Bringing transparency to Latin America's green bond market

Inter-American Development Bank (IDB) President Mauricio Claver-Carone sets out the thinking behind the IDB Green Bond Transparency Platform

Environmental Finance: Why did the IDB Group decide to create the Green Bond Transparency Platform?

Mauricio Claver-CaroneMauricio Claver-Carone: The IDB is the largest regional and multilateral development bank in Latin America and the Caribbean. We believe that mobilising private sector resources will be key to advancing sustainable and equitable development. That is why we have supported issuers in the region with technical and financial assistance over the past six years to tap into thematic bonds whose proceeds can have a material impact on the region's social and economic development. Over that period, we have facilitated more than 30% of Latin American and Caribbean [LAC] issuance by volume.

There is a lot of investor appetite for green bonds, but we learned that many investors were still hesitant in tapping this market because it can be hard to assess whether the proceeds are being used in high-quality projects and generating the promised development impact. Green bond reporting is still heterogeneous and costly to analyse. We realised that we could help solve this challenge and we began working closely with market actors to understand their pain points. In response, we developed the Green Bond Transparency Platform [GBTP], an online platform open to any investor, to provide the necessary information and transparency, and helping to scale up sustainable finance.

This platform not only helps us further our mission of mobilising more private capital to promote development but also helps the IDB advance another key goal: promoting a green economic recovery, which is part of our Vision 2025 strategy. We have an ambitious climate target to provide $24 billion in green finance over the next four years. The GBTP complements this strategy because it allows us to attract more long-term domestic and international green private investment to the region on top of the lending that we directly provide to governments.

EF: How does the Platform work? How has the market responded, and what are your expectations going forward?

MCC: The GBTP is a free, public tool that supports the harmonisation and standardisation of green bond reporting. It offers quality granular, comparable and easy-to-access data, providing investors with a simple way to understand the use of proceeds and the environmental impact of their bonds. Because it is public and open to anyone, it provides issuers a platform to reinforce their commitments to transparency and increases visibility to get investors' attention. For issuers and investors entering the market, it provides detailed data on how the market has fared, thus making participation in the market easier.

The market response has been extremely positive; the numbers speak for themselves. Since its launch in April 2021, the GBTP has covered 70% of the LAC market by volume, with more than 120 green and sustainable bond issuances, worth a total of $23.7 billion, added voluntarily to the platform.

The GBTP uses blockchain technology, allowing issuers and external reviewers to upload and directly update information on the platform in a secure manner, following international best practice reporting standards. It is a simple way to provide investors concrete, reliable and comparable information to understand the impact of their investments and market trends.

The Platform accepts all taxonomies and principles, helping to inform ongoing regulatory discussions on taxonomies in our region and beyond, supporting harmonisation of approaches, such as is the case with the EU Green Bond Standard. This particularity, and tailor-made Excel templates designed to simplify uploading and data compilation by issues, makes the GBTP a replicable concept in other regions and for other type of bonds.

Going forward, we are in continuous contact with market players to further refine the platform. We will continue discussions with our supporters and other key market actors on data and methodology sharing, to continue enhancing reporting and harmonisation.

EF: Beyond the platform, how is the IDB Group mobilising private sector investments for climate action?

MCC: As mentioned, climate change is a central pillar of our Vision 2025 strategy. Prioritising smart investments today will be key to help us drive pandemic recovery efforts that will lead to more sustainable and equitable growth in our region. With that goal in mind, the IDB is redoubling its efforts to support countries' development and implementation of long-term decarbonisation and climate-resilient policies.

Last year, during COP26 in Glasgow, the IDB launched its plan of action to fully align its operations with the Paris Agreement by 2023 to help countries meet their own commitments. We have also announced that we plan to provide $24 billion to fund projects that address climate change.

Besides lending directly to governments, we work closely with the private sector, especially the financial system, to expand green and other types of financing that contribute to the achievement of the Sustainable Development Goals.

In the last five years, the IDB has developed and implemented a holistic technical and financial assistance toolkit to support public and private issuers access green and thematic bond markets. We have provided technical cooperation and loan support to over 40 national development banks, crowding in 400 commercial banks and 27 capital market operations, and leveraging more than $3 billion of IDB resources with an estimated $450 million in international climate finance support.

Additionally, from 2015 to 2020, the Bank also invested in 28 projects with nature-based solutions components with a total financing of $850 million.

As you can see, we are doing a lot and we plan to do more. As the region's leading development bank, our job is to help our member countries fight climate change and achieve a net-zero emission and climate-resilient future. It is a big task, but I am confident we are making good progress.

For more information, see: www.greenbondtransparency.com.