SRI Markets. Our Experience in the THE WORLD BANK. GEORGE RICHARDSON Head of Capital Markets

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1 THE WORLD BANK Our Experience in the SRI Markets GEORGE RICHARDSON Head of Capital Markets THE WORLD BANK TREASURY 1225 CONNECTICUT AVE NW, WASHINGTON, DC USA

2 The World Bank in the Capital Markets Track Record Issuing debt since 1947; triple-a rating for over 50 years. Safety Strong balance sheet as result of prudent financial policies. Funds only extended to sovereigns and for sovereignguaranteed projects. Loans have always been repaid; no loan write off or capital call. Diversified 188 sovereign shareholders & recognized preferred creditor status. Products Demand-driven funding; offer a wide range of instruments to fulfill various needs of diverse investor groups. Development Mandate Provides financial solutions for sustainable and socially equitable economic development to end poverty and improve standards of living. 2

3 World Bank FUNDING VOLUMES Funding volume grows in response to global financial crises and the resulting increase in lending activity, and/or refinancing. Annual Funding Volumes Fiscal years , US$ billions * Note: World Bank fiscal years begin on July 1 st and end on June 30 th *YTD 3

4 SUSTAINABLE INVESTMENT FOCUS Investors are incorporating environmental, social and governance criteria in their investment decisions. The World Bank partners with investors and financial intermediaries to design sustainable investmentfocused products. 4

5 IFFIm s Treasury Manager The World Bank The IFFIm Board appointed the World Bank as IFFIm s Treasury Manager to manage IFFIm s financial operations, based on the fact that the World Bank has the following: Experience More than 60 years of capital markets experience Established policies Conservative financial management Donor Payment Tracking / Cash Management Execution of IFFIm Funding Program Liquidity Management Services Accounting and Reporting Asset and Liability Management 1 Management of Gearing Ratio 1 The World Bank is IFFIm s hedging counterparty. 5

6 IFFIm s Treasury Manager Government donors long-term financial pledges $ $ $ Vaccination Programmes Bonds $ A$ Capital Markets Investors

7 World Bank GREEN BONDS World Bank Green Bonds support mitigation and adaptation projects selected by World Bank climate change and sector specialists. The investment product was developed in partnership with SEB for investors concerned about the impacts of climate change. Investors benefit from AAA/Aaa World Bank (IBRD) rating and World Bank s due diligence for projects. Investors select financial terms like currency, size and maturity. World Bank Green Bonds help mobilize funds from the private sector for climate change projects in member countries. World Bank Green Bonds act as catalyst for larger green bond market. Since the inaugural issue in 2008, USD 4 billion has been raised with around 60 World Bank Green Bonds in 17 different currencies. 7

8 Overview of the SRI Market The SRI Market Accelerating During 2013 EIB s first ever Green Bond World Bank launches first Green Bond IFFIm issues first GBP retail ISA bond AfDB launches Clean Energy Bond sold into Japan IFFIm issues first A$ SRI Bond AfDB launches its inaugural USD Green Bond EIB launches the first EUR vanilla benchmark Green Bond KBN launches their inaugural Green Bond EDF prices 1.4bn 8y corporate Green Bond City of Gothenburg first city to issue a Green Bond Jan -13 Feb Mar Apr May Jun Jul Aug Sep Oct Nov IFFIm issues first focused SRI Bond ADB sells its first Water Bond in Apr followed by a Clean Energy Bond in Sep-2010 IFC issues its Green Bond World Bank launches the first retail structured Green Bond NIB issues first Green Bond from Nordic region Kexim launches the first non-supra USD Green Bond IFFIm issues its first USD FRN IFC launches the first $1bn USD benchmark size Green Bond State of Massachusetts is first US state to issue a Green Bond EBRD issues a 250m Green Bond FMO prices debut Euro Sustainability Bond BAC prices $500m first FIG Green Bond 8

9 Source: The full results of this survey are available to Callan clients at: 9

10 Source: The full results of this survey are available to Callan clients at: 10

11 Source: The full results of this survey are available to Callan clients at: 11

12 More Information Web site: Bloomberg: IBRD <Go> 4 <Go> 12

13 Annex A Details on World Bank Green Bond Program 13

14 The Green Bond Story The Green Bond Market Investors Intermediaries Issuer Green Projects in borrowing member countries Wind Power Solar Power Solution Technologies to Reduce GHG Emissions Waste Management 1. World Bank Project Cycle & Safeguards 2. World Bank is AAA/Aaa 3. Bond Transferable (Secondary Market) Maturity Selection Flexible 4. Return 5. Currency Flexible Transport Efficiency Reforestation Energy Efficiency Sustainable Forest Management

15 Types of Projects Supported by Green Bonds Mitigation Solar and wind installations Funding for technologies that result in significant reductions in GHG emissions Rehabilitation of power plants and transmission facilities to reduce GHG emissions Greater efficiency in transportation, including fuel switching and mass transport Waste management (methane emission) Energy efficient building construction Reforestation and avoided deforestation Adaptation Protection against extreme events, such as floods and droughts (including reforestation and watershed management) Food security improvement and stress-resilient crops (to slow down deforestation) Sustainable forest management and avoided deforestation 15

16 World Bank Green Bond Benefits Investors have high quality fixed income product that meets their financial needs (risk/return) and supports climate actions Diversify investor base for World Bank funding Create awareness about: the World Bank climate efforts in member countries about climate change and the need for private sector financing and opportunities Mobilize funds from the private sector for climate change projects in member countries Catalyst for bigger green bond market for global efforts 16

17 World Bank Green Bond Project Cycle 17

18 This image cannot currently be displayed. World Bank Green Bond Decision Process Strategic Framework Screening the WB Project Portfolio Green Bond Eligible Projects Project Disbursements Allocation of Green Bond Funds Project ID & Preparation Eligible Projects Phase 1 Phase 2 Phase 3 18

19 World Bank Green Bond Location of Eligible Projects Europe & Central Asia Belarus Montenegro Latin America & Caribbean Brazil Colombia Dominican Republic Serbia Turkey Ukraine South Asia India East Asia & Pacific China Indonesia Jamaica Mexico Peru Uruguay Middle East & North Africa Egypt Jordan Morocco Tunisia 19

20 Green Project Portfolio By Sector By Geography Note: Distribution by Sector: Agriculture 6%, Education 7%, Energy & Mining 8%, Finance 10%, Health & Social Services 12%, Industry & Trade 5%, Info & Communication 1%, Law & Public Administration 29%, Transportation 17%, Water & Sanitation 5% 20

21 World Bank GREEN BONDS List of Select Investors About 60 World Bank Green Bonds issued 17 different currencies USD 4 billion raised to-date Adlerbert Research Foundation AP2 - Second Swedish National Pension Fund AP3 - Third Swedish National Pension Fund BlackRock California State Treasurer s Office CalSTRS Calvert Investments Church of Sweden Deutsche Asset & Wealth Management Everence Financial FMO (Netherlands Development Finance Co.) LF Liv MISTRA New York Common Retirement Fund Nikko Asset Management Pax World Balanced Fund Rathbone Greenbank Sarasin SEB Ethos rantefund SEB Fonden SEB TryggLiv Skandia Liv Sonen State Street Global Advisors TIAA-CREF Trillium Asset Management, LLC UN Joint Staff Pension Fund WWF-Sweden (Världsnaturfonden) ZKB (Zürcher Kantonalbank) 21

22 Nikko AM World Bank Green Funds Nikko Asset Management set up two World Bank Green Funds for Japanese investors: SMBC Nikko World Bank Green Fund for European and Middle Eastern investors : Nikko AM World Bank Green Fund First funds set up to purchase World Bank green bonds; invest in broad range of currencies Offer Japanese, European, and Middle Eastern investors the opportunity to participate in diversified emerging market investment portfolios supporting World Bank-funded climate change projects Second time Nikko AM has worked together with the World Bank to create open-ended investment trusts (first time in 2007 with World Supporter Fund ) Donations by Nikko AM of a portion of the asset management fees (paid by investors) to IDA or entities with similar causes Initial launch: February 2010 Nikko Asset Management s diversified currency World Bank Green Bond funds won an ESG ( Environment, Social, Governance ) award in Europe in

23 23 Green Bond Communication Raising Awareness California, SEB and World Bank in the Media This is a landmark investment our first in global climate change solutions. Buying these green bonds makes financial sense for California. It strengthens our portfolio s diversity while adding a sound investment with a triple-a rated issuer. And it tells the world that when it comes to battling climate change, California is prepared to contribute not just its policies, but its money, too. California State Treasurer, Bill Lockyer (April 2009)

24 Next Steps and Challenges Continue to raise awareness of the need for and support from private sector financing to tackle the climate challenge to improve incentives Continue to work with investors and intermediaries to create financial products that support climate change programs and transparency around them to meet investor demand, and encourage complimentary products (e.g. green indices, funds, securitization) Continue to work with World Bank colleagues to further develop the internal infrastructure/capacity for more impact reporting and to create and deliver new investment products 24

25 Annex B Green Project Stories 25

26 CHINA Eco-Farming Project In China, millions of households rely on the agriculture sector for their livelihood and their future depends on improved management of their natural resources. The agricultural sector, however, has had widespread negative impacts on the environment because of inadequate farming techniques involving intensive and mechanized farming, misuse of land leading to desertification, over-use of synthetic pesticides and fertilizers, and the rapid growth in livestock production without adequate environmental controls. In addition, agriculture is responsible for 50% of China s methane emissions methane is a potent greenhouse gas. This project will improve the rural environment and living conditions in the project areas by promoting environmentally friendly and economically efficient farm production. In addition to cleaner, healthier farmyard environments, a key goal of the project is the reduction of greenhouse gas emissions through methane capture and combustion to generate energy and reduced burning of coal and firewood in the project areas. By the end of the project, CO2eq emissions in the project area are expected to be reduced by 800,000-1,000,000 tons per year. Project Summary Purpose Timeframe IBRD Financing Mitigation To reduce greenhouse gas emissions and deliver economic benefits through biogas systems in rural communities US$120 million Renewable energy (biogas), and reduced methane emissions and carbon dioxide from burning of coal and firewood Photo: Steve Harris/ World Bank For more information: Video:

27 MONTENEGRO Energy Efficiency in Public Buildings Montenegro currently must import about one-third of its power to feed its fast growing electricity demands and to make up for diminishing electricity production from the run-down plants and assets of the state-owned electricity company. In addition, a legacy of highly inefficient buildings and other facilities contribute to the drain on energy supplies in Montenegro. The World Bank funded Energy Efficiency Project is financing energy efficiency investments in the public sector, reducing energy consumption and improving environmental quality in public schools and health centers and promoting new energy efficiency and supply technologies in targeted public buildings across the country. Seven schools and four hospitals have been or will be retrofitted by the end of the project. This project is designed to be a model for energy efficiency activities in the rest of the country s public sector and private companies, ultimately having a much broader impact in reducing Montenegro s national greenhouse gas emissions. Project Summary Purpose Timeframe IBRD Financing Mitigation Improve energy efficiency in buildings used for health and education services US$9.4 million Energy efficiency in building Photo: Gennadiy Ratushenko / World Bank For more Information: 27

28 TUNISIA Second Water Sector Investment The project promotes efficiency improvements in irrigation schemes, more reliable water supply in rural areas and increased capacity to plan for current and future water management challenges, including climate change. Compared to other states in North Africa and the Middle East and in spite of severe scarcity and stress in its aquifers, Tunisia has been able to capture and use more than 80% of the usable water thanks to infrastructure investments and good management policies. Climate change will exacerbate the problems of scarcity and reliance on alreadystressed groundwater. The project promotes more efficient use of irrigation water and drinking water supply. By the end of the project about 25,000 hectares with irrigation and drainage systems are targeted to be rehabilitated and 10,000 households supplied with new drinking water service, among other outcomes. The project will also strengthen Tunisia's capacity to plan, monitor, and manage water in the future. Project Summary Purpose Timeframe IBRD Financing Adaptation To promote better water management US$30.6 million Improved efficiency in water use and increased capacity for watershed management Photo: Curt Carnemark/World Bank For more Information:

29 MOROCCO Solid Waste Development Policy Loan This program supported the government's reform program to enhance the governance of the solid waste sector through regulatory and institutional measures designed to establish a clear framework, eliminating overlap and/or gaps in the policymaking, regulatory, and operational structure; and improving the financial, environmental, and social sustainability of solid waste programs. The program includes the preparation of a programmatic Clean Development Mechanism Solid Waste activity which provides incentives for up to 11 municipalities to invest in landfill gas (methane) capture and utilization and to use carbon revenues to fund other managed landfills. Project Summary Purpose Timeframe IBRD Financing Mitigation To enhance the governance of the solid waste sector US$132.7 million Methane capture and related generation of renewable energy from solid waste Photo: Curt Carnemark/World Bank For more Information: 29

30 INDONESIA Geothermal Energy The project helps Indonesia increase power generation from renewable geothermal resources and reduce emissions of carbon dioxide that would otherwise be generated from its primarily fossil fuels-based power generation system. The project finances the confirmation of the geothermal resources and construction of a steam field system and 2 powers plants with a total capacity of 150 MW. The project is co-financed by the Clean Technology Fund and is expected to have transformational impact by reviving the development of geothermal energy, demonstrate an immediate potential for scale-up in geothermal projects, and help increase the confidence of other potential developers in the sector. In addition, the proposed fields are located on islands where there are currently considerable power supply shortages The project avoids the expansion of coal-fired power which is the predominant source of energy in Indonesia. The 150MW plant is estimated to avoid 1.1 million tons of CO2 per year or a lifetime emissions of 33 million tons of CO2 over 30 years. Project Summary Purpose Timeframe IBRD Financing Mitigation To increase power generation from renewable geothermal resources. US$150 million Renewable energy Photo: Curt Carnemark/World Bank For more Information: 30

31 MEXICO Integrated Energy Services The objective is to increase electricity access in the poorest southern states of Mexico targeting small communities in the range of 50 to 500 households. The project supports use of renewable energy, mainly photovoltaic (solar) systems and some wind generators together with the regulatory and technical support needed to develop a sustainable market for provision of energy services in remote rural areas. The goal of the project is to electrify over 47,000 rural households with renewable energy technology. Estimated carbon emission reductions from facilities installed by the project are about 250,000 tons of C0 2 eq per year over a 20 year lifetime of the systems. The long-term national impact of this project is expected to be larger due to replication effects throughout rural areas. Project Summary Purpose Timeframe IBRD Financing Mitigation To increase country s energy access using renewable energy US$15 million Renewable energy in rural areas Photo: Curt Carnemark/World Bank For more Information: 31

32 COLOMBIA Integrated Mass Transit System 75% of Colombia's population currently lives in cities and most of these urban residents rely entirely on the public transportation system. Yet, public transportation is the cause of many of these cities' problems, including serious traffic congestion, high incidences of accidents and crime, unhealthy air, and pollutants responsible for 62% of Colombia's carbon emissions. In 1998, the Colombian government began modernizing its transit system by developing a rapid bus system called Transmilenio in Bogota. Funded by the World Bank through the Bogota Urban Transport Project, the Transmilenio soon became an internationally recognized model for efficiency, improved speed, safety, and reduced urban traffic. The Colombian government and the World Bank are continuing to work together through the World Bank-funded Integrated Mass Transit Systems Second Additional Financing Project. It is designed replicated the success of Transmilenio, improve transport efficiency and accessibility, reduce fuel use per kilometer, as well as pollutant emissions. Old buses are being retired and replaced with new fuel efficient ones. The government continues to see this new transit system as an important contributor to climate change mitigation and is analyzing how further improvements to urban transport systems can contribute to reducing Colombia's carbon footprint. The Transmilenio program has been registered under the Clean Development Mechanism to deliver carbon credits. It is projected to result in reductions of 246,560 metric tons of CO2eq emissions per year. Project Summary Purpose Timeframe IBRD Financing Mitigation To reduce carbon emissions and transform public transportation efficiency US$300 million Lower carbon urban transport Photo: World Bank For more information: Video: 32

33 FOR MORE INFORMATION CONTACT US Internet treasury.worldbank.org Phone: Fax: Mailing Address Physical Address: 1818 H Street, NW MSN # C7-710 Washington, DC 20433, USA 1225 Connecticut Avenue, NW Washington, DC 20433, USA Pricing Sources Bloomberg IBRD <Govt> <Go> or IBRD <Go>; Discount Notes: WBDN <Go> 33

34 Acknowledgements and Disclaimers All photos, graphics and content World Bank This presentation has been prepared by the World Bank (International Bank for Reconstruction and Development, IBRD) for information purposes only, and the IBRD makes no representation, warranty or assurance of any kind, express or implied, as to the accuracy or completeness of any of the information contained herein. No Offer or Solicitation Regarding Securities. This presentation may include information relating to certain IBRD securities. Any such information is provided only for general informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy any IBRD securities. All information relating to securities should be read in conjunction with the appropriate prospectus and any applicable supplement and Final Terms thereto, including the description of the risks with respect to an investment in such securities, which may be substantial and include the loss of principal. The securities mentioned herein may not be eligible for sale in certain jurisdictions or to certain persons. Consult with Advisors. Investors considering purchasing an IBRD security should consult their own financial and legal advisors for information about such security, the risks and investment considerations arising from an investment in such security, the appropriate tools to analyze such investment, and the suitability of such investment to each investor's particular circumstances. No Guarantee as to Financial Results. IBRD does not warrant, guarantee or make any representation or warranties whatsoever, express or implied, or assumes any liability to investors regarding the financial results of the IBRD securities described herein. Each recipient of this presentation is deemed to acknowledge that this presentation is a proprietary document of IBRD and by receipt hereof agrees to treat it as confidential and not disclose it, or permit disclosure of it, to third parties without the prior written consent of the IBRD. All content (including, without limitation, the graphics, icons, and overall appearance of the presentation and its content) are the property of the IBRD. The IBRD does not waive any of its proprietary rights therein including, but not limited to, copyrights, trademarks and other intellectual property rights. 34