A $12 Billion Climate Fund Just Wrapped Up Its First Bond Sale

The Climate Investment Funds Capital Markets Mechanism just tapped the capital markets for the first time, selling $500 million of bonds after receiving bids for more than six times that amount.

Author of the article:

Bloomberg News

Natasha White

Published Jan 15, 2025  •  2 minute read

Sheep graze in a field close to wind turbines in South Africa. Photographer: Dwayne Senior/Bloomberg Photo by Dwayne Senior /Bloomberg

(Bloomberg) — The Climate Investment Funds Capital Markets Mechanism just tapped the capital markets for the first time, selling $500 million of bonds after receiving bids for more than six times that amount.

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The issuance marks the first time a multilateral climate fund is turning to the capital markets, as cash-strapped developed nations balk at providing the funds needed to cut greenhouse gas emissions.

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The three-year dollar-denominated debt was priced at a spread of 36.6 basis points over the three-year US Treasury, according to a statement from the borrower. CIF, a $12 billion fund housed inside the World Bank, mandated BNP Paribas SA, Bank of America Corp., HSBC Holdings Plc and TD Securities to place the bond. Proceeds are earmarked to spur investment in clean technologies in developing economies over the next decade. 

The debt was over-subscribed, with investor bids for the sale surpassing $3 billion, the statement said.

The level of demand shows that “the investment case for clean energy and the transition remains sound,” Tariye Gbadegesin, CIF’s chief executive officer, said in an interview. “We are shifting into a phase right now where the opportunity and potential for the new economies around the energy transition is something of hope, excitement and prosperity.”

The commitment of banks and asset managers to cut emissions and finance the energy transition has been put to the test recently, as Wall Street’s biggest lenders quit the industry’s main climate alliance amid pressure from conservative politicians in the US. 

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CIF’s goal is to use financial engineering to help mobilize capital for poorer nations to combat climate change, Gbadegesin said. As a multilateral climate fund, CIF collects funds from rich nations and distributes them to developing countries. But the national contributions backing that model are falling far short of the amounts needed.

Multilaterals like CIF are under pressure to be “smarter” with their balance sheets, use capital markets more frequently and “leverage the financial system,” Gbadegesin said. CIF’s Capital Markets Mechanism will help the fund weather political or economic disruptions, she added. 

CCMM, which is rated Aa1 at Moody’s and AA+ at Fitch, will use loans issued by CIF’s $6 billion Clean Technology Fund, which are channeled through six multilateral development banks, to back the bond issuance. This week’s deal is the first in a series of planned bond sales, Gbadegesin said. 

“It’s very exciting for us to shift from being a finite pool of donor based funding to being a financial institution that is able to call down these different mechanisms,” she said.

Buyers of the bond include Nuveen, a unit of TIAA, and Mackenzie Investments. 

“We believe that jointly innovative and impactful opportunities such as the CCMM will continue to drive investor demand,” said Hadiza Djataou, portfolio manager at Mackenzie Investments.

—With assistance from Colin Keatinge and Paul Cohen.

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