Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Corporate Sustainable Bonds in Emerging Markets AN ANALYSIS OF STATUS AND POTENTIAL Public Disclosure Authorized IFC – a sister organization of the World Bank and member of the World Bank Group – is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2020, we invested $22 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. 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Photo: Shutterstock Corporate Sustainable Bonds in Emerging Markets AN ANALYSIS OF STATUS AND POTENTIAL Contents KEY TAKEAWAYS ............................................................................viii SECTION 1: INTRODUCTION ...............................................................1 SECTION 2: GLOBAL AND EM BOND MARKETS OVERVIEW ................... 2 SECTION 3: EM GREEN AND SUSTAINABILITY BOND MARKETS IN THE GLOBAL CONTEXT ................................................................. 4 SECTION 4: TARGET REGIONS: ECA, MENA, AND SSA BOND MARKETS ........................................................................................ 7 The EM Bond Market in Target Regions ..................................................................................7 Real Sector Bond Market ............................................................................................................... 9 Green and Sustainability Bond Market ................................................................................... 12 SECTION 5: TARGET COUNTRIES: TAF COUNTRY SELECTION ............... 13 SECTION 6: CONCLUSION ................................................................18 ANNEX .......................................................................................... 20 Annex 1: Data Sources and Methodology ............................................................................20 Annex 2: Definitions .......................................................................................................................20 Annex 3: The Scope of Target Region Bond Market in ECA, MENA, and SSA ................................................................................................................................................ 22 Annex 4: All Criteria for Target Country Selection ...........................................................24 Annex 5: List of Identified Real Sector Corporate Issuers in Target EM Regions ........................................................................................................................................ 28 vi Corporate Sustainable Bonds in Emerging Markets: An Analysis of Status and Potential Figures Figure 2.1: Global and EM Bond Market Outstanding Value ........................................................................... 3 Figure 3.1: Global and EM Green and Sustainability Bond Market Development .................................. 5 Figure 3.2: EM Sustainability Bond Market Cumulative Issuance (2016-2019) ........................................6 Figure 4.1: Target Region Bond Market Size ...........................................................................................................8 Figure 4.2: Target Region (ECA, MENA, and SSA) Bond Market Characteristics ....................................9 Figure 4.3: Real Sector Corporate Bond Issuance in Target Regions (ECA, MENA, and SSA) ........10 Figure 4.4: Target Region (ECA, MENA, and SSA) Real Sector Bond Market Characteristics ......... 11 Figure 4.5: Target Region (ECA, MENA, and SSA) Green and Sustainability Bond Market ...............12 Figure 5.1: Target Countries and Criteria for Financial Market Development ....................................... 14 Figure 5.2: Market-Oriented Criteria for Selecting Target EM Countries .................................................15 Figure 5.3: Real Sector Cumulative Bond Issuance between 2015 and 2019 ...........................................17 Abbreviations and Acronyms Abbreviations and Acronyms BIS Bank for International Settlements CEMBI JP Morgan Emerging Market Corporate Bond Index DM Developed market EM Emerging market HGAM HSBC Global Asset Management IFC International Finance Corporation IMF International Monetary Fund REGIO Real Economy Green Investment Opportunity Fund SDGs Sustainable Development Goals TAF Technical Assistance Facility WBG World Bank Group WBG and IFC Regions EAP East Asia and Pacific ECA Europe and Central Asia LAC Latin America and the Caribbean MENA Middle East and North Africa SA South Asia SSA Sub-Saharan Africa vii Key Takeaways → Emerging market green bond issuance reached $52.2 billion in annual issuance volume in 2019; and between 2015 and 2019, on average more than 70 percent of annual issuance volume came from the corporate sector. → The emerging market sustainability bond market remains nascent, with a cumulative issuance of $7.7 billion between 2016 and 2019. However, it continues to grow and expand in terms of issuing country, currency, and issuer type. → The fast-paced growth of the emerging market green bond market has remained uneven across different regions, with the East Asia Pacific – dominated by China – and Latin America and the Caribbean regions leading the way. In addition, government and financial institutions in developing countries have led the way in issuing green bonds, whereas