The EU and partner development finance institutions have signed a new Global Green Bond Initiative (GGBI) Fund designed to mobilise up to €20 billion of private capital for sustainable infrastructure in low and middle-income countries.
The fund is a public-private investment tool that will invest only in newly issued “green bonds” — debt sold to investors to fund projects with climate or environmental benefits — in partner countries, the European Commission informed on Friday.
It is expected to help unlock up to €3 billion in green bonds in partner countries and will prioritise first-time issuers such as governments, local authorities and businesses.
At least 20% of the fund’s investments will be directed to the world’s least developed countries, with support for bonds issued in both local currency and euros.
The Commission said the fund should attract up to €2 billion from European and international private investors, supported by about €1 billion in equity from public investors.
Who is backing the fund — and how it will work
Close to €800 million of the public equity is expected to come from a consortium of European development finance institutions led by the European Investment Bank, alongside the European Bank for Reconstruction and Development and development banks from Spain, Italy, the Netherlands, Germany and France, according to the Commission.
The Commission will provide credit protection to the consortium through the European Fund for Sustainable Development Plus (EFSD+) Guarantee. EFSD+ is an EU guarantee programme that reduces risk for investors backing projects outside the bloc.
Additional equity will come from the Government of Luxembourg through LuxDev, with further funding expected later from the Green Climate Fund once documentation is finalised.
The fund will be managed by Amundi, Europe’s largest asset manager.
