Sustainable Finance and Environmental,Social, and Governance (ESG) Advisory
Innovative Sustainable Financing Solutions for Emerging Markets

April 2023

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Finance is Key for Sustainable Growth
We help our clients toUnderstandglobal and local
sustainability
issues, risks andsolutions

Facilitatesustainablefinancialsolutions

Direct financetowards
environmental
and sustainablepriorities

Develope
sustainablefinancialmarkets

Promoteintegrity of themarket andfoster better
practices

Promotesustainable
investment

For more information: www.worldbank.org/sustainablefinanceadvisory
Cover Page Photo Credits (Left-Right): © nazimpressions/iStockphoto; © Milos-Muller/iStockphoto; © Chhor Sokunthea/World Bank

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Sustainable Finance andAdvisory
Environmental, Social, and Governance (ESG) Advisory

Why Choose the World Bank?
y

The World Bank issued the first green bond in 2008yCreated the model for today’s labeled bond market
and set the blueprint for sustainability across capital
marketsy

Raised over US$13 billion through 158 green bondtransactions in 21 currencies

yIssued record-breaking US$8 billion
sustainability development bond for healthand COVID-19 response in member countries

yProcesses used by the World Bank arerecognized as international best practice

yWorks with multilaterals and markets actors
to set standards and guidelines for issuers andinvestors to promote the integrity of the marketyCreated the “green sukuk” and blue bond productsyFacilitated groundbreaking emerging market
sustainable finance transactions

The World Bank participatesin national, regional andglobal initiatives

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Labeled Bonds
Green, blue, social and sustainable bonds (i) raise money for investments that deliver sustainable economic and social
outcomes and (ii) offer investors the opportunity to earn competitive financial returns and diversify their portfolios
while supporting positive impact.

Green and Blue Bonds

Social Bonds

Green and blue bonds raise financing fordevelopment with clear environmental benefits
on land and at sea, e.g., power generation fromrenewables, infrastructure that increases energy
efficiency, and sustainable fishing economies.

Social bonds support thefinancing of the projects
that benefit under-served
populations with limited accessto essential services such as
basic infrastructure or finance.

Sustainability Bonds
Sustainability bonds
support the financing of agreen and social projects.

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Why Issue Labeled Bonds?

Asset owners such as pension funds are also
recognizing that ESG issues can influence
investment risk and return. They are increasingly
integrating these considerations into theirinvestment analysis. Often green, social andsustainability bond issuers receive higher ESG
scores from these investors. Investors may use
these bonds to hedge relevant risks in their portfolio.

Photo Credit: © Sasiistock/iStockphoto

Labeled bonds can help issuers expand and diversify theirinvestor base. These bonds are in huge demand frominvestors that place sustainability at the center of theirinvestment approach, i.e., invest specifically with theintention of generating positive, measurable social andenvironmental impact alongside a financial return.
These investors include fund managers, pension funds
and insurance companies, family offices, banks,financial institutions, religious institutions, as wellindividual investors. The Global Impact Investing
Network (GIIN) estimates the size of the impact
investing market to be more than US$1 trillion.

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Build Sustainable Financial MarketsyHelp financial regulators understand the financial impact of sustainability challenges such as climate change,
environmental degradation, loss of biodiversity, pandemics, social issues, etc.

yHelp develop regulations, guidelines and incentives to catalyze the development of sustainable capital marketsyPromote the issuance of labeled bondsyBuild the capacity of local certifiersyDevelop green taxonomies to provide clarity to issuersyDevelop capacity of issuers to report on ESG risksyBuild the capacity of institutional investors to set up ESG and impact investing strategies and frameworks

Photo Credit: © Liang Qiang/World Bank

Technical assistance for regulators and policymakers

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Promote Sustainable Solutions
Technical assistance for issuers of Financial Solutions

yyyyyyShare international best practices
and requirements
Develop action plan/roadmap
Develop the framework
Identify eligible categories/projects
based on national priorities
Facilitate the delivery of second
opinions/verifications/certification
Advise on reporting commitment
and communication strategy

Post-Issuanceyyyyy

Clarify processes and help issuers understand how to use
the standardized impact reporting template in line with
global standards
Explain information required, including baselines andindicators to measure the impact of selected green projects
Recommend work process flows and timeline for reportingin line with the green bond framework
Prepare terms of reference for an auditor to provide theannual assurance report
Review and provide feedback on drafts

Photo Credit: © havana77/iStockphoto

Pre-Issuance8

Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Advance Best PracticesyDeliver training to domestic environmental, climate-related and sustainability research institutions or
consultanciesyShare trends and perspectives on climate science, physical and transition climate risks, financial risks andscenarios

yExplain different forms of external review, and examine different approaches and methodologies, respective
benefits and disadvantages, potential conflicts of interest, dissemination, and costs

yClarify second opinion structure, content, required documents and information/data, and assessment process

yReview and provide feedback on methodologies

Photo Credit: © Lanski/iStockphoto

Technical assistance for certifiers or second opinion providers

9Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Promote Sustainable Investment

yDeliver training and capacity building on ESG and responsible investment (RI) trends, approaches andstrategies and identify institutional investors interested in integrating ESG in investment processes

ySupport the targeted investors by– reviewing identified institutional investor’s investment objectives, policies and strategies and deliver anoverview report identifying gaps
– providing recommendations for the integration of ESG in investment processes, including:

criterion for developing an ESG/RI policy and implications for investment processesorganizational setup, governance and operational processes
choosing ESG approaches to support investment objectives and mission alignment
stewardship, responsible ownership and engagement
reporting and disclosure

Photo Credit: © AvigatorPhotographer/iStockphoto

Technical assistance for institutional investors

Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Malaysia
In July 2017, Tadau Energy
Sdn Bhd issued the world’s
first green sukuk to raise
MYR 250 million (US$59million) to finance a 50MW
solar power plant inMalaysia.

Large institutional
investors
incorporated ESG
in their strategic
asset allocation.

Photo Credit: © WangAnQi/iStockphoto

Local ratingagencies
established amethodology
for green sukuk
rating.

Republic ofIndonesia issued
a sovereign green
bond (US$1.25billion, February2018).

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Malaysia

First green sukuk in the world
Green sukuk (Islamic bond) is a new climate finance instrument that has the potential to channel the US$2 trillion
Islamic finance market toward funding of green and sustainable investment projects.

World Bank Supportyyyyyy

Identified opportunity to leverage Malaysia’s role in Islamic finance to combine the “sukuk” and the green bond
Undertook diagnostic assessment for feasibility
Led awareness campaign with line ministries; financial intermediaries; banks; institutional investors; ratingagencies; and potential issuers
Provided capacity building for local green bond/sukuk certifiers
Provided technical assistance to issuers for sukuk transactions
Supported the development of ASEAN Green and Sustainable Bond Standards

Case Study: https://thedocs.worldbank.org/en/doc/21c2fb7dfb189f10a0503004757b03f4-0340012022/original/Case-Study-MalaysiaGreen-Sukuk-Market-Development.pdf

11Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

FijiIn November 2017, Fiji issued asovereign green bond.

The bond raised FJD 100 million,approximately USD (eq.) 50 million,
to fund climate change adaptationand mitigation projects.
Photo Credit: © sorincolac/iStockphoto

As COP 23 President, Fiji used thebond to bring global awareness tochallenges of small island nations
to the impacts of climate change.

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

FijiFirst emerging market sovereign green bond in the world
World Bank Support
yProvided technical assistance to structure the bond from start to finish within a tight time frameyConvened and facilitated a steering committee comprising senior government decision makers with clear lines ofauthority on preparing the green bond policy framework, prospectus, eligible expenditure definitions, and ongoing
monitoring and reportingyDeveloped the green bond framework, hired the external review provider, and helped Fiji navigate the independent
review processy

Identified eligible projects, focused mainly on building resilience against the impacts of climate changeyHelped raise the visibility of the bond in the global platform through a sustained communication strategyyProvided technical assistance to develop the post-issuance green bond impact reports

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Indonesia

In December 2017,
Indonesia Financial
Services Authority(FSA) issued green
bond regulations.
Photo Credit: © Velvetfish/iStockphoto

In July 2018, PT Sarana
Multi Infrastruktur (PT SMI),a state-owned enterprise,issued the first corporate
green bond in Indonesia.

In January 2019,
Ministry of FinanceIndonesia publishedits first green sukuk
impact report.

Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Indonesia

Developing a domestic green bond market
World Bank SupportyDelivered workshops to raise awareness of sustainability issues, standards, policies and implementation
requirementsyParticipated in technical meetings with Ministry of Finance, financial intermediaries, banks, institutional
investors, rating agencies, and potential issuersySupported the development of Indonesia green bond regulationsyProvided guidance to Ministry of Finance for the issuance of first sovereign green sukuk in the world; supported
knowledge-sharing activities, and provided technical assistance to develop the post-issuance impact reportyFacilitated the issuance of the first domestic green bond in Indonesia by PT SMI– developed transaction road map and green bond framework– helped identify eligible projects– provided guidance on reporting and impact indicators– facilitated independent external review– developed post-issuance impact report

Case Study: https://documents1.worldbank.org/curated/en/856781551372777380/First-Corporate-Green-Bond-in-Indonesia-SupportingIndonesia-s-Efforts-to-Fight-Climate-Change-Case-Study.pdf

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Seychelles

In October 2018, the Seychelles
government launched theworld’s first sovereign
blue bond.
Photo Credit: © Tunatura/iStockphoto

The proceeds will be used tohelp finance the island nation’stransition to sustainablefisheries and the protection ofmarine areas.

The World Bank structured
a new blue bond market
instrument to help theSeychelles government mobilize
private sector capital into
sustainable fishing, marine
spatial planning aquaculture
and biodiversity.

Sustainable Finance and Environmental, Social, and Governance (ESG) AdvisorySeychelles

First blue bond in the world
World Bank Supportyyyyyy

Structured a blue bond with a custom ten-year maturity schedule that aligned with project funding needs andSeychelles’ liability profile
Integrated a World Bank partial credit guarantee of US$5 million into the blue bond, which lowered Seychelles’
borrowing cost by at least 2 percent per year
Helped arrange US$5 million in concessional financing from the Global Environmental Facility (GEF), which further
lowered Seychelles’ net borrowing cost by over 3 percent per year
Secured a donation from Rockefeller Foundation to cover most of the transaction costs
Engaged with investment banks to find a top tier placement agent and a trustee for the blue bond issuance andbrought in banks to help manage the process and payments
Connected Seychelles with investors who purchased the blue bond issue

Case Study:
https://thedocs.worldbank.org/en/doc/242151559930961454-0340022019/original/CasestudyBlueBondSeychellesfinal6.7.2019.pdf

17Sustainable Finance and Environmental, Social, and Governance (ESG) AdvisoryIntellectual Leadership
The World Bank leads and shapes the debate on sustainablefinance with market actors by developing guides and guidelinesyGreen Bonds Proceeds Management and Reporting Guidey

Developing a National Green Taxonomy: A World Bank Guidey

Engaging on ESG Issues with Investors: A Guide for Sovereign
Debt IssuersyHow to Issue a Sovereign Green Bond: A Guide for Debt
Management Officesy

Incorporating Environmental, Social and GovernanceFactors into Fixed Income Investment: ReportySovereign, Green, Social and Sustainability Bonds:
Unlocking the Potential for Emerging Markets andDeveloping Economies

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Knowledge Sharing
The World Bank provides a platform for interested parties
to advance the dialog on sustainable finance by organizing
roundtable discussions, seminars, conferences andworkshops.
yRoundtable discussions topromote dialogue on ESG
between investors andissuers

yHigh level workshops
and seminars to shareknowledge about thevalue and process
for issuing green andsustainable bonds

yHigh level workshops andseminars to share lessons
learnt from the issuanceof sustainable bonds

Photo Credits (Left-Right): © Joshua Chee Yan Foong/World Bank; © Franz Mahr/World Bank; © Ria Henares Garrett/World Bank

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Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory

Miguel Navarro-Martin
Manager, Financial Products & Client Solutions
Capital Markets & Investments
World Bank Treasury
mnavarromartin@worldbank.org
Farah Hussain
Lead, Sustainable Finance and ESG Advisory
Capital Markets & Investments
World Bank Treasury
fhussain@worldbank.org

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