HSBC and IFC close USD474m bond fund for climate action in emerging markets

HSBC Global Asset Management and IFC, a member of the World Bank Group, have closed the HSBC Real Economy Green Investment Opportunity GEM Bond Fund, which has raised USD474 million of new financing to support climate risk-mitigation investments across emerging markets.

Emerging market countries have been hit by some of the worst impacts of climate change and many are insufficiently equipped to address them. REGIO is designed to attract investments into these economies, enabling their energy transition and helping them limit the effects of climate change.

The first green bond fund focused on emerging market real sector issuers, REGIO will use both public and private capital to build climate change-mitigation capacity in emerging market economies. HSBC and IFC each committed USD75 million to the fund as anchor investors. Seven private investors have now joined HSBC and IFC, with others expected to commit later this year.

Noel Quinn, group chief executive, HSBC, says: “At HSBC we have a long history of connecting markets with opportunities and we recognise that economic growth must be sustainable over the long term. Investors want more socially and environmentally responsible investment opportunities and funds such as REGIO are a way for them to achieve their sustainable objectives.”

Philippe Le Houérou, CEO of IFC, says: “The success of this fundraising is proof that investors remain committed to fighting climate change, even at this time of global pandemic. IFC is proud to have helped shape climate finance capital markets by issuing and investing in green bonds and establishing market standards. Innovative solutions like this fund create tangible action on the ground at a time of great urgency.”

Through its investment, REGIO will both catalyse climate finance globally and create viable markets for the development of climate-friendly projects. The fund provides a solution for global institutional investors to achieve impact and generate sustainable returns at the same time. The fund will invest in a diverse range of geographies and companies in the real sector through a diversified portfolio of green and sustainable bonds.

Nicolas Moreau, global CEO, HSBC Global Asset Management, comments: “We are at a tipping point in terms of climate change and investing in the real economy in emerging markets is critical to achieving the global transition to a lower carbon economy. Funds such as REGIO prove how we can achieve real economy impact in the markets that are most challenged by it.

“To achieve a close of this size in the current market environment proves the importance that institutional investors place on impact investing in emerging markets. We recognise the role we can play in enabling our clients to meet their sustainable investment objectives and support the Sustainable Development Goals. We hope that the green impact investment framework behind REGIO and its commitment to sustainable development is something that will be taken up by the wider industry.”
 
The fund is supported by HSBC Global Asset Management’s ‘Green Impact Investment Guidelines’ which set out a framework for the firm’s green impact strategies across asset classes, including eligible projects and activities aligned with impact. The framework aims to show potential bond issuers the eligibility criteria the firm will apply when selecting green bonds for REGIO. The framework is aligned to the SDGs and their targets and indicators and contributes directly to financing the objectives of the Paris Climate Agreement.
To bolster the supply of green bonds issued by real sector borrowers, REGIO’s investment activities will also be complemented by a Technical Assistance Facility managed by IFC.