HSBC, in partnership with the World Banks’s sister organisation the IFC, has raised £386m ($474m) to support investments into climate mitigation across developing countries and markets.
HSBC Global Asset Management and IFC, a member of the World Bank Group, have each committed £61m ($75m) to the HSBC Real Economy Green Investment Opportunity GEM Bond Fund (REGIO), acting as anchor investors for the fund. Seven other private investors have joined the initiative, bringing the fund’s total to $474m at the third closing.
The two investors expect others to commit to the fund, which focuses on attracting investments in developing economies, later this year.
HSBC’s group chief executive Noel Quinn said: “At HSBC we have a long history of connecting markets with opportunities and we recognise that economic growth must be sustainable over the long term. Investors want more socially and environmentally responsible investment opportunities and funds such as REGIO are a way for them to achieve their sustainable objectives.”
REGIO will access both public and private capital to fund climate mitigation projects in markets where access to capital is limited, especially during the market turmoil caused by Covid-19.
The green bond will be supported by IFC, which is the largest global development institution focused on the private sector in emerging markets.
IFC’s chief executive Philippe Le Houérou said: “The success of this fundraising is proof that investors remain committed to fighting climate change, even at this time of global pandemic. IFC is proud to have helped shape climate finance capital markets by issuing and investing in green bonds and establishing market standards. Innovative solutions like this fund create tangible action on the ground at a time of great urgency.”
The issuance of Environmental, Social, and Governance (ESG) bonds has increased by 272% year-on-year, as investors and insurance firms take proactive steps to respond to the coronavirus pandemic.
According to research from the Morgan Stanley Foundation, the issuance of green ESG bonds in April 2020 was 272% higher than the same month the year prior, with the total issuance figure sitting at $48.5bn.
Global green bond issuance last year reached an all-time high in terms of both individual bonds issued and collective value issued, global law firm Linklaters concluded earlier this year. Based on data from Thompson Reuters, 479 green bonds were issued by companies, governments and financial organisations in 2019, up from 382 in 2018.
Despite the REGIO, HSBC has been in hot water with environmental NGOs, which have named the bank as the second-highest fossil fuel financer in Europe, behind Barclays. The bank announced in April 2018 that it would “stop financing new coal-fired power in all countries around the world”, excluding Bangladesh, Indonesia and Vietnam.
HSBC currently offers a range of green finance services aimed at helping businesses of all sizes strengthen sustainability initiatives. Green Loans services have been launched following a in 2018 and have been extended to SMEs wanting to secure loans for sustainability initiatives. The minimum green loan starts at £300,000 and HSBC UK has already provided green loans totalling £600m as part of the pilot.