Sustainability-linked debt hub launches for COP27

World Bank-supported platform aims to channel sovereign bonds into addressing climate and nature

A platform of tools and support has been created in the hope of boosting the development of sustainability-linked sovereign bonds.

The Finance for Biodiversity Initiative, with support from the World Bank, the Climate Bond Initiative and other global finance groups, has today announced the launch of the Sustainability-linked Sovereign Debt Hub, which aims to develop the sovereign debt market into one that will take better account of climate and nature risks.

“[It] will help develop sovereign debt markets to make them as sensitive to the threats posed by biodiversity loss and climate change as they are to currency risk or unfavourable demographics,” said Simon Zadek, chair of the Finance For Biodiversity Initiative.

The Hub will raise awareness about the use of sovereign bonds for sustainability, as well develop tools for using performance-linked platforms for debt offerings and support standards for incorporating nature and climate into processes.

It will also look to foster more issuance of sustainability-linked debt along the lines of Chile’s unique $2bn sustainability-linked bond offering that was announced in March this year.

Zadek hopes it will encourage other governments to “integrate their dependence on natural capital and biodiversity with their lending activities”.

The Hub aims to be fully operational by November 2022, at COP27 in Egypt.

“The impacts of climate change are worsening at a far greater speed than had been anticipated, with the world’s poorest countries bearing the highest cost,” said Dr Mahmoud Mohieldin, executive director at the International Monetary Fund.

“The Sustainability-linked Sovereign Debt Hub will play a vital and welcome role in catalysing the market for KPI-linked debt issuances and in helping to ensure that countries’ climate and nature related policies are reinforced, thereby helping to stimulate investment to support the Sustainable Development Goals.”

The Hub is supported by the World Bank, European Bank for Reconstruction and Development, Asian Infrastructure Investment Bank, Climate Bond Initiative, Nature Conservancy and the Institute of International Finance.