Stockholm (NordSIP) – Biodiversity has been one of the main sustainable themes of 2024. Bond markets has been an important avenue through which the topic has risen in prominence. In August, the World Bank (WB), issued a 9-year US$225 million, Amazon Reforestation-Linked Bond on August 13th, via the International Bank for Reconstruction and Development (IBRD). At the time the bond attracted investments from Velliv.
Now, another member of the WB group, the International Finance Corporation (IFC) has issued a SEK2 billion green bond to promote biodiversity finance in emerging markets. The bond was tantamount to a private placement with all the securities being bought by Sweden’s public pension fund AP7.
“Climate change has long overshadowed biodiversity, but it has received greater global attention in recent years. It is a focus issue for AP7 where we had the opportunity to contribute to the development of the TNFD framework. In connection with the IFC expanding its framework for green bonds, the IFC has made it possible for us to contribute also through financing,” says Flora Gaber, Responsible ESG analysis AP7.
The investment is part of AP7’s goal that green bonds should amount to 50% of the capital in AP7 Interest Fund. According to the Swedish public pension company, AP7’s Fixed Income Fund amounts to over SEK 150 billion. Green bonds make up just over 50%, corresponding to approximately SEK 75 billion, of the fund’s managed capital.
“AP7 greatly appreciates the opportunities that the World Bank’s green bonds bring. It enables AP7 to be involved in financing environmental projects in the world where the need and climate benefits are greatest, but where the risks were previously too great to lend money to projects,” says Ulrika Lindén, Senior portfolio manager AP7.
The IFC has published a guide on biodiversity financing and a report on key figures for measuring the impact of projects on nature. IFC’s approach is compatible with TNFD’s framework for managing and reporting nature-related risks according to AP7. Examples of projects to which the bond will contribute are BTG Pactual Timberland Investment Group’s strategy for restoring forests in Latin America and BBVA Colombia’s biodiversity bond, which aims to renew original forests in Colombia.
“This issuance marks IFC’s second green bond dedicated to biodiversity, reinforcing our leadership in developing this critical market,” said Tom Ceusters, IFC Director for Treasury Capital Markets and Investments. “By mobilizing private capital for biodiversity projects, we are demonstrating how financial innovation can address sustainability challenges while driving economic growth.”
The bond was priced at par and pays a 2.305% annual coupon. The transaction underwritten by Skandinaviska Enskilda Banken AB (SEB).
“COP16 highlighted the need for collaboration with the private sector to raise awareness and create opportunities to deliver on the Global Biodiversity Framework. This transaction is an example of how to put this into practice and deliver positive development impact,” said Ben Powell, Head of Sustainability, Fixed Income at SEB.
