French asset manager Amundi has teamed up with the International Finance Corporation to launch a green bond fund that will seek to raise $2 billion in what Amundi chairman Xavier Musca described as a “game changer”.
The fund will invest in green bonds issued in emerging markets in Africa, Asia and the Middle East as well as in Eastern Europe and Latin America. The vehicle will buy bonds specifically issued by banks, which Amundi and the IFC said lag behind in developing countries in issuing such instruments. The pair believe the fund will convince these banks that international demand for green bonds is robust.
The move comes a day after rating agency Moody’s cut its green bond forecast for the year to $120 billion from $200 billion, citing a decline in issuances by development banks and Chinese institutions. The revised total would still set a record for yearly green bond issuance, with $29.5 billion issued in the first quarter of 2017 alone.
The IFC has seeded what will be known as the Green Cornerstone Bond Fund with $325 million and Amundi is set to raise the remainder of the target from institutional investors across the world. The pair are aiming for the fund to be fully invested within seven years, although Amundi had not responded to requests for comment about what green bonds will be eligible for investment by press time.
“We’ve already identified dozens of banks in many developing countries around the world that could be interested in this fund,” said the IFC’s chief executive Philippe Le Houérou. “It’s a win-win—supporting the green economy and deepening access to international markets for emerging market issuers.”
The fund is set to be the first product in a new joint venture between Amundi and the IFC in supporting green finance in emerging markets.