_Innovative Debt Offerings by Development Banks to Support Country Programs_ 4.4 **Since their inception, multilateral and national development banks have leveraged private funds on the world’s financial markets to help finance country level development efforts.** Between 1995 and 2008, these development banks raised a total of US$1.35 trillion in proceeds on the capital markets, of which IBRD and IFC accounted for approximately US$235.4 billion.<sup>24</sup> World Bank bonds and debt products, issued by IBRD, provide investors with the reassurance of an AAA credit rating, a wide choice of products, and strong secondary market performance for liquid World Bank benchmark bonds. It customizes its debt offerings to meet investors’ specific asset and liability needs.

4.5 **Some donors, such as Germany and France, have raised funds on their domestic capital markets, through their national development banks, to fund bilateral aid programs.** Both countries make substantial use of loans as part of their ODA. For instance, Kreditanstalt fuer Wiederaufbau (KfW) Entwicklungsbank sought to “expand the scope of development cooperation by combining federal budget and capital market funds.” In 2007 alone, contributions of KfW’s bonds and own funds reached 20 percent of Germany’s ODA commitments in 2007.

# **<u>Box 4.1: World Bank Targets Sustainable Investing with Climate-Related Themes</u>**

**<u>World Bank Eco notes</u>** (total USDeq 390 million, in three transactions: September and December 2007, and February 2008) are six-year euro-denominated notes with a coupon of 3 percent, plus a potential additional return linked to an ABN-Amro index of “green” equities. The notes raised funds for IBRD at attractive rates, while raising awareness for funding “green” activities, at the same time that the hedging activities of IBRD’s swap counterparties also supported capital available to companies in the index. ABNAmro and Fortis Bank distributed the notes in the Netherlands, Switzerland, and Belgium, primarily to retail investors. Proceeds were used in the general operations of IBRD.

**<u>World Bank Cool bonds</u>** (total USDeq 31.5 million to-date in two transactions, June and September 2008) are five-year, USD-denominated notes paying a coupon of 3 percent for an initial period, and a variable coupon amount for the remaining maturity of the note tied CERs generated by specified greenhouse gas (GHG)-reducing projects in China and Malaysia. Hedging exposure to CERs by IBRD counterparties contributes to expansion of this market as well. Daiwa Securities and Mitsubishi UFJ Securities distributed the notes to Japanese investors. Proceeds were used in the general operations of IBRD.

**<u>World Bank Green bonds</u>** (USDeq 350 million, October 2008) are 6-year, Swedish kronor notes paying investors a 3.5 percent annual interest rate and raising funds at a spread of 0.25 percent over comparablematurity Swedish government paper. They enabled IBRD to raise funds at an attractive cost despite the challenging market environment. Skandinaviska Enskilda Banken (SEB) underwrote the issue and distributed mainly to Scandinavian institutional investors, who were attracted to the investment because the proceeds would be credited to a special account at IBRD that supports World Bank loan disbursements on qualifying climate change mitigation and adaptation projects.

_Source:_ IBRD.

# 4.6 **Innovative debt offerings by MDBs target** **_sustainable investing_ (SI)** **_._**<sup>25</sup> **A leader in SI bonds, IBRD has raised a total of US$2.15 billion through bonds that tap new sources by**

> 24 Includes IFFIm.

> 25 “Sustainable investing” (SI) describes an investing approach that is becoming increasingly popular, especially among retail investors. It integrates social and environmental concerns into investment decisions.

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