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CIF lines up a USD 500 bond issuance: The Climate Investment Fund (CIF) is readying an issuance of USD 500 mn of bonds to raise funds for investments in renewables and new climate tech in developing countries over the next five to ten years, Bloomberg reports. The issuance will be the first for the fund’s newly finalized issuance program the Capital Markets Mechanism (CCMM) that CIF hopes it would unlock up to USD 74 bn in finances.
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The rationale: By issuing bonds, the fund aims to leverage its capital and positive credit ratings to attract financing that could be then used to invest in emerging markets’ climate transition. “It’s about being smarter with our capital basis” and creating a “multiplier effect” for capital, CIF’s Tariye Gbadegesin told Bloomberg. This will enable the fund to go “from being a finite pool of donor funding” to an institution able to independently raise funds and take high risk investments at low cost, Gbadegesin added. It is a form of “financial engineering” that could provide a new model of financing for other multilateral funds and institutions, Bloomberg said.
SOUNDS SMART- CIF’s solid credit ratings and strong balance sheet would allow it to secure debt-based funding whose cost are lower than if emerging markets’ issued the bonds themselves. The move is seen as an innovative way to mobilize private sector investment in climate projects at a time in which wealthier nations has grown more hesitant to provide the needed additional financing for developing nations, Bloomberg reported.
This has been in the works: CIF listed its bond issuance program on the London Stock Exchange a few weeks ago, marking the final step in the design and structuring of the CCMM program first announced at COP26. The program aims to use the fund’s strong balance sheets to mobilize USD 75 bn from private capital to finance climate action in developing countries and from frontloading reflows from CIF’s Clean Technology Fund (CTF).
ADVISORS- The bond issuance is managed by BNP Paribas, HSBC, BofA Securities, and TD Securities. The World Bank and the African Development Bank will be acting as CIF’s trustees, and the latter is set to take over as the host of the fund’s Secretariat.
