On September 26, 2019, In the latest dimension of global central bank’s interest in environmental sustainability, the Bank of International Settlements (BIS) has launched a dollar green bond fund enabling central banks around the world to invest in “green bonds”.
Key points:
i. Aim: The primary aim of this initiative is to let the central banks incorporate environmental sustainability into reserve management without destroying assets & value of their reserves.
ii. About the bond: It is an open-ended bond & drawn the pool of assets from a global group of central banks to develop green finance through sizeable climate-friendly investments. It is structured under the swiss law & will be managed in-house by Asset Management handout of BIS, which is owned by 60 central banks. These are denominated in US dollars.
iii. Eligibility: The bonds which have eligible for inclusion in the fund should have a minimum rating of A- and adhere to the International Capital Market Association’s (ICMA) Green Bond Principles or the Climate Bond Standard published by the Climate Bonds Initiative (CBI).
iv. Scenario: Although the green bond market is small, it is growing rapidly with fourfold in size over a period of 4-year, from some $50 billion in 2014 to $230 billion in 2018.
v. Institutional investors having assets worth $11 trillion have now pledged to divest from fossil fuel assets and shift to renewables, especially since the 2015 Paris Agreement on climate change.
About Green Bond:
It is a bond whose proceeds are used to fund environment-friendly projects related to clean water, renewable energy, energy efficiency, river and habitat restoration, acquisition of land, or mitigation of climate change impacts.
The first entity to issue green bonds was the World Bank, which began the practice in 2008.
About BIS:
Established :17 May 1930
Headquarters: Basel, Switzerland
Membership : 60 central banks
General manager: Agustín Carstens