World Bank Sells Record Green Bond Tied to ‘Ethical’ Companies

The World Bank sold $91 million of green bonds tied to an index of “ethical” companies, its largest offering of green bonds linked to an equity index and the first to be offered to individual investors.

The securities, which don’t pay a coupon, are linked to the performance of the Ethical Europe Equity Index, a group of European companies that have no involvement in weapons, gambling, tobacco or nuclear energy. The seven-year notes were sold in $100 denominations to individuals in Belgium and Luxembourg, according to a World Bank statement.

The Washington-based lender, founded in 1944 with the goal of aiding post-war reconstruction, issued its first debt securities in 1947 and has sold more than $7 billion of green bonds in 78 deals. Global issuance of the securities, which are used to fund environmentally friendly projects, rose to a record last year, with $32.6 billion sold through Oct. 24, according to data compiled by Bloomberg. Pension funds that are required to invest in sustainable assets have helped to fuel demand, according to Bloomberg New Energy Finance.

“We decided to test the retail market first in Belgium, where there is a lot of interest in structured products,” said Renaud Meary, Paris-based global head of structured equity at BNP Paribas SA, one of the banks that distributed the securities. “We think the green theme is very global and translatable, both for institutional and retail investors.”

The notes pay a return based on how well the Ethical Europe index performs over seven years, according to the release. If the performance is negative, investors receive only their principal back. If positive, they participate in the gains. The index, which includes Zurich Insurance Group AG and GlaxoSmithKline Plc, has returned 9.6 percent since the start of 2014, Bloomberg data show.

Six-Week Period

The World Bank issued the notes mainly over a six-week period in November and December, according to the statement. Proceeds go to fund projects related to climate change. Ten banks, including BNP Paribas and ABN Amro Bank NV, participated in the sale.

The Washington-based lender previously sold 60 million euro ($70.7 million) of the notes to institutional investors in two separate deals in July and September, according to its website.

The World Bank is rated AAA by Standard & Poor’s, the highest investment grade.

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