Sustainability Bond for the Pacific Feasibility Study

Griffon Emose
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Griffon Emose: Managing Director of Kontiki Capital Ltd (KCL)

No WP/21/06, MPDD Working Paper Series from United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)

Abstract: Small Island Developing States (SIDS) are vulnerable to the effects of climate change, environmental damage, and other social challenges. However, their public finances unlikely cover necessary expense for sustainable development and the gap tends to increase given the aftermath of COVID-19 pandemic. This report highlights a potential for sustainability bonds in Pacific SIDS (PSIDS) to fill in the financing gap, by leveraging private sector participation to finance climate resilient investment in the PSIDS. Aside from the bonds issuance itself, the paper provides three general recommendations as follows: (1) a blended finance structure is beneficial given the underdeveloped capital market and small pool of public and private funding; (2) to achieve a desirable target in bond issuance, a private placement could be pursued by direct negotiation with targeted financial institutions, while public offering can be issued through underwritten offerings, best effort offerings, and auctions; (3) country that are willing to issue the sustainability bonds should details their bond framework, in addition to the terms sheet and conditions to binding the bond in financing sustainable projects. The paper concludes that both sovereign and corporate issuance of sustainability bonds are feasible in PSIDS, which is well supported by two case: Fiji Sovereign Green Bond and Seychelles Blue Bond.

Keywords: : Climate Finance; Environmental and Social Risk; Financial Institutions (search for similar items in EconPapers)
JEL-codes: F65 G20 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-env and nep-isf
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