This story is an excerpt from the BMO 2019 Sustainability Report.
BMO’s collaboration with the World Bank on sustainable development bonds is part of a broader commitment to creating investment opportunities within an ESG framework.
To build a sustainable future, we need to start working today. And the challenge for many investors is how to transform that belief into concrete action. That’s why BMO, in bringing to life the Purpose that drives our bank, has committed to mobilizing $400 billion in sustainable finance to help enterprises in a diverse range of sectors pursue sustainable outcomes.
One of the most effective tools for investing in positive social and environmental change is the sustainability bond. And an acknowledged leader in this type of investment is the World Bank, which for seven decades has led the world in development finance through bonds issued by the International Bank for Reconstruction and Development (IBRD). Supported by 189 member countries, the IBRD has in recent years issued between US$50 billion and US$60 billion annually in bonds aimed at ending extreme poverty and boosting shared prosperity.
Since 2018, the World Bank has issued five sustainable development bonds denominated in Canadian dollars. BMO is the only bank to have book-run all five, helping to provide over $5.5 billion in financing for initiatives aligned with the United Nations Sustainable Developments Goals (SDGs – see page 8). In recognition of these efforts, BMO Capital Markets was named 2019 Lead Manager of the Year in Sustainability Bonds by Environmental Finance, a respected source of reporting and analysis on responsible investing.
LANDMARK SUSTAINABLE DEVELOPMENT BONDS
We partnered with the World Bank on three sustainable development bond issues in 2019 to raise awareness for pressing development challenges. The first, launched in January, raised $1.5 billion to support the financing of World Bank’s sustainable development programs, including those that improve the health and nutrition of women, adolescents and children. This engagement with investors focused on raising awareness for two of the UN goals: SDG3 – Ensure healthy lives and promote well-being for all; and SDG5 – Achieve gender equality and empower all women and girls. The largest bond ever issued in the Canadian market by a sovereign supranational agency, it was more than 1.5 times oversubscribed and ultimately placed with more than 40 institutional investors worldwide.
The World Bank’s second Canadian dollar bond of the past year, issued in July 2019, focused on two objectives: SDG6 – Ensure availability and sustainable management of water and sanitation for all; and SDG14 – Conserve and sustainably use the oceans, seas and marine resources for sustainable development. As the largest multilateral funder for oceans and water projects in developing countries, the World Bank is committed to ensuring that communities have access to safe, clean water, and that Earth’s oceans – which cover more than two-thirds of the planet, yet are only 2% protected – can sustain livelihoods even as we act to combat pollution, overfishing and other threats. The five-year bond, sized at $1.5 billion, had more than $1.85 billion of demand and was allocated among 47 investors globally. In September, this bond was re-opened by an additional $300 million, alongside a rare offering of a new $250 million 10-year tranche, highlighting the same water- and ocean-focused SDGs.
COMMITTED TO BUILDING A BETTER FUTURE
World Bank bonds represent one key component of BMO’s overall sustainable investment strategy. In October 2019, our bank originated our own three-year, US$500 million sustainability bond targeting a range of environmental and social development areas, from renewable energy and sustainable land use to support for women-owned businesses and Indigenous communities. The first bond of its kind issued by our bank, it was a significant step forward in our commitment to mobilize $400 billion for sustainable finance by 2025: $250 billion in client investments for which we act as advisors and managers, and $150 billion in capital that we provide to companies pursuing sustainable outcomes.
In addition, during the past year we launched an impact investment fund, with $250 million in seed capital, to identify viable solutions to sustainability challenges and take them to scale. In all of these efforts, the SDGs provide a globally recognized frame of reference for setting priorities, communicating with investors and benchmarking success – just as they do for our collaborations with the World Bank, which we expect to build upon going forward.
“The World Bank is an undisputed innovation leader in global markets,” says Rob Yeung, Managing Director and Head of Global Fixed Income, Currencies and Commodities with BMO Capital Markets. “For BMO to have been chosen as a bookrunner on these World Bank Canadian-dollar issues is a tremendous honour and a testament to the strong partnership we’ve forged over the years. Our teams work closely and effectively together, because we’re aligned in our values and in our shared commitment to creating a more sustainable future.”
To learn more, read BMO’s Sustainability Report.