More than 100 investors have backed the latest bond issued by the International Finance Corporation which was oversubscribed by 200%
The International Finance Corporation (IFC) has issued a three-year US dollar global benchmark bond, raising $2bn in private investment for its work in emerging markets and developing economies.
Interest in the bond was high with more than 100 investors and a final order book closure of over $4.9bn. Investors include central banks and official institutions, such as ministries of finance, government agencies and municipalities, which made up 60% of investors, and banks, which accounted for 27 %. The remaining share of investors included asset managers and corporates among others.
IFC, a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets, has been issuing US dollar denominated benchmark bonds every year since 2000.
Responding to questions from Impact Investor about how the proceeds would be invested, Vera Sevrouk, IFC’s acting head of investor relations said this bond issuance would not target any specific country or sector. She said that while IFC did issue green and social bonds, where proceeds were earmarked for specific green or social projects, this particular bond issuance was for IFC’s general corporate use.
“IFC bonds finance our loan activities in emerging markets, therefore the proceeds from the bond are essential for continuing to provide financing to private businesses in emerging markets,” she said.
Development impact measurement
Sevrouk said that since the bond was not a green or social bond, the IFC would not issue an annual report linking proceeds to specific projects: “We do, however, measure the development impact of our projects,” she added.
She explained that in 2017, IFC developed a tool to measure the anticipated impact of its projects enabling the organisation to better define, measure, and monitor the development impact of each project.
She said: “IFC currently scores all of its investment projects for development impact using this system, known as the Anticipated Impact Measurement and Monitoring system. The system is fully integrated into IFC’s operations, allowing development impact considerations to be weighed against a range of strategic objectives, including volume, financial return, risk, and thematic priorities.”
She explained the IFC monitored its investments to ensure compliance with the conditions in its loan agreements and that its clients submitted regular reports on financial as well as social and environmental performance, and information on factors that might materially affect their businesses.
“Ongoing dialogue during supervision allows IFC to support clients, both in terms of solving issues and identifying new opportunities. We also track the projects’ contribution to development against key indicators identified at the start of the investment cycle. And all of our investments adhere to IFC’s Environmental and Social Performance standards,” she added.
Investor appetite grows for short-term bonds
Sevrouk said the recent $2bn issuance had a slightly shorter tenor than some of its previous issuances in light of the more uncertain economic climate.
“We’ve seen strong investor appetite for shorter tenors given market uncertainty and inflationary pressures,” she said. “IFC is a triple-A rated institution with a long-standing presence in capital markets. Those factors determine our pricing on the market, and this deal was priced as tight as possible against the corresponding three-year US Treasury note.”
Much of this uncertainty has been driven by the war in Ukraine, which Sevrouk highlighted as having deepened the global economic slowdown and compounded the damage wreaked by the COVID-19 pandemic.
“Through our work, IFC aims to continue to provide post-pandemic relief to businesses, combat the effects of climate change and support the energy transition, and help address global food insecurity. We are also increasingly working in fragile and conflict affected countries,” she said. “For example, in Ukraine we have been providing working capital to our clients to help them access fuel and other staples and are keeping our trade lines open to support the import of critical supplies.”
IFC’s portfolio of investments includes debt and equity exposure in 117 countries and in over 1,800 companies across a wide range of industries and sectors.