Sustainable Finance and Environmental,
Social, and Governance (ESG) Advisory
Innovative Sustainable Financing Solutions for Emerging Markets
April 2023
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 2
Finance is Key for Sustainable Growth
We help our clients to
Understand Direct finance Develope
global and local towards sustainable
sustainability environmental financial
issues, risks and and sustainable markets
solutions priorities
Promote
Facilitate integrity of the Promote
sustainable market and sustainable
financial foster better investment
solutions practices
For more information: www.worldbank.org/sustainablefinanceadvisory
Cover Page Photo Credits (Left-Right): © nazimpressions/iStockphoto; © Milos-Muller/iStockphoto; © Chhor Sokunthea/World Bank
Sustainable Finance and
Advisory
Environmental, Social, and Governance (ESG) Advisory 3
Why Choose the World Bank?
The World Bank participates
in national, regional and
y The World Bank issued the first green bond in 2008
global initiatives
y Created the model for today’s labeled bond market
and set the blueprint for sustainability across capital
markets
y Raised over US$13 billion through 158 green bond
transactions in 21 currencies
y Issued record-breaking US$8 billion
sustainability development bond for health
and COVID-19 response in member countries
y Processes used by the World Bank are
recognized as international best practice
y Works with multilaterals and markets actors
to set standards and guidelines for issuers and
investors to promote the integrity of the market
y Created the “green sukuk” and blue bond products
y Facilitated groundbreaking emerging market
sustainable finance transactions
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 4
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 Sustainability Bonds
Green and blue bonds raise financing for Social bonds support the Sustainability bonds
development with clear environmental benefits financing of the projects support the financing of a
on land and at sea, e.g., power generation from that benefit under-served green and social projects.
renewables, infrastructure that increases energy populations with limited access
efficiency, and sustainable fishing economies. to essential services such as
basic infrastructure or finance.
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Why Issue Labeled Bonds?
Labeled bonds can help issuers expand and diversify their
investor base. These bonds are in huge demand from
investors that place sustainability at the center of their
investment approach, i.e., invest specifically with the
intention of generating positive, measurable social and
environmental impact alongside a financial return.
These investors include fund managers, pension funds
and insurance companies, family offices, banks,
financial institutions, religious institutions, as well
individual investors. The Global Impact Investing
Network (GIIN) estimates the size of the impact
investing market to be more than US$1 trillion.
Asset owners such as pension funds are also
recognizing that ESG issues can influence
investment risk and return. They are increasingly
Photo Credit: © Sasiistock/iStockphoto
integrating these considerations into their
investment analysis. Often green, social and
sustainability bond issuers receive higher ESG
scores from these investors. Investors may use
these bonds to hedge relevant risks in their portfolio.
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Build Sustainable Financial Markets
Technical assistance for regulators and policymakers
y Help financial regulators understand the financial impact of sustainability challenges such as climate change,
environmental degradation, loss of biodiversity, pandemics, social issues, etc.
y Help develop regulations, guidelines and incentives to catalyze the development of sustainable capital markets
y Promote the issuance of labeled bonds
Photo Credit: © Liang Qiang/World Bank
y Build the capacity of local certifiers
y Develop green taxonomies to provide clarity to issuers
y Develop capacity of issuers to report on ESG risks
y Build the capacity of institutional investors to set up ESG and impact investing strategies and frameworks
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 7
Promote Sustainable Solutions
Technical assistance for issuers of Financial Solutions
Pre-Issuance Post-Issuance
y Share international best practices y Clarify processes and help issuers understand how to use
and requirements the standardized impact reporting template in line with
y Develop action plan/roadmap global standards
y Develop the framework y Explain information required, including baselines and
Photo Credit: © havana77/iStockphoto
y Identify eligible categories/projects indicators to measure the impact of selected green projects
based on national priorities y Recommend work process flows and timeline for reporting
y Facilitate the delivery of second in line with the green bond framework
opinions/verifications/certification y Prepare terms of reference for an auditor to provide the
y Advise on reporting commitment annual assurance report
and communication strategy y Review and provide feedback on drafts
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Advance Best Practices
Technical assistance for certifiers or second opinion providers
y Deliver training to domestic environmental, climate-related and sustainability research institutions or
consultancies
y Share trends and perspectives on climate science, physical and transition climate risks, financial risks and
scenarios
y Explain different forms of external review, and examine different approaches and methodologies, respective
Photo Credit: © Lanski/iStockphoto
benefits and disadvantages, potential conflicts of interest, dissemination, and costs
y Clarify second opinion structure, content, required documents and information/data, and assessment process
y Review and provide feedback on methodologies
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Promote Sustainable Investment
Technical assistance for institutional investors
y Deliver training and capacity building on ESG and responsible investment (RI) trends, approaches and
strategies and identify institutional investors interested in integrating ESG in investment processes
Photo Credit: © AvigatorPhotographer/iStockphoto
y Support the targeted investors by
– reviewing identified institutional investor’s investment objectives, policies and strategies and deliver an
overview 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 processes
organizational setup, governance and operational processes
choosing ESG approaches to support investment objectives and mission alignment
stewardship, responsible ownership and engagement
reporting and disclosure
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 10
Malaysia
In July 2017, Tadau Energy
Sdn Bhd issued the world’s
first green sukuk to raise
MYR 250 million (US$59
million) to finance a 50MW
solar power plant in
Malaysia.
Large institutional Local rating Republic of
investors agencies Indonesia issued
incorporated ESG established a a sovereign green
in their strategic methodology bond (US$1.25
asset allocation. for green sukuk billion, February
rating. 2018).
Photo Credit: © WangAnQi/iStockphoto
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 11
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 Support
y Identified opportunity to leverage Malaysia’s role in Islamic finance to combine the “sukuk” and the green bond
y Undertook diagnostic assessment for feasibility
y Led awareness campaign with line ministries; financial intermediaries; banks; institutional investors; rating
agencies; and potential issuers
y Provided capacity building for local green bond/sukuk certifiers
y Provided technical assistance to issuers for sukuk transactions
y Supported the development of ASEAN Green and Sustainable Bond Standards
Case Study: https://thedocs.worldbank.org/en/doc/21c2fb7dfb189f10a0503004757b03f4-0340012022/original/Case-Study-Malaysia-
Green-Sukuk-Market-Development.pdf
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 12
Fiji
In November 2017, Fiji issued a
sovereign green bond.
The bond raised FJD 100 million, As COP 23 President, Fiji used the
approximately USD (eq.) 50 million, bond to bring global awareness to
to fund climate change adaptation challenges of small island nations
and mitigation projects. to the impacts of climate change.
Photo Credit: © sorincolac/iStockphoto
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 13
Fiji
First emerging market sovereign green bond in the world
World Bank Support
y Provided technical assistance to structure the bond from start to finish within a tight time frame
y Convened and facilitated a steering committee comprising senior government decision makers with clear lines of
authority on preparing the green bond policy framework, prospectus, eligible expenditure definitions, and ongoing
monitoring and reporting
y Developed the green bond framework, hired the external review provider, and helped Fiji navigate the independent
review process
y Identified eligible projects, focused mainly on building resilience against the impacts of climate change
y Helped raise the visibility of the bond in the global platform through a sustained communication strategy
y Provided technical assistance to develop the post-issuance green bond impact reports
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 14
Indonesia
In December 2017, In July 2018, PT Sarana In January 2019,
Indonesia Financial Multi Infrastruktur (PT SMI), Ministry of Finance
Services Authority a state-owned enterprise, Indonesia published
(FSA) issued green issued the first corporate its first green sukuk
bond regulations. green bond in Indonesia. impact report.
Photo Credit: © Velvetfish/iStockphoto
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 15
Indonesia
Developing a domestic green bond market
World Bank Support
y Delivered workshops to raise awareness of sustainability issues, standards, policies and implementation
requirements
y Participated in technical meetings with Ministry of Finance, financial intermediaries, banks, institutional
investors, rating agencies, and potential issuers
y Supported the development of Indonesia green bond regulations
y Provided 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 report
y Facilitated 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-Supporting-
Indonesia-s-Efforts-to-Fight-Climate-Change-Case-Study.pdf
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 16
Seychelles
The World Bank structured
a new blue bond market
instrument to help the
The proceeds will be used to Seychelles government mobilize
In October 2018, the Seychelles help finance the island nation’s private sector capital into
government launched the transition to sustainable sustainable fishing, marine
world’s first sovereign fisheries and the protection of spatial planning aquaculture
blue bond. marine areas. and biodiversity.
Photo Credit: © Tunatura/iStockphoto
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 17
Seychelles
First blue bond in the world
World Bank Support
y Structured a blue bond with a custom ten-year maturity schedule that aligned with project funding needs and
Seychelles’ liability profile
y 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
y 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
y Secured a donation from Rockefeller Foundation to cover most of the transaction costs
y Engaged with investment banks to find a top tier placement agent and a trustee for the blue bond issuance and
brought in banks to help manage the process and payments
y 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
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Intellectual Leadership
The World Bank leads and shapes the debate on sustainable
finance with market actors by developing guides and guidelines
y Green Bonds Proceeds Management and Reporting Guide
y Developing a National Green Taxonomy: A World Bank Guide
y Engaging on ESG Issues with Investors: A Guide for Sovereign
Debt Issuers
y How to Issue a Sovereign Green Bond: A Guide for Debt
Management Offices
y Incorporating Environmental, Social and Governance
Factors into Fixed Income Investment: Report
y Sovereign, Green, Social and Sustainability Bonds:
Unlocking the Potential for Emerging Markets and
Developing 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 and
workshops.
y Roundtable discussions to
promote dialogue on ESG
between investors and
issuers
y High level workshops
and seminars to share
knowledge about the
value and process
for issuing green and
sustainable bonds
y High level workshops and
seminars to share lessons
learnt from the issuance
of sustainable bonds
Photo Credits (Left-Right): © Joshua Chee Yan Foong/World Bank; © Franz Mahr/World Bank; © Ria Henares Garrett/World Bank
Sustainable Finance and Environmental, Social, and Governance (ESG) Advisory 20
Miguel Navarro-Martin
Manager, Financial Products & Client Solutions
Capital Markets & Investments
World Bank Treasury
[email protected]
Farah Hussain
Lead, Sustainable Finance and ESG Advisory
Capital Markets & Investments
World Bank Treasury
[email protected]
