Transcript
AARON LEVINE: A Green Bond is basically a fund-raising mechanism for a government or a corporation, a municipality, where they go out to the market and they say we'd like to raise a certain amount of money. Fiji raised 60 million US so that's a hundred million Fiji dollars and they say what we'll do with those proceeds is we'll spend them on green projects and they define what a green project means in accordance with international accepted principles and that can include things like projects focusing on renewable energy or focusing on building resilience against climate change or adapting to changes in the climate. Investors in that bond then receive a return on their investment over time so it's a great opportunity for investors to show their support for green projects but also receive a return for it.
SALLY ROUND: Where are the investors coming from?
AL: Look, the green bond market is growing at an incredible pace. It's only been around for about ten years and the original issuers were the World Bank Group, European investment banking and the International Finance Corporation as pioneers and since then we've seen massive growth. Last year was over 150 billion dollars in issuances and calls have been made to try to reach one trillion dollars in issuances by 2020 because the needs for financing green projects are so immense.
SR: And on the demand side who are the investors? Who wants to invest in the green bonds?
AL: It's really interesting. We've seen both conventional, big institutional investors like pension funds supporting it but what we're also seeing is that millenials are also starting to come through and they deeply care about environmental and social purpose in their investments so the pool of investors is expanding quite rapidly . For Fiji it was supported by pension funds, by the banks who rarely participate actually in bond issuances but then globally we're seeing a broad range of (inaudible) investors involved. This bond and many green bonds are over subscribed multiple times and that means that demand for this kind of product is incredibly high among investors.
SR: So with the money raised from this bond what are the projects in line to be invested in in Fiji?
AL: So the range of projects Fiji is going to invest in include crop resilience, irrigation and in particular, given that Fiji suffered from a Category 5 cyclone in 2016, Cyclone Winston, quite a lot of the money is going towards rebuilding infrastructure according to something we call the build back better principle and that is when you rebuild the infrastructure it's going to withstand severe weather events. When you issue a green bond it's fundamental to be transparent to investors about how you're going to spend that money and what the impact's going to be so Fiji followed really high standards that the IFC strongly supports as well in ensuring that the use of the proceeds would only go towards green projects and over time they will issue regular annual reports where they disclose how the money was spent and what kind of impact it's had. They've committed to annual reporting which is the industry standard and they're also planning on listing the bond on the London Stock Exchange which is another added layer of incredible transparency so those reports will be available on the internet but they'll also be released to the market though the London Stock Exchange.
SR: And is the money raised already filtering through into projects?
AL: The money raised is allocated to this fiscal year's Fiji budget so you are starting to see it being allocated. They've spent around 50 percent of the proceeds so far and they're actually going back to the market for just under half of the 100 million in coming months and that will then be matched towards projects towards the end of this fiscal year.
