MOBILISING PRIVATE SECTOR CAPITAL AT SCALE TO CLOSE THE CLIMATE FINANCE GAP FOR DEVELOPING COUNTRIES
Glasgow, Scotland — The Development Guarantee Group in partnership with the Green Climate Fund and with the support of the United Kingdom’s Foreign Commonwealth & Development Office (“FCDO”) is pleased to announce the launch of the Green Guarantee Company at the 26th UN Climate Change Conference of the Parties (COP26).
As climate financing contributions from developed countries to developing countries is now central to the success of the world’s collective efforts to keep global warming to 1.5 degrees, greater mobilisation of long-term pension, insurance and other global institutional capital will be needed.
An investment grade guarantor backing climate (also referred to as “green”) bonds issued to these investors via the world’s major financial markets like London is now both timely and critical. This is particularly so as both increased fiscal pressure post pandemic and downward pressure of sovereign ratings of developing countries will limit their private sectors’ access to global debt capital markets.
Upon commencement of operations in 2022, the Green Guarantee Company expects to initially guarantee climate bonds issued and listed on the London Stock Exchange and proliferating to other exchanges in the world’s major global debt capital markets. This support is pivotal to allow issuers from developing countries improved access to long term hard currency debt financing to combat the impact of climate change on their populations, particularly the poorest.
Besides enhancing the credit rating of these climate bonds to investment grade, the Green
Guarantee Company expects to also deliver high quality and consistent reporting of the
guaranteed climate bonds’ “green” credentials. In this respect the Green Guarantee Company will work with issuers in developing countries on an on-going basis helping to build their capacity to deliver quality and consistent reporting standards for climate bonds, helping to assure global investors and make climate bonds from developing countries an attractive asset class deserving of larger allocations in global climate bond portfolios.
The Green Guarantee Company at its pre-inception stage has received strong interest and
support from various parties given its mission:
- The United Kingdom’s FCDO has selected the Green Guarantee Company as a Competition finalist under its Mobilising Institutional Capital Through Listed Product Structures (“MOBILIST”) programme. MOBILIST is predicated on demonstrating the critical role that public listed markets can play in mobilising large scale institutional flows of capital for the Global Goals and climate financing. Through the MOBILIST Infrastructure Competition, FCDO will support GGC to commence operations and by doing so, help developing economies better access climate finance from new sources at scale.
- Technical assistance funding from the Green Climate Fund (“GCF”) Project Preparation Facility to establish the Green Guarantee Company and develop its climate investment policy, to support the development of a funding proposal for a potential equity investment by the GCF.
- Potential technical assistance funding from the U.S. International Development Finance Corporation (“DFC”), to assist with the workstreams needed to operationalise the Green Guarantee Company, as well as a potential equity investment are under consideration.
- MUFG Bank (“MUFG”), Japan’s largest bank and one of the world’s largest, is acting as an Accredited Entity for the Green Guarantee Company to access equity funding from GCF.
- Origination insights and project pipeline preparation from DBS Bank (“DBS”), MUFG and Standard Chartered Bank as Origination Partners.
- Credit and Political Risk Insurance guidance from BPL Global with Sovereign Risk Insurance, Liberty Specialty Markets, Ascot Group, Aspen Insurance and DFC as Insurance Partners.
As it works towards commencement of operations of the Green Guarantee Company, the
Development Guarantee Group looks forward to establishing partnerships with other
stakeholders in the public and private sectors.
Yannick Glemarec, Executive Director, Green Climate Fund says:
“I am very pleased that GCF’s Project Preparation Facility is supporting the development of a funding proposal to create a Green Guarantee Company. This innovative initiative aims to increase developing countries’ access to affordable finance to scale up climate investments, notably through the green bond market - estimated at USD30 trillion by 2030.”
Vicky Ford, Minister for International Finance, FCDO says:
“The world-leading reputation for financial innovation and longstanding relationships with developing countries makes the City of London the ideal capital market for the Green Guarantee Company. Guarantees from the Green Guarantee Company will give borrowers in developing countries an invaluable stepping stone to access the London Stock Exchange, catalyse global investors in the City of London to invest in climate bonds and help mobilise greater climate finance into developing countries.”
Koichiro Oshima, Managing Executive Officer, Head of Financial Solutions Group, MUFG
Bank Ltd. says:
“MUFG is wholly committed to financial innovation that supports a climate resilient and
sustainable future. Our business activities are driven by a determination to make every effort to empower all stakeholders, particularly those in developing countries, to advance to the next stage. As part of our “Sustainable Business Investment Strategy” and in order to lead the way in bringing innovative Blended Finance solutions for climate change, one of the most serious issues facing the world, MUFG is delighted to be acting as both an Origination Partner for the Green Guarantee Company as well as its Accredited Entity in respect of accessing technical assistance and equity funding from the Green Climate Fund.”
Clifford Lee, Global Head of Fixed Income, DBS Bank says:
“As a purpose-driven bank, DBS is excited to play an integral role as Origination Partner in the development journeys of the Development Guarantee Company and the Green Guarantee Company. Climate action and sustainable communities will feature prominently in this decade for action, and debt capital markets will play a critical role in aligning corporates towards a more environmentally-mindful and socially-conscious future. Connecting like-minded issuers and investors is the next integral step to up the ante on the supply of green, social and sustainable bonds, to meet the burgeoning demand from investors globally. This will help broaden and deepen sustainable debt markets globally, gradually transforming the complexion of capital markets, industries and businesses into a more ESG-friendly one.”
Henrik Raber, Global Head of Credit Markets, Standard Chartered Bank says:
“Standard Chartered seeks to promote sustainable finance by mobilising capital across our markets to where it is the most impactful. With our footprint in the emerging markets across Asia, Africa and Middle East, we believe that the impact of green finance will be immense to reach the communities that need it the most. We look forward to working with the Green Guarantee Company as an Origination Partner in developing countries, and further transition in communities that will be most impacted by climate change. We believe blended finance is one pivotal step in the current challenge we face in closing the financing gap to achieve the Sustainable Development Goals and the goals of the Paris Agreement.”
Lasitha Perera, Managing Partner, The Development Guarantee Group says:
“The power of a guarantee lies in that it promotes partnership, bringing parties together and building trust and confidence. Trust and confidence in turn help build and transforms markets. Partnership is at the heart of the Green Guarantee Company, we will partner with existing global capital market participants, use existing global capital market infrastructure and global capital market standards to mobilise private sector capital at scale and at speed. I, along with my cofounders at the Development Guarantee Group, Boo Hock Khoo and Jean-Pierre Sweerts, and our institutional shareholder, Cardano Development, would like to express our thanks to the Green Climate Fund, MUFG Bank, the Foreign Commonwealth and Development Office, the U.S. International Development Finance Corporation, BPL Global, DBS Bank and Standard Chartered Bank for their partnership and ongoing support in helping make the Green Guarantee Company a reality.”
ABOUT DEVELOPMENT GUARANTEE GROUP
The Development Guarantee Group was founded by Boo Hock Khoo, Jean-Pierre Sweerts and Lasitha Perera and includes Cardano Development as an institutional shareholder, thereby uniting the collective experience of a global network of experts in setting up and running guarantee companies and programmes focused on addressing development challenges globally.
The Development Guarantee Group is the world’s first dedicated guarantee platform with the mission to design, develop and operate guarantee solutions and companies that can effectively mobilise private sector capital towards funding development and sustainability challenges.
ABOUT CARDANO DEVELOPMENT
Cardano Development (CD) is an incubator and fund manager, established in 2007. Through careful risk-management analysis in data-poor settings, CD identifies scalable solutions that help to make frontier financial markets more inclusive, investible, and sustainable to unlock lasting economic value. CD creates solutions for local currency, credit, and liquidity risks in these markets. With over USD 6 billion assets and USD 1.5 billion capital under management, CD supports its scale-up funds and a number of start-ups with ongoing management services, financial support and corporate governance oversight. Cardano Development works with reputable partners including foundations, governments, impact investors, institutional investors and commercial partners.
ABOUT MUFG BANK LTD.
MUFG Bank, Ltd. is Japan’s premier bank, with a global network spanning around 50 countries. Outside of Japan, the bank offers an extensive scope of commercial and investment banking products and services to businesses, governments and individuals worldwide.
MUFG Bank’s parent, Mitsubishi UFJ Financial Group, Inc. (MUFG) is one of the world’s leading financial groups. Headquartered in Tokyo and with over 360 years of history, MUFG has a global network with approximately 2,500 locations in more than 50 countries. The Group has about 70,000 employees and offers services including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing. The Group aims to “be the world’s most trusted financial group” through close collaboration among our operating companies and flexibly respond to all of the financial needs of our customers, serving society, and fostering shared and sustainable growth for a better world. MUFG’s shares trade on the Tokyo, Nagoya,
and New York stock exchanges. For more information, visit https://www.mufg.jp/english
ABOUT DBS BANK
DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank’s “AA-“ and “Aa1” credit ratings are among the highest in the world.
Recognised for its global leadership, DBS has been named “World’s Best Bank” by Euromoney, “Global Bank of the Year” by The Banker and “Best Bank in the World” by Global Finance. The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney and the world’s “Most Innovative in Digital Banking” by The Banker. In addition, DBS has been accorded the “Safest Bank in Asia” award by Global Finance for 13 consecutive years from 2009 to 2021.
DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationship with customers, and positively impacting communities through supporting social enterprises, as it banks the Asian way. It has established a SGD 50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia.
With its extensive network of operations in Asia and emphasis on engaging and empowering its staff, DBS presents exciting career opportunities. For more information, please visit www.dbs.com.
ABOUT GREEN CLIMATE FUND
The Green Climate Fund (GCF) is the world’s largest dedicated climate fund. GCF’s mandate is to foster a paradigm shift towards low emission, climate resilient development pathways in developing countries. GCF has a portfolio of USD 10 billion in projects and programmes across 127 countries. It also has a readiness support programme to build capacity and help countries develop long-term plans to fight climate change. GCF is an operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) and serves the 2015 Paris Agreement, supporting the goal of keeping average global temperature rise well below 2 degrees Celsius.
ABOUT FOREIGN COMMONWEALTH DEVELOPMENT OFFICE
UK Foreign, Commonwealth and Development Office (FCDO) pursues the UK’s national interests and seeks to project the UK as a force for good in the world. FCDO promotes the interests of British citizens, safeguards the UK’s security, defends its values, reduces poverty and tackles global challenges alongside international partners. For more information please visit: https://www.gov.uk/government/organisations/foreign-commonwealth-development-office
ABOUT STANDARD CHARTERED BANK
We are a leading international banking group, with a presence in 59 of the world’s most dynamic markets and serving clients in a further 85. Our purpose is to drive commerce and prosperity through our unique diversity, and our heritage and values are expressed in our brand promise, here for good.
Standard Chartered PLC is listed on the London and Hong Kong Stock Exchanges.