12
percent from 15 percent. Issuers from the consumer discretionary
sector also saw their relative weight in the market decline, from
11 percent to 9 percent, while tech-sector borrowers retreated froman 8 percent share to just 1 percent (see Exhibit 12).

EXHIBIT 12

Energy and Utilities Continue to Dominate Green Bond
Issuance by Non-Financial Corporates in Emerging Markets
Emerging market non-financial corporate green bond issuance by sector
2022

2023

8%

9%

Technology
Consumer Discretionary

20%

Industrials

10%

Materials

100%

11%

18%

5%

43%

15%
0%

Source: Bloomberg, CBI, Environmental Finance, IFC

Consumer Staples

46%

12%

Utilities

EnergyPage 25

Market Developments in 2023

Use of Proceeds
Green bond proceeds are typically designatedto projects identified as making a positive
contribution to environmental objectives.
Issuance trends therefore reflect the spending
priorities of governments and companies

EXHIBIT 13

Renewables’ Top Share of Green Bond
Proceeds Challenged by Buildings
Emerging market green bond issuance by designation of proceeds

seeking to boost their sustainability

40

credentials. The largest slice of the money
raised from the instruments in emerging

Renewables, 37.6

markets during 2023 was designated for35

renewables, though at 37 percent the share
was broadly flat from the previous year (seeExhibit 13).

30

Buildings, 29.4

$ Billion

25

20

15

Water, 12.5
Transport, 11.7
10

5

Waste, 4.6
Land, 3.5
Industry, 1.6
ICT, 0.9
Unallocated, 0.1

02016-2019
Annual Average

2020-2021
Annual Average

Source: Bloomberg, CBI, Environmental Finance, IFC

2022

2023

EMERGING MARKET GREEN BONDS

Page 26

The next biggest destination for money raised from sales

land use (3 percent in 2023, unchanged from 2022) andof green bonds was buildings, with 29 percent of the total,industry (2 percent in 2023, versus 1 percent).

a sharp increase from 9 percent in 2022. This is consistent

Currencywith the rising investment needs from a drive to makethe construction and operation of buildings in emerging

In emerging markets, the share of green bonds issued inmarkets—an important source of carbon emissions—more

local currencies remained broadly stable in 2023, rising tosustainable over the next decade.16

9 percent of the primary market from 7 percent in 2022.

Water projects have also become increasingly important,

However, the share of green bonds denominated in hard

representing 12 percent of issuance in 2023, up from 8 percent,currency increased to 37 percent, up from 31 percent, while

also ahead of low-carbon transport which saw its contribution

the proportion of green bonds denominated in Chinese yuan

fall to 11 percent from 18 percent in 2022. This is due to a rise

fell to 54 percent of the total from 62 percent a year earlier,in blue bond sales, a sub category of green bonds (see Box 1).

consistent with the weakening trend observed in China’s

Other destinations for proceeds from green bonds issuance

primary bond markets highlighted earlier in this chapter (seeinclude waste (5 percent in 2023, from 6 percent in 2022),

Exhibit 14).

EXHIBIT 14

Chinese Yuan’s Lead in Emerging Market Green Bond Sales Narrows
Emerging market green bond issuance by currency, 2012–2023
140

120

$ Billion

100

Chinese yuan, 72.3

80

60

Local currency, 12.5

40

Foreign currency, 49.7

20

0

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Source: Bloomberg, CBI, Environmental Finance, IFC

16

A recent IFC report estimated such investment needs at $1.5 trillion. See IFC, 2023, “Building Green: Sustainable Construction in Emerging Markets,” available at https://www.ifc.org/en/
insights-reports/2023/building-green-in-emerging-markets

Page 27

Market Developments in 2023

Furthermore, while Chinese local bond yields remained
stable, the U.S. Treasury yield was on the rise. This reduced
the relative appeal of local Chinese bonds to many investors
seeking investment income or potential for capital growth(see Exhibit 15).

EXHIBIT 15

Rising Yields on Long-Term U.S. Bonds Increased their Appeal to Investors
U.S. 10-year bond yield versus China’s 10-year bond yield

Source: Amundi, Bloomberg

EMERGING MARKET GREEN BONDS

Page 28

The U.S. dollar represented 30 percent of issuance in 2023,
versus 18 percent previously and the euro climbed three
percentage points to a 7 percent share. The next mostcommon denominations (outside the Chinese yuan) usedby emerging market issuers were the Brazilian real, at 3
percent, followed by the Indian rupee with 2 percent (seeExhibit 16).

Issue Size

EXHIBIT 16

Brazil’s Real Took the Largest
Slice of Non-Chinese Emerging
Market Green Bond Sales
Emerging market local currency green
bond issuance by currency excluding
the Chinese yuan, 2012-23

Bond issues that are sufficiently large to be considered
as benchmarks by international investors provide greater
access to external financing as they are more liquid and canOthers10%

be included in major indices. There were 111 benchmarksize emerging market green bonds in 2023 with a deal size
exceeding $300 million, of which 88 were bigger than $500
million. This represented 21 percent of the total, flat versus
the previous year. The proportion of benchmark-size bonds
was larger in China, at 28 percent (versus 26 percent in2022), probably due to the influence of fundraising for largescale renewable projects (see Exhibit 17).

RUB
3%

BRL
27%

COP
4%
IDR
4%
MXN
5%
HUF
7%

INR
13%

MYR
7%
ZAR
9%

THB
11%

Note: BRL is the Brazilian real, THB refers to the Thai baht, ZAR the South African
rand, HUF the Hungarian forint, MYR the Malaysian ringgit, INR the Indian rupee,
MXN the Mexican peso, RUB the Russian ruble, IDR the Indonesian rupiah and
COP the Colombian peso
Source: Bloomberg, CBI, Environmental Finance, IFC

Page 29

Market Developments in 2023

EXHIBIT 17

A Fifth of New Green Bond Sales Are Benchmark Sized
Emerging market and developing economy green bond issuance size

Number of bonds
250
at least $500M

0
250

4

1

12

14

12

27

22

54

88
31

$300M to $500M

0
250

3

1

2

15

21

22

14

42

39

23

$200M to $300M

0
250

0
250

0
250

6

1

1

1

4

7

6

14

25

16

10

21

26

12

23

36

18

22

28

35

66

69

77

24

29

53

61

Source: Bloomberg, CBI, Environmental Finance, IFC

70

88$50M to $100M

216
117

0

$100M to $200M

1

13

21

21

76

87

0 to $50M

EMERGING MARKET GREEN BONDS

Page 30

Ratings
For many investors, a key barrier to allocating funds toshare was 83 percent. Although for China this represented

emerging market green bonds is the low proportion carrying

an improvement from 2022, it was nevertheless meaningfullyinternationally recognized credit ratings. In fact, only 18

higher elsewhere in emerging markets.

percent of emerging market green bonds were rated in 2023,
down from 22 percent in 2022 (see Exhibit 18). Around 16
percent of the total in 2023 held investment grade labels. A
further 2 percent were rated high yield, or sub-investment
grade. For China, the proportion of unrated securities stoodat 82 percent, while for the remaining emerging markets, theHowever, defaults remain rare among green bond issuers17
with only three from emerging market borrowers to date.
Two of these were in 2021, from a Chinese solar power firm
and a property developer, whereas the other was in 2020 by
an Indian irrigation firm.

EXHIBIT 18

Most Emerging Market Green Bonds Are Unrated
Ratings of outstanding emerging market green bonds
100%
90%
80%
70%

Withdrawn60%

Non-Rated
50%

High Yield

40%

Investment Grade

30%
20%
10%
0%

2016

2017

2018

2019 2020 2021

2022 2023

Source: Bloomberg, CBI, Environmental Finance, IFC

17

Defaults are defined in the same way as for all other bonds. Failure to comply with green bond standards, to use the proceeds for the stated projects, or to meet annual reporting requirements does not constitute default.

Page 31

Tenor
Through 2019, emerging market green bonds were typicallymedium-term instruments issued by financial institutions,with the majority of issuances having a three- to five-year
tenor. Over the past four years, however, as new entrants
came to market, including a larger number of non-financial
corporates and sovereigns, the range of tenors widened. In
2023, 60 percent had a maturity of less than three years.
Just 3 percent of issuance was medium term with three-tofive year maturities, while another 14 percent had five- to
10-year terms. A further 22 percent was longer dated atover 10 years.

Conclusion
For many developing economies, limited capital market
depth and underdeveloped financial infrastructure
contribute to keeping green bond issuance below potential.
This underscores the importance of sound governanceand consistent regulation for healthy financial markets. As
outlined in Box 3 below (and discussed more extensively inAnnex 3), many emerging markets are making considerable
progress in boosting and harmonizing standards, adopting
guidelines compatible with other jurisdictions, improving
regulation, and in doing so, reassuring international
investors.
At the same time, momentum is building behind green
transitions in emerging markets as governments andcompanies move toward meeting commitments signed
at international climate summits. This is helping fuel thegrowth in sales observed over the past year and bodes wellfor future issuance, as discussed in the next chapter.
Market prospects for many of the countries listed are also
discussed in Annex 1.

Market Developments in 2023

EMERGING MARKET GREEN BONDS

Page 32

Box 3

Issues and Initiatives in 2023
Noteworthy GSSS Bond Issues in 2023

Key Initiatives in 2023

The growth in GSSS bond issuance in emerging markets

We also highlight initiatives to formalize guidelines andduring 2023 featured a number of inaugural issuances asbest practice codes for sustainable finance, an area

acceptance of the asset class continued to spread.

of international capital markets still characterized by

The most notable transactions included inauguralmultiple taxonomies and inconsistent requirements.

sovereign green bonds in Brazil, India, North Macedonia,

At the national level, we describe new sustainable

and Türkiye, a debut sovereign sustainable bond in thefinance frameworks published in 2023 by Brazil, Chile

UAE by the Government of Sharjah, Argentina’s first(which released an update to its SLB framework), thesovereign sustainability bond, and a sovereign blue bond

Government of Sharjah, and Romania. There were new

in Fiji.

taxonomies in Mexico, Thailand, and Rwanda, as well as

Africa saw a number of important developmentsa new strategy unveiled by Argentina.

including Rwanda Development Bank’s first

At the international level, we highlight the publication

sustainability-linked bond (SLB), a blue bond “debt-

in 2023 of the second version of the ASEAN18 trade

for-nature swap” from Gabon, and a first ever green

bloc’s Taxonomy for Sustainable Finance, the Commonbond from Zambia, issued by the Copperbelt Energy

Framework for Sustainable Finance Taxonomies for Latin

Corporation and focused on biodiversity.

America and the Caribbean (July), and the Singapore-

Other financial innovations worth highlighting in

Asia Taxonomy for Sustainable Finance (December).

emerging markets included Chile’s first sovereign

The year also saw a number of initiatives aimed at

SLB with a social key performance indicator, and thetackling biodiversity loss unveiled by regulators,

country’s first sovereign inflation-linked SLB, the firstinternational institutions, and other bodies. Theseof its kind in Latin America.

include IFC's Biodiversity Finance Reference Guide

Significant, but not inaugural, transactions seen during
the year included a sovereign sustainability bond from
Mexico, and a tap of Uruguay’s sovereign SLB that was
first issued in late 2022. Also significant were Malaysia’s(May), finance industry association ICMA's blue bondguide (September), and the Task Force on NatureRelated Financial Disclosures’ final recommendations
on nature-related issues (September).

announced plans for a sovereign biodiversity sukuk,More details about these initiatives can be found ina bond-like instrument that conforms with Islamic

Annex 3.

principles, and Brazil’s foreign exchange hedge platform
supported by the Inter-American Development Bank.
More detail about these deals can be found in Annex 2.

Key Initiatives Announced Before 2023
In Annex 3, we also discuss initiatives launched before
2023 and not discussed in previous editions of thisreport that remain relevant given their ongoing
potential to influence market structure. These include
the Green Bond Technical Assistance Program that
got underway in June 2018, and the Inter-American
Development Bank’s Green Bond Transparency
Platform from March 2021.

18

Association of South East Asian Nations (ASEAN)

3
GSSS Bond OutlookT

his chapter sets out expectations for the GSSS
bond market through 2024 and beyond. It outlines

predicted issuance volumes under three potential
scenarios based on a methodology developed by
Amundi and described in Box 4 below.
The central scenario envisaged in this report—given a
70 percent likelihood by Amundi—forecasts ongoingstrength in GSSS bond issuance fueled by investor demand
for sustainable assets and borrowers seeking funds to pay
for their climate commitments.

EMERGING MARKET GREEN BONDS

EXHIBIT 19

Emerging Market Green
Bond Issuance Under Three
Projected Global Scenarios

Page 34220$211B Upside Scenario

220$211B Upside Scenario$156B Central Scenario

Issuance forecasts for 2023–2025$ Billion$128B Downside Scenario$156B Central Scenario$ Billion$128B Downside Scenario

Source: Amundi calculations, Bloomberg, CBI,
Environmental Finance.

0
2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

160

$150B Upside Scenario

0

EXHIBIT 20

160$150B Upside Scenario

Projected Green Bond
Issuance in China Versus
Other Emerging Markets$ Billion$80B Upside Scenario$75B Downside Scenario$101B Central Scenario
China's Green Bonds$ Billion

China versus other emerging market
issuance forecasts 2023-2025$101B Central Scenario$53B$80BCentral
Upside Scenario
Scenario$75B Downside Scenario$39B Downside Scenario

China's Green Bonds$53B Central Scenario$39B Downside Scenario

Green Bonds (excluding China)0
2016

Source: Amundi calculations, Bloomberg, CBI,
Environmental Finance.

2017

2018

2019

2020

2021

2022

2023

2024

2025

2024

2025

Green Bonds (excluding China)
0
2016

2017

2018

2019

2020

2021

2022

2023

Page 35

GSSS Bond Outlook

Against this backdrop Amundi expects a compound annual growth rate of 7.1 percent for emerging market GSSS bondissuance over the 2023–2025 period, with sales volumes rising to $240 billion from $209 billion. Emerging market green bondissuance will increase faster still at an annual rate of 7.5 percent, from $135 billion sold in 2023 to $156 billion in 2025.
Within that, there will be some regional variation, with China posting a lower annual issuance growth rate versus the
emerging market average for green bonds of 6.3 percent over the period (see Exhibits 19 and 20).

Key features of the central scenario include:

Meanwhile, we also consider two alternative scenarios.

•

Inflation and Policy Mix: Inflation gradually eases,

The first of these is the most pessimistic outlook to whichwith core inflation remaining sticky. Developed

Amundi assigns a 20 percent probability. This factors in moremarket central banks refrain from cutting rates until

persistent inflationary pressures than the central outlook

the middle of the calendar year. Policy rates among

and tighter financial conditions in response that lead to avarious central banks remain stable and show a slightly

global slowdown. Worsening sentiment around Russia’s

decreasing trend.

invasion of Ukraine and conflict in the Middle East adds toaversion among investors toward riskier assets. Increased•

Growth Path: Global growth slows with European

protectionism affects global trade with significant impacts

economies remaining sluggish amid a rising risk of

on international relations and economic stability. Meanwhile,

recession in the first half of the year. The United Statesa greater prevalence of damaging climate events disrupts

faces the possibility of a sharp slowdown, while Chinese

supply chains and threatens food security, exacerbating

growth rates slow. Emerging market growth outpaces

economic challenges.

that of developed markets from 2024–25.
•

Geopolitics: Russia’s invasion of Ukraine continues,

in 2025 some 15 percent lower than in the central scenario.

though the conflict in Gaza remains localized with aThis implies a 1.4 percent annual drop in GSSS bond sales, withtemporary truce likely. Relations between China andtotal issuance falling to $203 billion in 2025 from $209 billion

the United States will follow a controlled downward

in 2023. Sales of green bonds will fall at an annual rate of

trajectory, amid rising protectionism globally.
•

Public funding will become scarce leaving GSSS bond issuance

Climate Change: Climate change and the energy
transition will continue to be central to investment

2.6 percent over the period, to $128 billion in 2025, from $135
billion, shrinking their share of emerging market GSSS bondissuance two percentage points to 63 percent.

decisions and policy making amid coordinated efforts

Meanwhile, China’s share of emerging market green bondto confront the problem across regions despite theissuance would shrink to 58 percent in 2025, from 66 percent

challenging geopolitical and economic backdrop.

in 2023 following an 8.2 percent annual drop in sales acrossthe period. The annual retreat in other emerging markets

EMERGING MARKET GREEN BONDS

Page 36

would be around 8.3 percent, according to Amundi’s

In this environment, GSSS bond issuance from emerging

forecasts.

markets in 2025 would be 30 percent higher than in the

The final scenario, given a 10 percent probability by Amundi,is the most optimistic of the three, involving more stableinterest rates and geopolitical conditions. This also factors

central scenario. GSSS bonds would see a 22 percent
compound annual growth rate reaching an issuance tally of$311 billion in 2025, from $209 billion in 2023.

in wider adoption of sustainable finance taxonomies andEmerging market green bond issuance would rise at antransparency initiatives, increased debt issuance fromannual rate of 25 percent per year in 2023–2025, to $211

emerging markets, and a stepping up of efforts to acceleratebillion from $135 billion, increasing the securities’ weight inenergy transitions. Inflation is brought under control while

the broader developing country GSSS market to 68 percent

sentiment improves around Russia’s invasion of Ukraine andfrom 65 percent.

the conflict in Gaza.

BOX 4

Methodology Used for Forecasting GSSS Bond Issuance
To project the bond issuance for each subset in 2024 and

The AM model is the retained model. In this model

2025, Amundi constructs the time series consisting ofAmundi calibrates three smoothing parameters for level,

the monthly year-to-date volume of bond issuance sincetrend and seasonality, the initial values of trend and level2016. For example, the data for March 2019 consists of theand the 12 first values of seasonality.

sum in U.S. dollars of bond issuance in January, February
and March 2019. By construction, the time series has aseasonality of 12 months.

To calculate the predicted mean and standard deviation
at the 12-month and 24-month horizons, Amundi
introduces an additive error term that follows a Gaussian

A multiplicative pattern for seasonality is observed, when

distribution with a mean of 0 and a variance equal to that

decomposing the time series into trend, seasonalityof the model errors. Amundi assumes that the error terms

and residual using the STL method. To assess the trend

are independent and identically distributed. Amundi thenpattern, Amundi fits the data to four error-trend-

runs Monte Carlo simulations with 1,000,000 iterations,seasonality (ETS) models with multiplicative seasonality.

calculating step by step the predicted data for each of the

The four models are respectively additive trend (AM),next 24 months.

additive damped trend (AdM), multiplicative (MM) andmultiplicative damped trend (MdM). Amundi then backtests the models to predict the realized data for 2022 and2023. Amundi discards the models with very high or very
low prediction, and high variance.

As the predicted values for 2022 and 2023 were in the top
5 percent percentile, the upper limit of the confidence
interval is set at 95 percent. The lower bound is set taking
into account the probability of downside risk as perceived
by Amundi.

Page 37

GSSS Bond Outlook

This outlook also sees Chinese issuance underperform other

Meanwhile, progress in embedding new guidelines in someemerging markets, with green bond sales in the country risingjurisdictions was followed by significant issuances overat around 30 percent per year, compared with 32 percent in

the past year, suggesting new channels of potential GSSS

other developing economies.

bond sales are being unlocked. One such instance was the

Beyond geopolitical and macroeconomic conditions, issuance
will also be shaped by developments in how emerging
financial markets are regulated and ongoing efforts to set

establishment of India’s Sovereign Green Bond Framework inlate 2022, followed soon after by a pair of sovereign deals inearly 2023. More are likely to follow (see Annex 2).

up robust taxonomies that are compatible with those of

Other market developments observed in recent months

other jurisdictions. More clearly defined guidelines, as well aswith potential to shape issuance over the coming years

harmonization with international standards, make markets

include the establishment of social guidelines in some Latin

more attractive to international investors. Therefore,

American markets. Mexico’s national sustainable taxonomy,

progress by regulators and policy makers during 2023 arefor example, emphasizes issues such as gender equality,

likely to add momentum to emerging market GSSS bondfinancial inclusion, and access to healthcare and education.

issuance.19

This suggests the GSSS bond market is broadening from its

An encouraging trend that is likely to help stimulate market

climate focus.

activity for GSSS bonds is the emergence of policy efforts
to place greater emphasis on interoperability between
regional and national taxonomies. Advances in this area
are illustrated by examples such as the Common GroundTaxonomy, a comparison of the Chinese and EU taxonomies
established in 2021 and revised in 2022.

19

See Annex 2 for a review of the most significant sovereign GSSS bond issues in 2023, and Annex 3 for a description of noteworthy initiatives in emerging markets.

4
Concluding RemarksT

his analysis shows that emerging market GSSS

While the rebound in emerging market GSSS bond sales inbond issuance bounced back in 2023 as sovereign,2023 can be attributed in part to the rising tide of improved

financial, and corporate borrowers put the monetary

market sentiment after the inflationary stress of 2022, muchpressures that had depressed debt markets in 2022of the credit can also go to a maturing of the asset class as

behind them.

an established part of the international financial system.

They sold 45 percent more of the securities to international

More jurisdictions are setting up increasingly sophisticatedinvestors than they did the previous year. Issuance growth

regulation and taxonomies for categorizing sustainable

was faster still—at 65 percent—if we strip out the Chinese

finance. At the same time, market supervisors are making

market that saw GSSS bond sales advance by 28 percent.

progress in ensuring taxonomies and regulatory regimes are

For the dominant green bond sub-category, meanwhile,

compatible with those in other jurisdictions. The EU-Chineseemerging market sales were one third ahead of where theyCommon Ground Taxonomy is an illustration of this and,were in 2022.

anecdotally at least, appears to be stimulating cross-border

Rising sales suggest healthy demand for these assets asinvestment flows toward GSSS bonds.

more portfolio investors looking for sustainable securities

India followed the setting up of its Sovereign Green Bond

diversify into emerging markets. GSSS bonds are a channel

Framework in late 2022 with a debut sovereign green bondfor private investment capital to finance green transitions inearly in 2023. The offering encountered an enthusiastic

emerging markets.

reception from investors who ordered four times as many
bonds as there were on sale, allowing the Indian government
to tighten pricing and secure a better deal.

Page 39

Concluding Remarks

The importance of strengthening market structure cannot

this area. Meanwhile, a more credible, well regulated, andbe overstated. If international investors are faced with atransparent GSSS bond market will help reassure more

patchwork of contradictory regimes that are incompatible

international investors and open access for emerging market

with one another, it becomes difficult, and by extension

borrowers to bigger pools of portfolio capital. It will also help

costly, to assess risk and gauge an asset’s performance. Theassuage skepticism, increasingly audible in public discourse,

recent growth in demand for emerging market GSSS bonds

about the asset class’s credibility and alleviate concerns

from international investors, therefore, suggests efforts inabout greenwashing, or misstating the extent to which an

this area are bearing fruit.

asset really does qualify as green.

Furthermore, Amundi’s central forecasts, assuming no

The data in Chapter 2 of this report on the intended use ofsignificant worsening of geopolitical instability and a

GSSS bond sales show an evolving picture. As highlighted inrelatively calm inflationary outlook, suggest GSSS bond2023 by IFC,20 the construction sector is a central component

issuance will continue to grow at around 7 percent per yearof economic activity in emerging markets but generates a

to reach a volume of around $240 billion in 2025.

sizeable slice of global carbon emissions. Making construction

There is no room for complacency, however. The global
economic and financial outlook remains vulnerable togeopolitical and inflationary shocks.
The decline in global GSSS issuance seen in 2022 highlightsthat the market remains fragile and further reversals could
set back efforts to prepare emerging economies for futureclimate challenges.

and operation of buildings more environmentally sound is ahigh priority in emerging markets. This study shows buildingis the fastest growing recipient of funds raised through green
bond issuance, closing the gap on renewable energy’s wellestablished dominance.
Nevertheless, the market remains embryonic, with GSSS
bonds making up a fraction of the global fixed income market,
as the data on market penetration in Chapter 2 shows.

More work needs to be done by regulators and policy makers

Financial supervisors, governments, investors, borrowers, andto further underpin market structure, enhance regulation,

multilateral development institutions working together tofine tune categorization, and work toward greater cross-push this still-nascent market toward its full potential would

border compatibility. Multilateral development banks canhelp it better serve the financial needs of emerging markets

and do provide advisory and other support for efforts inseeking to deepen their financial markets.

20

IFC, 2023, “Building Green: Sustainable Construction in Emerging Markets,” available at https://www.ifc.org/en/insights-reports/2023/building-green-in-emerging-markets

EMERGING MARKET GREEN BONDS

Page 40

Annex 1
Annual Emerging Market Green Bond Issuanceby Market Segment

Part 1. The Data

up in China as well as the developed markets broadly (perThe analysis in this report uses data consolidated fromdatabases, respectively) after the publication of last year’s

Bloomberg, the Climate Bonds Initiative, and Environmental

report. Second, we now use Bloomberg data to get total

Finance, according to the bond definitions in Box 1 of the

fixed income (both GSSS- and non-GSSS-labeled) issuancereport. A complete data set showing issuance volumes by

per region and issuer type over time. Given Bloomberg’s dataregion, in billions of U.S. dollars from 2012 to 2023 can be

is more comprehensive than that provided by the vendor wefound in Table 2. According to Bloomberg’s methodology,

used last year (Dealogic), this resulted in a material change inbonds are associated with the issuer’s country of risk, which

GSSS bond penetration rates.

comprises four factors: management location, the security’scountry of primary listing, the country of revenue, and theissuer’s reporting currency. Categorizing a country as an
emerging market aligns with criteria used by the Amundi
Planet Emerging Green One fund. This list is made up of IFC
members, including countries eligible to receive International
Development Association (IDA) resources and official
development assistance, as defined by the Organization
for Economic Cooperation and Development (OECD)’s
Development Assistance Committee. Although Russia is notincluded in the fund’s investment universe, it is included in thisdata set. Bonds issued in China that do not meet international
norms or standards as defined by the Climate Bonds Initiative
are excluded from the data set. We also include eligible
bonds, as defined in Box 1, issued by supranational entities.
Importantly, we only include bonds with a maturity of over
one year to better capture bonds issued to fund medium- tolong-term projects.
Compared to our 2022 report, we acknowledge two changes
in the data used. First, GSSS bond issuance was revised

the Climate Bonds Initiative and Environmental Finance

Finally, we also acknowledge there is only a brief mention
of “transition bonds” in the report (in Box 1). While we dotake them into account, when calculating GSSS issuance,
we also flag their small scale, with their contribution to
overall GSSS issuance being under 0.3 percent of the total in2023 (down from 0.4 percent in 2022). This does not negate
the fact that these instruments may have an important roleto play in financing transitions to greener practices in hardto-abate sectors, as well as in aligning heavy industry with
global net-zero efforts.
Issuance patterns reflect prevailing conditions in different
markets. Political stability, market depth, and otherstructural factors influence demand for the financial
securities issued in particular jurisdictions. Table 1 illustrates
how individual countries perform across various factors suchas institutional quality and the maturity of their financial
markets and indicates whether there has been a notablechange from 2022 to 2023.

Page 41

Annex 1

Part 2. Regional Trends
TABLE 1

Determinants of Green Bond Market Potential
Volume ofGreen Bonds
Issued in 2023,$Billion

Argentina
Armenia
Bahrain
Bangladesh
Barbados
Bolivia
Bosnia and Herzegovina
BrazilCambodia
Cabo Verde
Chile
China
Colombia
Costa Rica
Côte d’Ivoire
Czech Republic
Dominican Republic
Ecuador
Egypt
EstoniaFiji
Gabon
Georgia
Ghana
GuatemalaHonduras
Hungary
India
Indonesia
Iraq
JordanKazakhstan
Kenya
Kyrgyz Republic
Lao PDR
LatviaLebanonLithuania
Malaysia
Maldives
Malta
MexicoMongolia
MoroccoNamibia
Nepal
Nigeria
North Macedonia
Pakistan
PanamaParaguay
Peru
Philippines
PolandRomania
RussiaSamoa
Saudi Arabia
SerbiaSeychelles
Slovakia
Slovenia
South Africa
Sri Lanka
ThailandTunisia
TürkiyeUkraineUnited Arab Emirates
Uruguay
Uzbekistan
Viet Nam
Zambia0.42

Cumulative
Volume ofGreen Bonds
Issued in 201223, $Billion

-

1.9
0.1
0.9

Sustainable
Banking and
Finance
Network Score
OverallGreen Bond
Issuance in 2023

3
3
4
0

0.01

0.0
0.0

4.69

18.1

5

1.61
89.13
0.30

16.6
292.5
1.4
0.5
0.0
9.0
0.0
1.1
0.9
0.2
0.1
0.5
0.8

3
5
5
3
0
0
3
3
4
0
2
3
5
4
3
3
0
3
5
3
3
3
4
2
2
0
0
0
0
2

1.08
0.82

0.50

0.7
1.09
5.08
2.09

7.8
25.0
10.1

0.05
0.12

0.1
0.1
0.1

0.05

0.5
0.1
0.9
2.7

0.01
0.65
0.03
1.65
0.06

0.01
0.14

0.33
2.05
0.78

6.70

0.0
5.2
0.1
0.4
0.0
0.2
0.0
0.5
0.4
1.7
3.5
10.0
3.5
2.5

0.64
0.55
0.86

11.1
1.2
0.0
2.0
0.6
4.2

1.25

4.8

3.30

4.8
1.2
14.4
0.4
0.3
0.3
0.1

8.70
0.35
0.05

Green Bond Momentum

5
4
4
0
3
4
3
3
4
3
4
0
0
0
2
0
2
0
0
0
4
4
3
3
4
3
0
0
4
3

Capital Market Development

Green Bond
Domestic Credit
Issuance
to Private Sector
Relative to Total as a % of GDP
Debt Issuance in2018-23, %
2
5
0
4
4
3
3
5
4
2
4
3
4
5
1
3
5
5
5
2
5
2
2
4
4
2
3
3
5
5
2
3
2
5
4
5
5
4
5
1
5
5
2
3
4
3
4
3
5
2
4
3
2
3
2
2
2
5
2
2
3
3
3
5
0
2
3
0
2
3
2
2
5
3
1
3
3
3
2
2
3
3
5
4
2

2

5
3

2
3
2

5
3
3
5

5

3
5

2
2
2

3

3

2

5

5
5

4

2
1
2
1
3
3
3
3
3
5
3
0
3
5
5
3
5
0
5
0
5
3
5
3
4
5
1

GovernanceMarketEMBI Spreads,
Capitalization as January 2024
a % of GDP

0
1
1
3
5
1
1
5
0
1
5
5
3
2
2
5
0
0
5
0
0
1
1
2
1
0
2
5
4
0
4
3
3
0
0
0
0
0
5
0
5
3
0
5
2
0
2
1
0
3
1
4
5
3
2
5
0
5
0
0
0
2
5
2
5
3
5
0
5
0
1
5
1

1
3
0
0
0
0
0
3
0
0
4
4
3
3
3
3
3
1
1
0
0
0
3
1
3
3
0
4
4
3
3
4
2
0
0
0
1
0
3
4
0
3
3
3
4
0
2
0
1
3
3
3
4
4
3
5
0
4
3
0
0
0
3
1
0
1
3
1
4
4
0
5

Regulatory
Quality

2
3
3
2
3
3
2
3
2
3
4
3
3
4
3
5
3
3
2
5
3
3
4
3
3
3
3
3
3
2
3
3
3
4
2
4
2
5
4
2
4
3
3
3
3
2
2
3
2
3
3
3
3
4
3
3
2
3
3
4
4
4
3
2
3
3
3
3
4
4
3
3
3

Rule of Law Index

3
3
3
2
3
3
2
3
2
3
4
3
3
3
3
4
3
2
3
5
3
3
3
3
2
2
3
3
3
2
3
3
3
4
2
4
2
4
4
3
3
2
3
3
3
2
2
3
2
3
2
2
2
3
3
3
2
3
3
4
4
4
3
3
3
3
3
2
4
4
3
3
3

Notes: Countries included are those that are Sustainable Banking and Finance Network (SBFN) members or green bond issuers. Countries are scored from 0 to 5 on each of
the components, with 5 being the highest on a relative basis, according to available data. The SBFN Score is based on the Sustainable Banking and Finance Network measurement framework assessing national sustainable finance policies. Countries that are not SBFN members are indicated in gray. Sovereign Green Bond Issuance is based onwhether the sovereign has already issued green bonds and whether it has announced plans to do so. Relative Green Bond Issuance measures the share of green bond issuancerelative to total bond issuance from 2019 to 2023. Domestic Credit to Private Sector is based on the percent of gross domestic product and refers to financial resources provided to the private sector by financial institutions. The data source is the World Bank. Market Capitalization data is based on the percent of GDP and are sourced from the WorldBank and World Federation of Exchanges. J.P. Morgan Emerging Market Bond Index spreads are measured in basis points and are from January 2024. Lower spreads are scoredas a 5, while higher spreads are scored as a 1. The Regulatory Quality and Rule of Law Index indicators are sourced from the World Bank.
Official Use#

EMERGING MARKET GREEN BONDS

Page 42

Green Bond Issuance by Region in 2023

Asia Pacific

Table 2 breaks down emerging market GSSS bond issuance

China saw the weakest growth among emerging markets

data by region and by sub category for 2023. Green bondwith green bond issuance rising 18 percent in 2023 from aissuance in emerging markets rose 34 percent to $135.3

year earlier, marking a sharp slowdown from its 81 percent

billion, having more than doubled in the Middle East andgrowth in 2022. This was consistent with weaker overall

advancing almost 90 percent in Latin America. Driving

fixed income issuance in the country (up by just 2 percent)factors included a stepping up by governments, corporations,amid mounting concerns around economic growth andand financial institutions of work toward transitioning

worries about the health of the construction sector.21

economic and business models to make them moresustainable. A number of countries also advanced theirmarket infrastructure, bolstering regulation of sustainablefinance and introducing new frameworks and taxonomies,
which in turn helped stimulate activity.
Outside China, the United Arab Emirates was largest singlecountry primary market for green bonds in 2023, with $8.7
billion of issuance, almost double the previous year. Saudi
Arabia was next, selling $6.7 billion, followed by India with
$5.1 billion, Brazil at $4.7 billion, and Türkiye with $3.3 billion.

Nevertheless, with sales of $89.1 billion during the year China
retained its status as the largest green bond issuer among
emerging markets as well as globally (see Exhibit 21).
Growth was far faster for issuance elsewhere in the Asia
Pacific region, with green bond issuance rising 58 percent
year-on-year to a record $9.6 billion. This was mostly
explained by strong sales from India of $5.1 billion, or 1.3
times the previous year. Indeed, the country issued its firstever sovereign green bond in January, a $1 billion deal thatit tapped again for a similar amount the following month.

Not all emerging markets saw their green bond issuanceThis came in the wake of the release of India’s Green Bond

expand, however, with Indonesia and Hungary, well-

Framework in November 2022 (see Annex 2).

established green bond issuance markets, both retreating
during the year.

Thailand’s green bond issuance was also strong, increasing
54 percent to $1.2 billion, following the publication of the firstphase of its Green Taxonomy in July.
But Indonesia saw green bond issuance fall 19 percent to$2.1 billion in 2023, largely on account of a particularly strong
performance in 2022.

21

Bloomberg, June 13, 2023, “China’s Offshore Green Bond Market Evaporates on Default Worries,” available at https://www.bloomberg.com/news/articles/2023-06-14/china-s-offshoregreen-bond-market-evaporates-on-default-worries

Page 43

Annex 1EXHIBIT 21

China Dominated 2023 Emerging Market Green Bond IssuanceTop 10 emerging market green bond issuing countries

89.1$ Billion

100

0

1

6.7

5.1

4.7

3.3

2.1

2.1

1.6

1.6

2

3

4

5

6

7

8

9

10

1.71%

1.8%

Percentage of GDP

8.7

0.63%

0.50%

0.47%
0.14%

0.0%

1

2

4

0.23%

5

6

0.15%
7

0.24%
0.10%
8

9

10

23%

25%
Percentage of Overall Fixed
Income Issuance

3

0.22%

7%
2%

4%

3%
1%

6%

5%
2%

2%

Source: Bloomberg, CBI, Environmental Finance, IFC

Chile

MexicoPolandIndonesia

TürkiyeBrazilIndia

Saudi Arabia

UAE

China

0%

EMERGING MARKET GREEN BONDS

Page 44

Europe and Central Asia

Middle East and North Africa

Green bond issuance in Europe and Central Asia increased by

The Middle East and North Africa was the second biggest

55 percent in 2023. This was largely driven by Türkiye which

regional source of primary emerging market green bondsaw sales multiply to $3.3 billion from just above $100 million

issuance outside China in 2023, more than doubling sales

in 2022, much of which reflects the sale of a $2.5 billion

to $15.5 billion. The bulk of this came from the UAE, which

inaugural sovereign green bond in April.

increased sales 174 percent to $8.7 billion, and Saudi Arabia,

In addition, strong issuance by other well-established green
bond issuers, such as Poland, which saw sales rise 2.6 times
to $2.1 billion, and the Czech Republic which almost doubled
to $1.1 billion, helped offset weaker dynamics in Hungary

which advanced 119 percent to $6.7 billion.

Sub-Saharan Africa
Borrowers in Sub-Saharan Africa increased green bondwhere sales fell 67 percent to $1.1 billion.

issuance in 2023 by 125 percent, albeit from low levels, toOther significant deals from the region included North

market’s growth, the region remains the least established

Macedonia’s inaugural sovereign green bond in October,regional green bond market among developing economies.

which raised $10 million.

It is noteworthy that while green bonds issued in 2023

Notwithstanding the growth seen throughout 2023, overall
green bond issuance in Europe and Central Asia in 2023 of$10.1 billion was meaningfully below the $14.8 billion peakachieved in 2021.

Latin America and the Caribbean
Latin America and the Caribbean was among the strongest
regions for green bond issuance in 2023, with growth of 88
percent year-on-year. This was largely driven by Brazil with a
44 percent increase to $4.7 billion, which included a $2 billion
inaugural sovereign green bond in November following
publication two months earlier of the country’s Sovereign
Sustainable Bond Framework. Mexico was also a strong
performer, posting issuance of $1.6 billion from zero in 2022,
while Chile, a well-established green bond market, sold $1.6
billion, an 18 percent advance from the previous year.
As of the end of 2023, Brazil and Chile were among the top
four green emerging market bond markets with, respectively,$18 billion and $17 billion of green bonds issued since 2012.

reach $1.4 billion from $600 million in 2022. In spite of theamounted to the equivalent of 0.3 percent of GDP for
emerging markets, for Sub-Saharan Africa the proportion
was under 0.1 percent.
Within the region, South Africa remains the most significant
issuer, with $900 million in green bonds sold over the year,
58 percent more than the previous year.
Also noteworthy was Zambia’s first green bond from the
Copperbelt Energy Corporation, which raised $53.5 million.
Meanwhile, Gabon issued a $500 million ‘blue’ bond,raising funds to buy back government international debt
at a discount while the savings were earmarked to fundconservation via a so-called debt-for-nature swap (seeAnnex 2).

Page 45

Annex 1

Table 2

Regional GSSS Bond Issuance Data, 2012–2023

GREEN BONDS
East Asia and the Pacific(Excluding China)
Europe and Central Asia

2012

2013

Latin America and Caribbean

2014

0.2

2015

1.1

2018

2019

2020

2021

2022

2023

1.2

1.8

5.2

3.4

6.6

4.3

9.1

6.1

9.6

58%

47.2

0.8

0.5

1.7

4.4

6.6

14.8

6.5

10.1

55%

45.5

1.1

1.6

4.2

1.3

5.8

9.0

10.1

5.1

9.6

88%

48.1

0.2

0.7

0.1

1.3

2.1

0.7

7.2

15.5

114%

27.8

0.1

0.1

0.9

0.2

0.5

0.6

1.4

125%

5.1

1.3

15.7

14.3

21.6

21.1

11.7

41.9

75.7

89.1

18%

292.5
2011.2

0.1

China

2017

Total
Issuance
2012-23

0.1

Middle East and North Africa
Sub-Saharan Africa

2016

ChangeBetween2022-23Developed Markets

1.4

5.1

25.8

32.0

47.4

114.5

121.7

197.7

237.9

414.4

380.1

433.2

14%

Supranational

1.7

5.8

9.6

8.3

10.5

10.0

11.7

15.3

15.8

28.5

41.6

33.0

-20%

191.7

Total

4.2

10.9

35.7

43.9

78.0

149.6

161.6

253.1

287.6

520.0

522.9

601.5

15%

2669.1
Total
Issuance
2012-23

SOCIAL BONDS
East Asia and the Pacific(Excluding China)
Europe and Central Asia

2012

2013

2014

2015

2016

2017

2018

2019
0.3

Latin America and Caribbean

0.3

0.2

2020

2021

2022

2023

ChangeBetween2022-23

0.6

2.9

386%

6.0

8.9

535%

31.7

1.2

1.0

0.3

0.3

3.4

17.5

1.4

0.3

0.3

0.7

Middle East and North Africa

0.1

Sub-Saharan Africa

0.3

China
Developed Markets

0.6
0.2

0.8

Supranational
Total

SUSTAINABILITY BONDS
East Asia and the Pacific(Excluding China)
Europe and Central Asia

0.2

2012

0.8

2013

0.5

3.2

0.5

0.1

1.0

3.3

2014

2015

2.9
2.9

16.5

94.4

125.1

144.4

154.4

7%

2.9

1.3

68.9

67.7

17.8

10.1

-43%

172.1

11.3

14.4

18.4

168.8

211.9

164.4

179.3

9%

776.8

2023

ChangeBetween2022-23

Total
Issuance
2012-23
26.4

2017

0.3

0.3

2018

2019

0.2

2.0

0.3

1.6

0.1

2020

2021

China

2.2

8.9

8.2

4.8

-41%

4.2

0.4

6.0

1481%

11.9

1.2

10.4

17.0

22.5

33%

53.9

2.3

4.7

110%

7.1

1.0

0.1

0.1

1.4
0.6

2.1

Total

0.5

SUSTAINABILITY-LINKED BONDS 2012
East Asia and the Pacific(Excluding China)
Europe and Central Asia

2013

0.6

2014

2.1

2015

2022

561.8

0.8

Sub-Saharan Africa
0.5

1.1
3.5

11.3

Middle East and North Africa

Supranational

2.8

2.8

0.9

Developed Markets

0.1
-59%

8.2

2016

Latin America and Caribbean

0.1

0.5

1.4

-100%
2.3

1.1
5.6

4.2

9.8

13.9

34.8

49.4

89.4

77.4

60.9

-21%

343.1

0.1

0.3

2.7

11.1

79.6

70.6

44.7

61.4

37%

270.4

4.5

11.4

18.5

49.5

133.8

185.8

150.0

162.7

8%

719.5

2023

ChangeBetween2022-23

Total
Issuance
2012-23
5.0

2016

2017

2018

2019

2020

2021

2022

2.2

1.3

1.5

13%

0.5

1.0

2.2

0.2

-90%

3.9

Latin America and Caribbean

4.3

14.3

7.9

13.0

63%

39.5

Middle East and North Africa

0.6

0.6

Sub-Saharan Africa

0.3

China

1.7

1.1

3.7

245%

6.5

Developed Markets

0.1

0.4

4.2

6.7

72.4

59.2

47.3

-20%

189.7

4.2

12.1

91.8

71.7

65.8

-8%

245.7

2023

Changebetween2022-23

Total
Issuance
2012-23

Supranational
Total

TRANSITION BONDS
East Asia and the Pacific(Excluding China)
Europe and Central Asia

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

EMERGING MARKET GREEN BONDS

Page 46

Part 3. Strengthening the Impact ofFinancial Incentives in SustainabilityLinked Bonds
A distinguishing feature of Sustainability-Linked Bonds(SLBs) is their embedded financial incentives, typically
via adjustment of the coupon rate, that are linked to theachievement of sustainability targets. These are meant to act
as an enforcement mechanism for issuers, encouraging themto meet these targets. To influence the issuer’s conduct,
however, financial incentives need to be material, which
will depend on their level and structure.

premium’—the difference between SLB yields and those on
a conventional bond of similar structure. This means thatissuers are able to lower their cost of debt by issuing SLBs
even if sustainability targets are not met.24
Issuers should ideally seek to set incentives that areproportional to the ambition and quality of sustainability
targets. This should ensure an adequate risk-return profilethat can encourage issuers to undertake the requiredsustainability efforts. Penalties should be higher than the
SLB premium, to avoid a ‘free lunch’ for SLB issuers.
Meanwhile, the structure of incentives is also important.

First and foremost, the level of the incentive needs tobe adequate. Research shows that this is often not
the case: the average coupon step-up penalty, whichis overwhelmingly the most common type of financial
incentive, is less than 12 percent of the coupon rate.22 A
vast majority of SLBs have a step-up penalty of 25 basis
points or less. For context, traditional bonds typically havea 125-basis point penalty in the case of a fall in the issuer’s
credit rating. Another indication that step-up penalties
are not set effectively is the fact that these tend to be
uncorrelated with coupon rates. Furthermore, there islittle evidence that these are related to the likelihood ofachievement of sustainability targets.23

that step-up penalties are, on average, lower than the ‘SLB

Certain bond features can influence the enforcement
mechanism, irrespective of the penalty amount set at
issuance. For example, setting late target dates means thatthe step-up penalty is applicable to fewer coupon payments.
This is particularly concerning as research shows that SLBs
with step-up penalties are likely to have later target dates.25
Furthermore, higher step-up penalties are correlated withlater target dates. Late target dates effectively reduce thecumulative liability for the issuer if sustainability targets areunmet. Accounting for target dates, the average cumulative
coupon payments for step-up SLBs increase by only about 5
percent if targets are unmet.

Research shows

22

Ul Haq, I., & Doumbia, D. 2022, “Structural loopholes in sustainability-linked bonds.” World Bank Policy Research Working Paper 10200.

23

Webb, D. 2023, “SLB market shows maturity as step-ups and target achievement evolves," Responsible Investor. Available at: https://www.responsible-investor.com/slb-market-showsmaturity-as-step-ups-and-target-achievement-evolves/

24

Kölbel, J. F., & Lambillon, A. P. 2022. “Who pays for sustainability? An analysis of sustainability-linked bonds,” Swiss Finance Institute Research Paper, (23-07).

25

Ul Haq, I., & Doumbia, D. 2022.

Page 47

Annex 1

A second such bond feature is callability, which can allow

triggered. Furthermore, revised sustainability targets should

issuers to minimize or avoid step-up penalties. SLBs are not

be subject to external verification to ensure consistency

only five times more callable than conventional corporate

with the original level of ambition.

bonds, but also typically do not incur a penalty for an earlycall if targets are unmet. Where these are imposed, they tend
to be a fraction of the original cumulative step-up penalty.
A third possible bond feature that can weaken enforcement
are flexibility clauses that allow issuers to adjust theirsustainability targets after issuance. These do not typicallyrequire bondholder consent and hence could potentially be
used to minimize penalty payouts by the issuer.

Simply removing callable and flexibility clauses may
not be ideal, as issuers tend to value the flexibility SLBs
allow, which can be important in an environment where
technologies and approaches for sustainability constantly
evolve. Therefore, greater investor awareness and scrutiny
by external reviewers is needed. For example, industry
standards can include tighter language around materialityof financial incentives.26 External reviewers can also play a

These issues can be easily addressed to safeguardrole by expanding their scope to cover assessment of bondmateriality of financial incentives. For target dates, issuers

structures.

can set interim sustainability targets across a bond’s tenor,
each with its own corresponding penalty. This has the
additional advantage of reducing the impact of external
factors—such as an energy crisis as seen in 2022—on target
achievement around a single target date. For callability,
issuers can include provisions to apply the original
cumulative penalty in case the bond is redeemed before
the target date or if targets are unmet. To avoid flexibility
clauses weakening incentives, issuers can explicitly identify
the precise conditions that allow such clauses to be

26

For example, the International Capital Market Association currently recommends that “variation of the bond financial or structural characteristics be commensurate and meaningful
relative to the issuer’s original bond financial characteristics” but does not require it.

EMERGING MARKET GREEN BONDS

Page 48

Annex 2
Key GSSS Bond Issues in 2023
Part 1. Inaugural Deals

The five-year tranche was allocated to 32 investors, while

January

was a significant step for India's sustainable finance market

India launched its Sovereign Green Bond Frameworkoutlining categories for green investment in November
2022. The country followed soon after with its first sovereign
green bond in late January, offering debt worth 80 billion
rupees, the equivalent of approximately $1 billion. The
transaction was divided into two tranches with half theamount allocated to five-year bonds at a coupon rate of 7.1
percent, while the remainder was issued as 10-year bonds
with a coupon rate of 7.29 percent. A subsequent sale in earlyFebruary raised a similar amount, bringing the total to 160
billion rupees. The sales raised money for spending in areas
such as energy efficiency, clean transport, reducing carbon
emissions, promoting climate change adaptation, improving
biodiversity, and water and waste management.27
The initial deal was oversubscribed with four times as manyorders as there were bonds available, enabling the issuer toreduce the pricing and secure the funds at lower cost. The
green premium effect—where investor demand for green
assets gives the issuer a pricing advantage— meant boththe 10-year debt went to 57 investors.28 The deal’s successand is likely to boost the local currency green debt market,
potentially attracting more investments in green projects.

February
The Government of Sharjah's first sovereign sustainablebond was a landmark event, not only marking the firstsuch issuance from a member of the Gulf Cooperation
Council region but also distinguishing itself as the first saleof this type of debt by a government entity in the UAE. The$1 billion bond was issued at a 6.5 percent interest rate,maturing in 2032.29
Proceeds were dedicated to financing or refinancing projects
in line with the Government of Sharjah's Sustainable
Financing Framework. This framework was crafted inaccordance with the 2021 editions of ICMA’s Green Bond
Principles, Social Bond Principles, and Sustainability Bond
Guidelines. The deal is intended to support initiatives that
contribute to sustainable development and align with theUN’s Sustainable Development Goals.

tranches priced inside India’s yield curve.

27

ESG Today, January 26, 2023 “India’s Inaugural Green Bond Earns 'Greenium' on Solid Demand,” available at https://www.esgtoday.com/indias-inaugural-green-bond-draws-greenium-on-solid-demand/

28

Climate Bonds Initiative, March 2023, “India’s debut in the sovereign green bond market: first deal landed a greenium,” available at https://www.climatebonds.net/2023/03/india%E2%80%99s-debut-sovereign-green-bond-market-first-deal-landed-greenium#:~:text=The%20Government%20of%20India%20joined%20the%20Sovereign%20Green,split%20
equally%20between%20five%20and%20ten%20year%20tenors.

29

Legal Community Mena, February 2023, “Government of Sharjah issues first-ever GCC Sustainable Bond,” available at https://legalcommunitymena.com/government-of-sharjah-sustainable-bond/Page 49

Annex 2

April

AugustTürkiye's first sovereign green bond raised $2.5 billion with

Gabon's first sovereign blue bond in the form of a debt-

an offering of seven-year bonds that mature in 2030. The

for-nature swap was a landmark transaction aimed atdeal priced at a 9.125 percent coupon rate and a 9.3 percent

marine conservation. The deal enabled the refinancing

yield. The offering attracted orders for more than threeof $500 million of Gabon's sovereign debt, enabling thetimes the issue size with interest from around 200 accounts.

nation to allocate $163 million to ocean conservation. This

Geographically, the bond attracted diverse investors, theinitiative was intended to underscore Gabon's commitment

biggest share of whom, 31 percent, were based in the United

to protecting 30 percent of its lands, freshwater systems,

Kingdom. Türkiye provided 19 percent of the investors

and ocean by 2030, aligning with the UN’s Sustainable

while 18 percent were in the United States. The Middle East

Development Goals.32

accounted for 16 percent while other European countries
brought 15 percent.30

June
Chile followed the update to its Sustainability-Linked Bond
Framework, which introduced female board representation
as a key performance indicator, by issuing three sovereign
SLBs. These were a $1.2 billion bond maturing in 2036, a$1.1 billion note maturing in 2054, and a 750 million-euronine-year deal. Subsequently, the two dollar-denominatedbonds were reopened, adding $500 million and $380 million

The transaction included the issuance of blue bonds torepurchase a portion of Gabon’s existing sovereign dollardenominated debt. An independent conservation fund, with
The Nature Conservancy, a non-profit organization acting as
the project manager and technical advisor, will partially use
the payments from Gabon to support conservation efforts.
The U.S. International Development Finance Corporation has
provided political risk insurance for the Blue Loan to Gabon,enhancing the credit rating of the bond issuance and offering
debt relief for the country over the next 15 years.

respectively. Chile also introduced its first local currency
SLB, a 1.75 billion Chilean peso (approximately $1.9 billion)
instrument with a 2037 maturity.31

30

Republic of Türkiye Ministry of Treasury and Finance, April 6, 2023, Press Release, available at https://ms.hmb.gov.tr/uploads/sites/2/2023/04/20230406_Press-Release.pdf

31

Climate Bonds Initiative, November 2023, “Sustainable Debt Market Summary Q3 2023,” available at https://www.climatebonds.net/files/reports/cbi_susdebtsum_q32023_01e.pdf

32

Reuters, August 15, 2023, “Gabon 'blue bond' swap raises hopes for wave of African debt-for-nature deals,” available at https://www.reuters.com/sustainability/gabon-blue-bond-swapraises-hopes-wave-african-debt-for-nature-deals-2023-08-15/

EMERGING MARKET GREEN BONDS

October
The Development Bank of Rwanda successfully closed its
first SLB offering in October, attracting orders for 33.17 billion
Rwandan francs, compared with an initial target of 30 billion
Rwandan francs. This inaugural seven-year bond, part of alarger 150 billion Rwandan-franc medium-term note program,
was launched in late September. The bond was offered withan annual coupon rate of 12.85 percent.
A considerable portion of the orders came from banks
and pension funds, which accounted for 64 percent of
the orders, with the remainder filled by retail and otherinstitutional investors. The issue is backed by the World
Bank's lending operation to the Rwandan Government
through the Access to Finance for Economic Recovery and
Resilience Project.33
This SLB, the first issued by a development bank globallyand the first sustainable bond issued in Rwanda, supports
the Development Bank of Rwanda's efforts in ESG practices,
promoting loans to women-led businesses and financing
affordable housing projects.
Chile returned to the market in October to launch its firstsovereign SLBs indexed to inflation, raising the equivalentof $927 million denominated in its local unit-of-account(Unidad de Fomento) currency. The deal comprised anoffering of 16-year notes at a 3.4 percent yield. The bondPage 50

features step-up rates linked to environmental and social
targets, including reducing public sector greenhouse gas
emissions and increasing female board representation instate companies. This issuance was the first such issue
in Latin America, marking a significant milestone for theregion in integrating sustainability goals with financial
instruments.34
In October, North Macedonia's Finance Ministry announced
the country's first-ever sovereign green bond, a 10 millioneuro transaction with an annual interest rate of 4.75 percent
and a two-year maturity. This initiative, part of a strategy
to diversify financial instruments on the domestic capital
market, aims to fund environmental projects throughthe Energy Efficiency Fund, managed by the state-run
Development Bank. This follows the successful launch of civil
bonds and precedes further market expansions, including
project and development bonds, to stimulate investment andeconomic growth.35

NovemberBrazil successfully issued its first-ever sovereign green bond,raising $2 billion. This sale was part of the country's efforts
to establish a benchmark in the sustainable finance market
and direct funds toward the government's sustainability
objectives. The seven-year notes were offered with a yield of
6.5 percent and met significant investor interest that resulted

33

Environmental Finance, October 25, 2023, “Development Bank of Rwanda raises RWF30bn in landmark sustainability-linked bond,” available at https://www.environmental-finance.com/
content/news/development-bank-of-rwanda-raises-rwf30bn-in-landmark-sustainability-linked-bond.html; World Bank, September 29, 2023, “Rwanda Development Bank Launches
First Sustainability-Linked Bond to Promote Inclusive Sustainable Development,” Press Release, available at https://www.worldbank.org/en/news/press-release/2023/09/29/rwanda-afe-development-bank-launches-first-sustainability-linked-bond-to-promote-inclusive-sustainable-development

34

Latin Finance, October 18, 2023, “Chile sells first inflation-linked SLBs in global market,” available at https://latinfinance.com/daily-brief/2023/10/18/chile-sells-first-inflation-linked-slbs-inglobal-market/

35

bne IntelliNews, September 27, 2023, “North Macedonia announces debut green bond issue,” available at https://www.intellinews.com/north-macedonia-announces-debut-green-bond-issue-294441/

Page 51

Annex 2in close to $6 billion of orders. Around 75 percent of thesolutions for coastal protection, scaling up aquaculture,

demand came from Europe and North America, while the rest

developing sustainable towns and cities, and enhancing

was from Latin America, including Brazil itself. The operation

waste management. This financial instrument aims to

was part of a broader strategy to align Brazil's financial

unlock the economic potential of Fiji’s blue economy throughinitiatives with its climate and environmental policies. 36

sustainable use of ocean resources.38

The bond's proceeds are destined for environmental

Argentina's first sovereign sustainability bond raised 44.3

and climate projects reflecting investors' preferences forbillion Argentine pesos ($125 million) as part of a larger

environmental commitments over social spending. In

bond offering. This bond, with a 4.25 percent coupon andparticular, the funds are expected to primarily support

a two-and-a-half-year term, is inflation-adjusted via thethe Climate Fund under the oversight of the state

CER index. The funds are earmarked for two aqueduct

development bank BNDES, contributing to Brazil's

projects and a program that provides computers to students.

ecological transition plans.

This sustainability bond was fully allocated, contrasting

Also in November, Fiji's first Sovereign Blue Bond launchedwith support from the United Kingdom's Blue Planet Fundand the United Nations Development Programme. The deal
represented a significant step toward sustainable ocean
management and economic resilience for the country. The
Fiji Sovereign Blue Bond was set up to raise private sector
funds to support conservation and protection of marine
environments. This initiative underlines Fiji's commitment
to sustainable development and offers a model for otherwith other parts of the larger offering which saw lower
investor uptake, indicating particular interest in sustainable
investment opportunities within the country's broader
financial initiatives.39

DecemberZambia's first Green Bond, issued by CEC Renewables Ltd,a subsidiary of Copperbelt Energy Corporation, aimed toenhance renewable energy development. The bond, part of adeveloping small island states to follow.37$200 million initiative, was fully subscribed in its first tranche

The bond offered maturities of three and 15 years with

mitigation efforts and supports its green energy transition,

coupon rates set at 1 percent per annum for three years andfocusing on renewable sources like solar and wind.40

of $54 million. This move aligns with Zambia's climate

4.2 percent over 15 years. The bond focuses on nature-based

36

Reuters, November 13, 2023, “Brazil raises $2 billion in ESG sovereign bonds debut,” available at https://www.reuters.com/sustainability/sustainable-finance-reporting/brazil-prices-2-blnfirst-ever-esg-bond-65-yield-source-2023-11-13/

37

UNDP, November 2, 2023, “Launch of Fiji’s first-ever Sovereign Blue Bond,” available at https://www.undp.org/pacific/press-releases/launch-fijis-first-ever-sovereign-blue-bond

38

Environmental Finance, November 2023, “Fiji launches debut sovereign 'blue' bond,” available at https://www.environmental-finance.com/content/news/fiji-launches-debut-sovereign-blue-bond.html

39

Environmental Finance, November 22, 2023, “Argentina issues debut sustainable bond amid future doubts,” available at https://www.environmental-finance.com/content/news/argentina-issues-debut-sustainable-bond-amid-future-doubts.html

40Copperbelt Energy, April 19, 2024, “CEC Announces Registration of Zambia's First Green Bond,” Press Release, available at https://cecinvestor.com/cec-announces-registration-of-zambias-first-green-bond/EMERGING MARKET GREEN BONDS

Page 52

Part 2. Other Noteworthy
Developments and Issuances

The bonds are part of Uruguay's broader strategy to alignIn July 2023, Mexico issued a sustainability bond valued atemissions and preserving native forests.

23 billion Mexican pesos (approximately $1.4 billion), with its

Meanwhile, Brazil, in collaboration with the Inter-American

use of proceeds linked to the UN’s Sustainable Development
Goals. The transaction was part of Mexico's continued
commitment to sustainable finance following the publicationof a sustainable finance taxonomy in March 2023. The
taxonomy, which is interoperable with the EU’s system, aims
to foster development of the local market by encouraging
sustainable investment practices.41
Malaysia announced plans to issue a sovereign biodiversity
sukuk—a type of bond that adheres to Islamic principles—inlate October. This 1 billion Malaysian ringgit (approximately$210 million) deal will raise money to fund reforestation

its fiscal management with sustainability and climate goals,
particularly those related to reducing greenhouse gas

Development Bank, is set to launch a foreign-exchange
hedge platform in 2024. This aims to smooth out volatility
for investments under the country's green transition
plan. The initiative seeks to address one of the significant
challenges faced by emerging countries in attracting foreign
investments, namely the risk associated with foreignexchange fluctuations. By providing tools such as foreignexchange swaps, credit lines for liquidity in foreign currency
investments, and hedging mechanisms against potentiallysharp depreciations, the platform intends to safeguard
investors from the adverse impacts of unexpected currency

and restoration projects through the generation of carbon

movements triggered by economic shocks. 44

credits.42 The use of Islamic finance mechanisms marks a

The primary focus of this platform is to support investments

significant departure from reliance on traditional funding
facilities to address environmental and conservation
challenges (see Annex 3 for further discussion on Islamic
finance initiatives).
In November 2023, Uruguay executed a tap of its 2022
sovereign sustainability-linked bond, adding $700 million
to the original issuance. The fundraising was on the sameterms as the initial $1.5 billion, 5.75 percent transaction
which matures in 2034. This additional sale brought the total
outstanding size of this bond to $2.2 billion.43

in areas critical to Brazil's environmental and climate goals,
including reforestation, new infrastructure to prevent
environmental disasters, low-carbon agriculture, greenhydrogen, and energy transition projects.
Initially, the platform is expected to have a potential forforeign exchange hedges of $3.4 billion, with the possibility
that this amount increases in the future. The initiative is partof Brazil's broader efforts to mobilize long-term resources
for climate mitigation and adaptation.

41

Climate Bonds Initiative, November, 2023, “Sustainable Debt Market Summary Q3 2-23,” available at https://www.climatebonds.net/files/reports/cbi_susdebtsum_q32023_01e.pdf

42Islamic Sustainable Finance & Investment, October 20, 2023, “Malaysia’s Budget 2024; biodiversity Sukuk in the works,” available at https://islamicsustainable.com/malaysias-budget-2024-biodiversity-sukuk-in-the-works/#:~:text=The%20Malaysian%20federal%20government%20is%20looking%20to%20issue,at%20the%20tabling%20of%20the%202024%20
national%20budget.

43

Environmental Finance, November 7, 2023, “Uruguay raises $700m from sustainability-linked bond tap,” available at https://www.environmental-finance.com/content/news/uruguayraises-$700m-from-sustainability-linked-bond-tap.html

44Inter-American Development Bank, December 1, 2023, “Brazil’s Ministry of Finance, IDB Plan to Create Hedging Platform for Brazil's Green Transformation Plan Investments,” available athttps://www.environmental-finance.com/content/news/uruguay-raises-$700m-from-sustainability-linked-bond-tap.html

Page 53

Annex 3Annex 3
Recent Noteworthy Initiatives for Sustainable
Finance in Emerging Markets

In this annex we highlight notable recent initiatives by

Finance. These initiatives, outlined in more detail below, add

regulators, governments, and international institutions toto existing cross-border frameworks such as the EU andformalize guidelines, standardize classifications, and establish

China’s Common Ground Taxonomy, described in the last

best practice codes for sustainable finance.

installment of this report.

The GSSS bond market remains a relatively new area of

The annex also provides an overview of initiatives aimed atinternational finance and remains hindered by the existence

tackling biodiversity loss announced in 2023 by regulators,of multiple taxonomies and inconsistent requirements,

international institutions, and other bodies. These include

adding complexity and raising transaction costs for investors.

IFC's Biodiversity Finance Reference Guide, unveiled in May,

But regulators and policymakers are making progress

ICMA's blue bond guide, launched in September, and thetoward setting up taxonomies that are compatible with

Task Force on Nature-Related Financial Disclosures (TNFD)'s

international standards.

final recommendations on nature-related issues, announced

This is significant. Greater harmonization makes it easierin September.

for ratings agencies and investors to assess risk, thereby

We also discuss two initiatives launched before 2023 that

promoting financial market deepening in emerging markets

remain relevant given their ongoing potential to influence

where the need for new capital to finance green transitions

market structure, including the Green Bond Technicalis highest.

Assistance Program (GB-TAP) that got underway in June

Recent months have seen important developments inthe establishment of multi-jurisdiction frameworks such

2018, and the Inter-American Development Bank’s Green
Bond Transparency Platform (GBTP) from March 2021.

as a second version of the ASEAN trade bloc’s Taxonomy

A final section discusses efforts to formulate an Islamicfor Sustainable Finance, the Common Framework forfinance framework for sustainable finance in the Middle East,

Sustainable Finance Taxonomies for Latin America and theone of the fastest growing issuance markets for GSSS bonds.

Caribbean, and the Singapore-Asia Taxonomy for Sustainable

EMERGING MARKET GREEN BONDS

ASEAN Taxonomy for
Sustainable Finance
In Southeast Asia, where fossil fuels account for more than70 percent of electricity generation, there is a pressing
need to decarbonize the energy sector. With this in mind,
ASEAN first introduced a standardized terminology for thefinancing of sustainable economic activities in November
2021. Released by the ASEAN Taxonomy Board, the new code
was designed as a classification system to support efforts bymember states to fund a shift to low-carbon models.
The second version of the ASEAN Taxonomy for Sustainable
Finance, published in March 2023, takes into accountcomments received from stakeholder consultations
conducted in 2022, and expands on the multi-tiered
framework set out in the first version.
The Taxonomy’s assessment approaches are two-fold. First,
there is a principles-based Foundation Framework allowing
for a qualitative assessment of activities, and secondly,
the Plus Standard that uses technical screening criteria toclassify activities.
Under the Foundation Framework, an economic activity
seeking classification in the taxonomy must comply withat least one of four main environmental objectives. These
are climate change mitigation, adaptation, protectionof ecosystems and biodiversity, and resource resilience
including the transition to a circular economy.
Any economic activity must also fulfil the minimum
requirements of three essential criteria. These are ensuring
an activity contributing to an environmental objective does
not cause significant harm to another objective, requiringthat any harm is addressed or rendered insignificant, and the
avoidance of social harm by upholding human or labor rights.
Under version two of the taxonomy, users adopting theprinciples-based Foundation Framework are able to assess
economic activities by using qualitative guiding questions,Page 54

decision trees and use cases. This enables classificationof economic activities into three categories: green, amberand red.
i.

Green: activities that clearly contribute to theenvironmental objective.

ii.

Amber: covering activities that do not meet therequirements of a Green classification but represent
progress toward a more sustainable ASEAN. It could
also be used to temporarily classify an activity forwhich some remediation of harm is outstanding.

iii. Red: activities that are not aligned with or are causing
significant harm to environmental objectives.
Under the Plus Standard approach, activities are assessed
based on pre-defined technical screening criteria to
categorize economic activities into Tiers 1, 2, or 3. Activities
which meet Tier 1 criteria are considered “Green” and thosewhich fulfil requirements for Tiers 2 or 3 are considered“Amber”.
According to the taxonomy, "classification" refers to an
activity's contribution to an environmental objective, while“tier" refers to the different levels of technical screening
criteria. The Plus Standard system has tiers: Green, Amber
Tier 2, and Amber Tier 3. The Foundation Framework does
not apply tiers.
The second version of the ASEAN Taxonomy provides
technical screening criteria tiers for the energy sector—
including electricity, gas, steam, and air conditioning
supply—which is one of the six priority sectors identified in
the first version. It also provides technical screening criteria
tiers for carbon capture, utilization, and storage, identified as
an “enabling” sector with significant potential to help othersectors to contribute to the four environmental objectives
identified under the Foundation Framework.
The ASEAN Taxonomy Board aims to finalize the technicalscreening criteria for all six priority sectors by 2025.

Page 55

Annex 3Moreover, it is expected that future versions of the ASEAN

to address biodiversity loss and includes a target on

Taxonomy will establish an assessment mechanism not only

mobilizing finance for necessary global economic actions.

for economic activities, but also for entities and portfolios

The framework sets ambitious targets for 2030 and 2050

based on the aggregation of such activities.

and is complemented by the Global Biodiversity Framework

A critical update of the Taxonomy is the inclusion of anassessment framework for phasing out coal as an energy
source for generating electricity. Criteria such as emissions

Fund which aims to mobilize and accelerate investment in
the conservation and sustainable use of wild species andecosystems.

intensity, absolute emissions reduction, or cuts to the

Several initiatives have emerged to promote the inclusion

period of operations are considered in the second version ofof biodiversity as a consideration in the strategies of

the ASEAN Taxonomy. Using these requirements, activities

corporations and investors:

related to coal phase-out are categorized into three tiers—
again ranging from green to amber—according to how•

Science Based Targets Network (SBTN), publishedguidelines for companies to develop methods andquickly coal-fired plants are scheduled for retirement.

resources for establishing credible nature-focused goals.

Importantly, the second version of the ASEAN Taxonomy
seeks to be interoperable with those used by the EU and•Taskforce on Nature-related Financial Disclosures

ASEAN member states. It accounts for differences in(TNFD), provides guidance to organizations forfinancial sector maturity and the variety of local economic

disclosing their impact and dependencies on nature andand social contexts across member states. To ensure

addressing the related risks and opportunities.

that national specificities were considered, a syndication
exercise was conducted during the drafting of the second
version to compare the ASEAN Taxonomy and other

After two years of design and development, the TNFD
published its final recommendations for nature-related risk

national taxonomies’ technical screening criteria.

management and disclosure. The recommendations aim

This second version of the ASEAN Taxonomy is therefore

providers, and ultimately contribute to a shift in global

a positive development for the region, providing afinancial flows toward nature-positive outcomes.

common framework compatible with member states’
own regimes. As a result, it should enhance clarity forcompanies and financial institutions on what constitutes
an environmentally sustainable activity within a specificregional context.

New Momentum for Tackling
Biodiversity Loss
The Kunming-Montreal Global Biodiversity Framework,
adopted at COP15, the UN’s biodiversity summit held in 2022,
emphasized the need for a whole-economy transformation

to inform better decision making by companies and capital

The recommendations build on those of the Task Force on
Climate-related Financial Disclosures (TCFD), set up in 2015 by
the Basel-based Financial Stability Board, and are consistent
with the global sustainability standards of the International
Sustainability Standards Board. They are also incorporated
into the new European Sustainability Reporting Standards.
The TNFD recommendations are aligned with therequirement of Target 15 of the Global Biodiversity
Framework that came out of COP15 for corporate reportingwhich calls for assessment and disclosure of nature-relatedrisks, impacts, and dependencies.

EMERGING MARKET GREEN BONDS

Page 56

The final recommendations are science-based and voluntary,defined by the World Bank as a debt instrument that raises

building on the market’s experience with, and progress on,

capital to finance marine and ocean-based projects thatclimate-related reporting. They are closely aligned with thehave positive environmental, economic and climate benefits.

disclosure framework developed by the TCFD, incorporating

Based on input from financial market participants, thethe same four conceptual pillars: governance, strategy,

marine industry, and global institutions, the guide provides

risk and impact management, and metrics and targets. In

information in areas such as evaluating the environmental

addition, they are structured in a way that allows companies

impact of blue bond investments and the steps needed toand financial institutions to start building on their current

facilitate transactions that preserve the market’s integrity.

reporting while also providing a pathway for corporates toincrease their disclosures over time, leading eventually toscience-based nature-related metrics and targets.

Developing a sustainable blue economy involves stopping
the decline of marine fisheries, encouraging expansion of
low-carbon aquaculture, scaling up offshore renewable

With the adoption of the Global Biodiversity Framework,

energy generation, and promoting the decarbonizationstrong market interest has followed, propelling market

of maritime transport. This is integral to tackling a rapidly

participants to create implementable guidelines andchanging climate and reversing nature loss and pollution.

mechanisms to address biodiversity loss.

The ocean serves as a vital heat and carbon sink, regulating

For example, IFC has published a Biodiversity Finance
Reference Guide, which provides a structured approach

the global climate while absorbing about 31 percent ofcarbon dioxide emissions.

for investors and financiers to identify activities that yield

Conserving and sustainably using marine resources is one

positive outcomes. Furthermore, IFC has suggested thatof the sustainable development goals outlined by the UN,

the ICMA Executive Committee build upon this to develop arequiring around $174.5 billion per year.45 However, thispractitioners’ guide on biodiversity bonds. Another notable

is one of the least funded of the 17 UN goals and annual

example is ICMA’s Blue Bond Guide, which aims to provide

expenditure in this area is currently around $25 billion,

a comprehensive list of eligible use-of-proceeds, output

according to one analysis. Bonds and loans which earmark

and impact indicators that can support private investments

funds exclusively for ocean-friendly projects may help toaligned with the latest green bond and loan principles.

close this financial market gap. Momentum is building
for innovative blue finance among investors, financial

ICMA Blue Bond Guide

institutions, and issuers globally.
This most recent global guidance helps define blue economy

Trade association ICMA, together with four international

eligibility criteria, suggests key performance indicators, andinstitutions, developed a global practitioner's guide for bonds

highlights the critical need for increased financing. It builds

to finance the sustainable blue economy in September 2023.

on current global market standards that underpin the global

This was intended as a guide that outlines the criteria andsustainable bond markets and also draws on pre-existing

best practices for issuing blue bonds. This type of security isblue guidance.46 While some blue bond issuances have and45

See Eco Business, June 7, 2023, “Powering the blue economy with blue finance,” available at https://www.eco-business.com/opinion/powering-the-blue-economy-with-blue-finance/

46

Existing guidance can be found in ICMA’s Green Bond Principles, UNEP's Sustainable Blue Economy Finance Principles and associated Blue Finance Guidance, the UN Global Compact's Practical Guidance to Issue a Blue Bond and Sustainable Ocean Principles, the Asian Development Bank's Ocean Finance Framework and Green and Blue Bond Framework, andIFC's Guidelines for Blue Finance.

Page 57

Annex 3will include freshwater-related projects, this latest addition is

impact indicator could be the revenues generated fromfocused on ocean-related projects that support Sustainable

permitted visitors. And a social co-benefit from this type ofDevelopment Goal 14, known as Life Below Water.

activity could be a behavior change campaign to increase

The guidance outlines eight eligible project categories anddetails how these relate to green bond eligibility criteria:

environmentally sustainable behaviors by tourists or thecommunity.
In addition to promoting alignment with current

1.

Coastal climate adaptation and resilience

2.

Marine ecosystem management, conservation

provide much needed credibility to blue issuances, as welland restoration

as the broader sustainable use-of-proceeds formats. It is

expectations and best practices, the guidance will help

intended that this added credibility will go hand-in-hand3.

Sustainable coastal and marine tourism

4.

Sustainable marine value chainsis directly usable by practitioners, to not only raise the5.

Marine renewable energy

blue formats, thereby catalyzing greater investment in a

6.

Marine pollution

7.

Sustainable ports

8.

Sustainable marine transportwith the knowledge sharing aspects of the guidance, which
quality of blue financing but also to increase appetite forsustainable marine economy.
This guidance may be useful for potential issuers to betteralign their financial instruments with the organization’s
strategy. In the case of financial institutions, it may
contribute to a better organization of projects’ portfolios

This non-exhaustive list covers the most common types ofas well as expanding financing opportunities for marine-

projects supported by blue bonds. It also includes examples

related activities that were not clearly covered underof activities that should be excluded, project outputs, social

sustainable frameworks before. Additionally, it provides

co-benefits, and impact indicators. For example, sustainable

market confidence for different stakeholders, from issuers tocoastal and marine tourism activities may support theinvestors and regulators, for financing sustainable activities

conservation and restoration of critical ecosystems. An

related to ocean resources.

EMERGING MARKET GREEN BONDS

IFC’s Biodiversity Finance
Reference Guide
Interest in biodiversity finance from investors, financial
institutions, and bond issuers has increased globally,

Page 58

The guide cites five essential eligibility criteria for investment
activities to be considered biodiversity finance. The activity
should:1.

Green Loan Principles’ eligible project categories andparticularly since the adoption of the Kunming-Montreal

contribute to the relevant Sustainable Development

Global Biodiversity Framework to halt and reverse
biodiversity loss by 2030.
Both the Green Bond Principles and the Green Loan

Goals.
2.

types of projects that fit this category. To address this gap,

UN’s Social Development Goals.
3.

of the project if there are material environmental andpublished in November 2022, providing an indicative list

social risks.

of investment projects and activities that help protect, orof natural resources.

4.

overexploitation and unsustainable use of nature,pollution, and alien invasive species.

drivers of biodiversity loss in economic activity, target
nature-based solutions into appropriate infrastructure
projects. The guide builds on the Green Bond Principles andthe Green Loan Principles and spells out how indicative

address one or more of the key drivers of biodiversity
loss: land and sea use change, climate change,

The guide focuses on investments that address the key
conservation and restoration of ecosystems, and integrate

have ESG safeguards and standards, such as the IFC
Performance Standards, applied in the implementation

IFC developed its Biodiversity Finance Reference Guide,enhance biodiversity and promote sustainable management

not introduce risk that may affect progress on otherenvironmental priorities, such as those identified in the

Principles list biodiversity as an eligible use of proceeds.
However, they do not provide a granular description of thebe consistent with the Green Bond Principles’ and5.

have appropriate metrics to determine the impacts
on biodiversity and measure performance against
selected impact indicators.

biodiversity finance activities are aligned with other

Beyond these broad eligibility criteria, the Biodiversity

environmental objectives articulated in the principles,

Finance Reference Guide can help issuers and investors

which address the key drivers of biodiversity loss. These

identify opportunities linked to biodiversity preservation andare pollution prevention and control; natural resource

to the sustainable management of natural resources. In thisconservation; climate change mitigation; and climate changeway, the guide is complementary to existing frameworks

adaptation. This guide has been incorporated into IFC'ssuch as TNFD, which helps companies and financial

Green Bond Framework.

institutions identify biodiversity-related risks. This guidance
seeks to effectively direct capital flows to companies,
projects, and activities that can help halt and reverse
biodiversity loss and rehabilitate ecosystems.

Page 59

Moreover, the guide was updated in May 2023 to reflect howeach of the investment activities listed contributes, directly
or indirectly, to specific targets of the Kunming-Montreal
Global Biodiversity Framework. This is key to ensuring thatthe financed activities are supportive of targets set by theAnnex 3The Impact of These Initiatives on theDevelopment of Biodiversity and Blue
Bonds and Loan Markets

framework for 2030.

Sustainable debt investors should welcome these initiatives

In the months to come, IFC will work on expanding thisproviding guidance and clarity to issuers and investors

guide by providing a list of metrics for eligible use ofproceeds to facilitate impact reporting. This will be done bybuilding on the ICMA Handbook for Impact Reporting.
The aim is to help issuers and investors report on theirperformance against key metrics in a harmonized andstandardized way. Furthermore, IFC will continue towork with other stakeholders in the market to maximizealignment with existing initiatives and frameworks. In thisregard, IFC will help complement the TNFD’s biodiversity
risk-related metrics with indicators linked to biodiversity-

which are key to support the expansion of the market byalike. The bond market can help drive capital flows towardsustainable activities and projects.
Furthermore, biodiversity and blue economy financing
through use-of-proceeds bonds is still lagging climaterelated issuance. These two areas are crucial to ensuring a
global transition as they are closely intertwined with theobjectives of climate mitigation and adaptation.
In this context, the IFC Biodiversity Finance Reference
Guide and the ICMA Blue Bond Guide are likely to foster

related opportunities.

additional issuances, including in emerging markets. They

Lastly, another innovation of the IFC guide relates toto support blue financing or biodiversity and demonstrate

including nature-based solutions for infrastructure projects.
The guide provides a broad list of eligible uses of proceeds
to help investors and companies identify opportunities tointegrate nature-based solutions into core operations. To
provide further guidance, IFC jointly with Conservation
International developed a more detailed catalogue ofnature-based solutions for the water, mining, and renewableenergy sectors. IFC is now developing further guidance fornature-based solutions for cities and ports in collaboration
with the World Bank.

provide guidance to borrowers with a list of eligible projects
how these projects can contribute to global environmental
objectives.
Moreover, the ICMA Blue Financing Guide provides moreclarity in terms of performance indicators for reporting oneach type of project, as well as on exclusions and potentialsocial co-benefits. This guidance is key, as standardizing
data and reporting practices is essential to ensuring themeasurability of impact investments. Moreover, the alignmentof ICMA’s Blue Bond guide with categories in the Green Bond
Principles ensures compatibility between “green,” land-based
financing and “blue” ocean-focused financing.
Even though these guides provide lists of eligible projects
and their potential contribution to environmental objectives,
assessing the quality of projects remains challenging for
asset managers and investors, and especially so in emerging
economies. However, the development of environmental
taxonomies, along with technical criteria around theworld, could help define environmental projects with real
additional impact.

EMERGING MARKET GREEN BONDS

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IFC’s Green Bond Technical
Assistance Program

GB-TAP has also brought first-in-kind thought leadership

The Green Bond Technical Assistance Program (GB-TAP)•

is managed by IFC in partnership with Switzerland’s State

products to stimulate the market development andtransparency of green bonds, including the following:

explores the potential growth and impact of green

Secretariat for Economic Affairs, the Swedish Internationalbonds in emerging markets.

Development Cooperation Agency, and Luxembourg’s
Ministry of Finance. Launched in 2018, the objective of

The Emerging Market Green Bonds report, which•

Green Bond Pricing in the Primary Market reports with

GB-TAP is to stimulate the supply of green bonds issued by

the Climate Bonds Initiative, analyzing the pricing

financial institutions in emerging markets by creating anddynamics of green bonds, examining how thesedisseminating knowledge on green bonds and by enhancing

instruments offer pricing advantages for issuers andthe quality of disclosed information by issuers.

investors.

The program has a transformative convening platform
supporting investment in climate change solutions for a low-•

a green bond and its companion online course forcarbon economy. It also holds a unique convening platform

emerging market financial institutions.

to connect developed-market investors and emerging
market issuers. It brings leading market players to shareknowledge in order to stimulate the issuance of quality•

reporting, and an environmental, social, and governancedisclosure white paper series.

GB-TAP has delivered over 32 executive trainings to morefrom 370 financial institutions across 75 countries. The•

small, and medium enterprises.

financial institutions which have issued conventional bonds
to include green bonds. The curriculum emphasizes the•and to promote good-quality green bond issuances.
Alumni of the executive trainings have gone on to participate
in the issuance of over 105 GSSS bonds with a total value ofover $11 billion. The mobilized capital financed and supported
social and green projects across 44 developing countries
around the world.

The world’s first biodiversity finance reference guide tohelp the private sector invest in nature-based solutions.

importance of maintaining alignment between the issuer’s
sustainability strategy and the bond to avoid greenwashing

The Sustainable MSME Finance Reference Guide forfinancial institutions to provide assistance to micro,

executive training strategically targets emerging market
and thus have the potential to upgrade their offering

A pilot training on impact reporting, several reports on
best practices in green bond fund and issuer impact

green bonds.

than 1,300 professionals, 42 percent of whom were women,

Green Bond Handbooks, a step-by-step guide to issuing•

An award for sustainable bonds focused on supporting
small and medium enterprises.

•

The launch of ESG Book (formerly Arabesque), which is a
new central source for free, accessible, standardized, andtransparent corporate sustainability information.

Page 61

The Green Bond Transparency
Platform
The GBTP, a public tool developed by the Inter-American
Development Bank, supports the harmonization andstandardization of green bond reporting, facilitating firsthand, granular, and comparable data for evidence-based
decisions. It is a taxonomy-neutral tool designed with aflexible and open architecture, replicable to other emerging
markets and types of thematic bonds. In the two years
since launch, the GBTP has covered around 70 percent of
Latin America and the Caribbean’s green bond market byvolume, reaching over 230 issuances from 104 borrowers.
The platform won the Initiative of the Year – Green Bondaward from Environmental Finance and was selected as a
Global Public Good by Oxford Economics. The continuous
feedback from key market stakeholders led to discussions
on the platform’s expansion to other regions, resulting
in the GBTP globalization announcement achieved
together with four international development institutions.
The initiative aims to achieve the enhancement ofAnnex 3Its objective is to help countries develop nationalframeworks that are interoperable, not only at the regional
level but also globally, to facilitate local actors’ access tocross-border financial markets. Ensuring interoperability
will also help overcome information asymmetry andmarket fragmentation, among the main barriers to scalingsustainable finance in developing economies.
Published in July 2023, this framework was developed by theWorking Group on Sustainable Finance Taxonomy in Latin
America and the Caribbean, which was created as part of theInteragency Technical Committee of the Forum of Ministersof Environment from Latin America and the Caribbean. It
was also constituted by the United Nations Environment
Programme and its Finance Initiate, and other institutions
including the World Bank, IFC, the International Monetary
Fund, and the Economic Commission for Latin America andthe Caribbean.
The framework provides six guiding principles for taxonomy
development:
1.

taxonomies.

accountability and transparency in the emerging green andsustainable bond market.

Seek interoperability with other regional and global

2.

Make material positive contributions to well-defined
objectives and avoid damage.

Common Framework for Sustainable
Finance Taxonomies for Latin America
and the Caribbean

3.

Provide clear definitions that are science based forthe environment or evidence based for other areas ofsustainability.

4.

Allow for a credible transition of high-emission sectors

The Common Framework for Sustainable Financewith a clearly defined final goal, regardless of theTaxonomies for Latin America and the Caribbean is apathway.

guidance document serving as a voluntary reference togive states in the region directions to develop sustainablefinance taxonomies.

5.

Be dynamic and subject to regular reviews.

6.

Ensure adequate governance, transparency, andpractical applicability.

EMERGING MARKET GREEN BONDS

Page 62

The framework also provides guidance on four structural

governance structure needed for the proper development,elements:

implementation, and monitoring of taxonomies.

1.

2.

Objectives. Helps to determine the ambition,

The release of this guidance document will certainly serve

selection of sectors and economic activities, andas a catalyst for progress toward the implementation

development of screening criteria to assess eligibility.

of sustainable finance taxonomies across the region.

Sectors. Provides guidance to identify economic
sectors for which activities are selected and defined.

3.

4.

By offering a regionally aligned approach to classifying
sustainable activities, the framework can help unlock awide range of opportunities and financing for sustainable

Activities. Supports in defining economic activities

development. Greater regulatory harmonization is a driver ofunder the selected sectors for which definitions andmarket growth as it can help investors make more informed

eligibility criteria are developed.

decisions.

Screening criteria. Gives guidance for metrics that
could be used for key economic sectors in order to set
relevant screening criteria.

In this first phase, the framework focuses on climatechange objectives—mitigation and adaptation—andprioritizes sectors that are relevant to these objectives
for Latin America and the Caribbean, such as agriculture,
manufacturing, or electricity, gas, steam and air
conditioning supply.
In a second phase, the framework is expected to expand its

The Singapore-Asia Taxonomy
The Singapore-Asia Taxonomy for Sustainable Finance wasdeveloped by the Green Finance Industry Taskforce (GFIT),
convened by the Monetary Authority of Singapore. The
taxonomy is designed to promote the development of asustainable economy for Singapore and ASEAN countries.
The foundation is science based with detailed technicalscreening criteria to define and set thresholds on green
and transition activities across eight sectors, covering 90

scope to cover other environmental objectives.

percent of the region’s greenhouse gas emissions. While the

The framework does not select specific sectors or activities

version first focuses on climate change mitigation.

to be included in taxonomies as these must be assessedon a country-by-country basis. Its aim is rather to provide
recommendations on the inclusion of sectors and activities
based on their contribution to climate mitigation andtaxonomy identifies five environmental objectives, the latest

The taxonomy uses a traffic light system. Besides “green”
and “ineligible” activities, the “amber” category covers
existing activities and infrastructure that are not presently

adaptation objectives.

on a 1.5 degrees Celsius pathway but are either moving

The outcomes will thus ultimately depend on theemissions reductions. It is the first of its kind in pioneering

governments themselves developing their own taxonomies

the concept of “transition” and defining associated criteria. It

based on the framework’s recommendations. To further

recognizes the need to properly define “credible transition”,

support national governments in doing so, the guidance

particularly in Asia, where a successful and orderly transition

document shares best practices for countries to define theis much needed. This allows investors to support the

toward a green transition trajectory or facilitating significant

Page 63

Annex 3transition of certain hard-to-abate sectors and key industry

that contribute positively to sustainable development withinsegments, such as steel, aluminum and cement which offer

Sharjah and beyond.

substantial transition financing opportunities for realworld decarbonization. The taxonomy has also provided aframework for phasing out coal-fired power plants whereby
the lost generation capacity is replaced with clean energy.

The following month Mexico announced its sustainabletaxonomy, which was notable on account of its inclusion ofsocial as well as environmental objectives, with a significant
focus on achieving gender equality. This taxonomy is seen

To enhance interoperability with global taxonomies, theas a model for the region and beyond, particularly in the

Monetary Authority of Singapore has started to work

prominence it gives to social issues.48

with the International Platform for Sustainable Finance toenhance its Common Ground Taxonomy, which currently
covers the EU Taxonomy and People’s Bank of China’s Green
Bond Endorsed Projects Catalogue.

Argentina's National Strategy for Sustainable Finance,
announced in May, aims to attract investments that
contribute to sustainable development goals by integrating
economic, social, and environmental factors into financial

As with any taxonomy, its ultimate success will depend on

activities. It outlines five strategic areas, including regulatory

its uptake in a competitive and fragmented environment forframework enhancement, establishing a common taxonomy

climate change-related guidance and standard-setting. The

for sustainability, and creating incentives to attract

extent to which it evolves as a gold standard in Asia will be

investments. This approach emphasizes the importanceshaped by how regulators and investors embed the criteriaof sustainability in the country's development strategy,

in legislation or in the design of products or services.

especially in light of the significant financing gap identified
for achieving sustainable development goals by 2030.49

Other New Taxonomies, Frameworks,
and Strategies
The Government of Sharjah's Sustainable Financing
Framework, announced in February 2023, is structured toenable funding of projects in line with the UN's Sustainable
Development Goals.47
Emphasizing environmental and social sustainability, it wasdeveloped according to the 2021 editions of ICMA's Green
Bond Principles, Social Bond Principles, and Sustainability
Bond Guidelines. The framework is designed to ensure thatproceeds from transactions are allocated to eligible projects

Chile's updated Sustainability-Linked Bond Framework,
adopted in June, introduces a gender-based key performanceindicator alongside environmental goals. This means that
as well as setting targets for reductions in greenhouse gas
emissions by 2030, it also targets an increase in female
representation on the boards of companies regulated by the
Financial Market Commission to at least 40 percent by 2031.50
Thailand's first phase of its Green Taxonomy, launched inearly July, focuses on the energy and transportation sectors,
which are responsible for a significant portion of the country's
emissions. Developed with the Climate Bonds Initiative andthe Bank of Thailand, it aims to guide investments toward

47

Government of Sharjah Finance Department, 2023, “Emirate of Sharjah Sovereign Sustainable Financing Framework,” available at https://www.sfd.gov.ae/En/PUBLICATIONS/Emirate%20
of%20Sharjah%20-%20Sovereign%20Sustainable%20Financing%20Framework.pdf

48

Gobierno de México, 2023, “Taxonomía Sostenible de México,” available at https://www.gob.mx/shcp/documentos/taxonomia-sostenible-de-mexico?state=published

49

Banco Central de la Republica Argentina, 2023, “Argentina’s Sustainable Finance National Strategy,” available at https://www.bcra.gob.ar/Pdfs/SistemasFinancierosYdePagos/Sustainable%20Finance%20National%20Strategy.pdf

50

Gobierno de Chile, Ministerio de Hacienda, 2023, “Chile’s Sustainability Linked Bond Framework,” available at https://hacienda.cl/english/work-areas/international-finance/public-debt-office/esg-bonds/sustainability-linked-bonds

EMERGING MARKET GREEN BONDS

Page 64

decarbonization and is based on science-aligned criteria

projects that contribute to environmental and sustainableconsistent with objectives set out in the Paris Agreements.

development objectives, reaffirming the country’s

The taxonomy emphasizes interoperability with international

commitment to UN Sustainable Development Goals andstandards while incorporating local decarbonization

to the Paris Agreements on climate. The framework seeks

trajectories, aiming for net-zero by 2050. It also features ato promote a greener economy, diversify the investor

user-friendly approach to facilitate business adoption and isbase, and attract environmentally focused investments. It

designed to be resistant to greenwashing.51

outlines governance structures for project selection and use

Brazil's Sovereign Sustainable Bond Framework, announced
in September, focuses on transparently allocating netof proceeds to meet market expectations, with technicalassistance from the World Bank.54

issuance proceeds to environmental and social projects.
It encompasses various expenditure categories forenvironmental benefits, like pollution control, renewableenergy, and climate change adaptation, as well as social
benefits, including socioeconomic empowerment andaccess to basic infrastructure. The framework aligns with

The Middle East and theDevelopment of the Green andSustainable Sukuk Market

ICMA principles, emphasizing transparency and impact

GSSS bonds can help fill financing gaps in the Middle Eastassessment, and lists exclusions to ensure sustainability

as economies work toward transitioning away from fossil

criteria are met. This initiative sets Brazil apart by integrating

fuels and building resilience against climate-related shocks.

broad environmental and social goals within its bond

The region's surge in GSSS bond issuance in 2023, led by theframework.52

UAE and Saudi Arabia, underscores an increasing dedication

Rwanda's Green Taxonomy, announced in December,aims to define sustainability criteria, ensure transparency

to a sustainable development agenda addressing urgent
environmental and social challenges.

in ESG reporting, build trust in green investments, andThe Middle East has a large pool of institutional investors,

prevent greenwashing. It supports Rwanda's green growthsovereign wealth funds, and Islamic finance institutions.

development, requiring an estimated $11 billion for its 2030

We expect GSSS bond issuance from the region to continue

Climate Action Plan. This taxonomy focuses on agriculture,

to expand for some years on account of ongoing economic

construction, transport, and energy sectors for climate

dependence on the hydrocarbon sector and vulnerabilitychange mitigation and adaptation, seeking to position

to water scarcity. The ambition and the implementation

Rwanda as a sustainable finance hub in East Africa.53

pace of decarbonization strategies will determine the future

Romania's Ministry of Finance launched a Green Bond
Framework in December. This was aimed at financing

trajectory of GSSS bond issuance from the region. Rising
investor appetite for products aligned with ESG criteria is
another driver that is likely to boost issuance volumes in

51

Bank of Thailand, 2023, “Thailand Taxonomy. A Reference Tool for Sustainable Economy,” available at https://www.bot.or.th/en/financial-innovation/sustainable-finance/green/Thailand-Taxonomy.html

52Tesouro Nacional, 2023, “Brazil launches Sovereign Sustainable Bond Framework,” available at https://www.gov.br/tesouronacional/en/news/brazil-launches-sovereign-sustainable-bond-framework#:~:text=Brazil%E2%80%99s%20Sovereign%20Sustainable%20Bond%20Framework%20contains%20the%20rules,programs%20that%20generate%20positive%20
environmental%20and%2For%20social%20impacts.

53

Minecofin, 2023, “Rwanda’s Green Taxonomy,” available at https://www.minecofin.gov.rw/rwandagreentaxonomy#:~:text=Rwanda%E2%80%99s%20Green%20Taxonomy%20Rwanda%E2%80%99s%20Green%20Taxonomy%20is%20a,a%20green%20investment%2C%20as%20well%20as%20prevent%20greenwashing.

54

Government of Romania, 2023, “The framework related to the financing of projected that are intended to protect the environment and combat climate change,” available at https://www.mfinante.gov.ro/static/10/Mfp/trezorerie/GreenBondFrameworkofRomania_14022024.pdf

Page 65

Annex 3the future. Whereas climate mitigation, renewables, and

COP28, the UN climate summit held in Dubai in Decemberhydrogen projects currently dominate the use of proceeds,

2023, gave a notable impulse to green and sustainable bondfuture GSSS bond deals in the Middle East may increasingly

deals in the region. Led by Saudi Arabia and the UAE, Middle

be focused on financing adaptation to water stress andEastern GSSS bond issuance expanded to a record $20.4 billion

heat waves.

in 2023, more than doubling from the previous year (Exhibit 22).

EXHIBIT 22

Middle East Becomes Largest Emerging Market
GSSS Bond Issuer Outside China in 2023
GSSS Bond Issuance in the Middle East
Source: Bloomberg, CBI, Environmental Finance, IFC

22

20.4

4.8

Sustainability-linked$ Billion

Social10
2.3

Sustainability
15.5
Green

4.7
7.2
3.9
0

2016-2021

2022

Source: Bloomberg, CBI, Environmental Finance, IFC

2023

EMERGING MARKET GREEN BONDS

Page 66

Nevertheless, the Middle East's overall market size

Bond Standards certification. These include solar parks,

remains modest by international standards. The region

biogas plants, wind energy projects, energy efficiency

only accounts for 10 percent of global GSSS issuance andinitiatives, and electric vehicles.

claims a 7.4 percent share of worldwide green bond sales.
Moreover, deals are concentrated in just a few countries
and mainly come from financial institutions or large
corporates in the energy sector. In 2023, the UAE and Saudi
Arabia accounted for 58 percent and 38 percent respectivelyof total GSSS emissions in the Middle East.

The Middle East’s issuers have proven to be enthusiastic
adopters of sustainable finance. The region’s first green
bond was issued in 2012, by First Abu Dhabi Bank, a UAE
financial institution. In 2020, Etihad Airways issued the firstsustainability-linked transition sukuk whereas Egypt soldthe Middle East’s first sovereign green bond. In 2022, Saudi

Meanwhile, there is mounting interest in integrating

Arabia saw the first green bond issue by a sovereign wealthclimate priorities with the principles of Islamic finance.

fund, a $3 billion deal with a maturity of up to 100 years.

This has impacted the market for sukuk, debt-like issuance

The COP28 summit showcased the role Islamic financein compliance with Islamic finance rules by remaining

can play in meeting clean transition needs. Middle Easterninterest free and establishing a risk and profit sharing

green and sustainable sukuk issuance soared to $5.5 billion

relationship based on the ownership. Unlike conventionalin 2023 from $3.1 billion a year earlier, accounting for 27

bonds that generate interest payments, sukuk investors

percent of the region’s total GSSS bond issuance. By thereceive an agreed share of the profits generated by theend of 2023, the Middle East accounted for nearly half ofunderlying assets.

global green sukuk issuance. Although the region’s sukuk

Meanwhile, green sukuk base their compliance with
Islamic law on environmental commitments and thenature of the underlying assets which adhere to Climate

market is overwhelmingly U.S. dollar-denominated, First
Abu Dhabi Bank issued the first dirham-denominatedgreen sukuk in 2023.

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