The issuing of two SDG Bond issues of €1.5 billion and €2 BN amount to a near doubling of Sustainable Bond issues in just one year, between 2020 and 2021, and represent 48% of the loans made last year.
What does it all mean?
SDG bond issues represent borrowings on the financial markets. This is how AFD Group, the second largest borrower in the French public sector before the Covid-19 crisis, makes up most of its annual resources. Some of these loans are "theme-based,” such as in the case for the Climate and SDG loans, which indicate the institution’s priorities.
"In 2014, AFD was the first French public bank to issue climate bonds,” explained Bokar Chérif, AFD Group’s Chief Financial Officer. “In 2020, in order to align our 100% Paris Agreement commitments with our presence on the markets, we set up a bond issue structure aligned with the Sustainable Development Goals."
Issues to support major transitions
The funds raised must be allocated in accordance with the Sustainable Development Goals bond issuance guidelines drawn up in 2020 and reviewed by V.E (part of Moody's ESG Solutions). Eligible loans must address one of AFD's six transitions (including demographic and social transitions, economic and financial, and territorial and environmental, to name a few). They must also show positive or neutral SDG interactions. This selection process is based on a key, innovative tool in AFD's evaluation system, sustainable development analysis and advice.
"This makes it possible to assess and control environmental and social risks,” said Bokar Chérif. “In this way, the Group implements procedures to identify, prevent, or minimize environmental and social damage or human rights abuses that may result from the funded projects,”
"Financial institutions, banks, and investors are looking for responsible investments, but the supply is currently lower than the demand,” said Samia Ben Mebarek, Deputy Head of AFD's Financing and Market Operations Division. “For AFD Group, which finances and supports transitions in all regions where it operates for a fairer, more sustainable world, these issues make it possible to borrow at a reduced rate.”
Contributing to the UN's Sustainable Development Goals
Some of the five goals to which the SDG bonds contribute include those on quality education (SDG #4), decent work and economic growth (#8), climate action (#13), peace, justice and strong institutions (#16), and partnerships for the goals (#17).
AFD Group issued 595 loans of this sort last year, worth more than €18 billion, including €13.5 billion devoted to sustainability and another €4.9 billion to climate change. Close to 150 of these loans support the development of renewable energy and energy efficiency worldwide, resulting in the avoidance of 14,750 tons of CO2 emissions per year and access to or improvement of electricity services for 72 million people.
"This reporting is an opportunity to show that the environmental projects we support also have social impacts," said Samia Ben Mebarek. We do not distinguish between the two in our bond issues because, as a development bank, we bring both aspects into play when we appraise projects.”