With blue finance steadily making waves in sustainable finance, the World Bank Group’s private sector development arm, the International Finance Corporation (IFC), is actively working on developing the asset class. ISFI spoke to Christina Ongoma, the manager of financial institutions group for upstream advisory services at the IFC, about how the institution works with first-time sustainability issuers.
As part of its advisory services, the IFC helps issuers identify and tag climate assets. According to Christina, many of them are already engaging in sustainable finance activities without them knowing it, with climate assets flying under the radar.
“When we talk to banks about building a portfolio of sustainable assets that we can eventually finance or that they can showcase in a first issuance of a bond, the answer is always ‘we don’t really have enough’,” Christina shared.
According to Christina, the tagging activity gives financial institutions confidence in their current activities as well as potential future sustainable projects and need for climate finance.
The IFC also helps institutions implement a system to tag all new financing. The system divides social financing into the subcategories of social and sustainability while climate finance is divided into blue and green financing.
According to Christina, the IFC puts a large emphasis on the avoidance of greenwashing through implementing governance mechanisms as the institution has a major responsibility to ensure that the first-time issuers it brings to market are following best practices.
By acting as an anchor investor, the IFC is putting its skin in the game both financially and reputationally. “We want to ensure that the work that we do — the capacity-building and also the advice that we give — is current, applicable and hedges against concerns with greenwashing.”
Islamic products play a significant role in advancing financial inclusion in specific markets.
“The question has always been: how can we issue thematic Sukuk? How can we adopt Islamic financing approaches to certain products that we have in our mainstream product suite?” Christina explained.
The Shariah compliant small loan guarantee program is a prime example of this. It was originally launched as a conventional facility in Afghanistan and the IFC is now looking to expand the program to other countries including Pakistan, Bangladesh, Yemen, Ethiopia and Djibouti.
Also in Bangladesh, the IFC is currently working on growing the Sukuk market in the country. It is also looking at expanding its offering in the Middle East, modeling off of its test case of its US$50 million Murabahah-based Tier 2 financing instrument signed with ADIB Egypt in July this year.
This is an excerpt from an interview with Christina Ongoma, the manager of financial institutions group for upstream advisory services at the IFC. Listen to the full discussion on IFN OnAir.