HSBC Global Asset Management and the International Finance Corporation (IFC) have raised $324m ($291m) from European occupational pension funds and insurance companies for a bond fund aimed at supporting climate risk-mitigation investments in emerging markets.
HSBC Group and IFC have each committed $75m to the fund – the HSBC Real Economy Green Investment Opportunity GEB Bond Fund, dubbed REGIO – and today said that seven private investors had joined in for the latest close of the fund, taking the total so far to $474m, with others expected to commit later this year.
An HSBC spokesman said the private investors were a mix of European occupational pension funds and insurance companies.
The fund will target green and sustainable bonds from so-called real economy issuers in emerging markets with a view to increasing access to climate finance and promoting the development of sustainability-oriented capital markets by broadening the range of issuers.
This is to be achieved by the combination of the fund’s investment activities, supporting guidelines and eligibility criteria, and technical assistance provided by the IFC to bolster the supply of green bonds from real economy borrowers.
REGIO has some similarities with an emerging market green bond fund launched by Amundi and IFC in 2017, but theirs is aimed at green bonds issued by financial institutions rather than companies operating in sectors such as manufacturing, agriculture, or services.
HSBC and IFC say their fund is the first green bond fund focused on the emerging market real economy.
“To achieve a close of this size in the current market environment proves the importance that institutional investors place on impact investing in emerging markets”
Nicolas Moreau, global CEO, HSBC Global Asset Management
Nicolas Moreau, global CEO, HSBC Global Asset Management, said: “We are at a tipping point in terms of climate change and investing in the real economy in emerging markets is critical to achieving the global transition to a lower carbon economy.
“To achieve a close of this size in the current market environment proves the importance that institutional investors place on impact investing in emerging markets.
“We hope that the green impact investment framework behind REGIO and its commitment to sustainable development is something that will be taken up by the wider industry.”
The spokesman told IPE the most recent commitment to the fund was made on 6 May.
Philippe Le Houérou, CEO of IFC, said: “The success of this fundraising is proof that investors remain committed to fighting climate change, even at this time of global pandemic.
“Innovative solutions like this fund create tangible action on the ground at a time of great urgency.”
Asked about there being any signs investors were put off committing to the fund by concerns about the impact of the coronavirus on emerging market countries, the HSBC spokesman said: “This close is a very positive statement about the willingness of sustainably-minded, long-term investors, to commit to investing in emerging markets, despite the near term volatility.”
Financials drive EM green bond issuance
According to a recent report from Amundi and the IFC, emerging market green bond issuance increased by 21% in 2019 to $52bn, bringing the overall size of the market to $168bn.
Although emerging market bond growth continued to be led by China, other emerging markets drove the overall growth in 2019 with $18bn of issuance, nearly triple that in 2018, according to Amundi and the IFC.
Excluding China, the leading issuers were India, Chile, Poland, the Philippines, the United Arab Emirates, and Brazil, they said.
Financial institutions remain the largest issuing sector in emerging markets, driving 59% of issues compared with 19% in developed markets, followed by non-financial corporates at 35%, sovereigns at 12%, government agencies at 5%, and municipals at 0.1%.