Emerging markets (EM) struggle to issue green bonds due to regulatory, technical and investor-related barriers. Institutional investors are deterred by risk and limited sustainable investment opportunities. The Amundi Planet Emerging Green One (AP EGO) Fund, a joint initiative by Amundi and IFC, addresses this gap with a blended finance structure offering varying risk/return targets and a dedicated first-loss buffer and Technical Assistance support to issuers.
The Amundi Planet Emerging Green One (AP EGO) Fund
Abstract
Emerging Markets and Developing Economies (EMDEs) face urgent – and growing – financing needs, exacerbated by the climate crisis. Green bonds – which are used to finance green/sustainable projects that mitigate climate related risks or respond to climate adaption needs hold significant potential. Yet entities in EMDEs face numerous challenges in issuing them – including the lack of a strong enabling regulatory environment, limited familiarity with international investors’ sustainability/financial objectives, and resource constraints to meet stringent international reporting standards on sustainable finance. International institutional investors have the capacity and size to invest sustainably in EMDEs; in practice, however, they allocate only a modest amount of their capital to this market. Institutional investors with commitments to support sustainable outcomes are often limited by concerns on risks (credit, currency, political, among others), respective institutional financial objectives (risk/returns) and sustainability preferences, or have investments in Emerging Markets (EM), but without suitable investment opportunities and/or sustainable outcomes as an objective.
Amundi and the IFC therefore partnered for an innovative solution: the Amundi Planet Emerging Green One (AP EGO) Fund. AP EGO successfully addressed this gap through its structure by offering varying risk/return targets and a dedicated first-loss buffer, while targeting EM debt premium. It attracted a range of institutional investors with the capacity to deploy significant levels of capital, who would otherwise have been averse to investing in climate impact-oriented bonds on their own, particularly in less developed markets.
This was the first and largest green bond fund solely focused on investing green bonds issued by EM financial institutions. Additionally, its holistic investment philosophy approach allowed the blended finance mechanism to target both the supply and demand of these instruments.
Launched in March 2018, the AP EGO Fund is a layered fund with a credit enhancement mechanism (junior, mezzanine and senior tranche) and a first loss buffer. The fund seeks to deploy over USD 1.5 million into emerging markets, while also deepening local capital markets and supporting green investments.
To mobilise capital from private investors, the AP EGO Fund has a layered capital structure, with the first loss buffer and the junior tranche providing a risk cushion by taking first losses through a waterfall process in case of credit events. Development finance actors like the IFC, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and Proparco came in as anchor investors, and the Fund also raised capital from leading pension funds, insurance companies and asset managers.
The Fund’s strict inclusion criteria encourage issuers to follow market best practices. The AP EGO Fund also supports local issuers enter the green bond market via the IFC’s Green Bond Technical Assistance Programme (GB-TAP). The GB-TAP offers a suite of activities – ranging from providing training and capacity building to local financial institutions; promoting the use of the International Capital Market Association’s Green Bond Principles; supporting issuers throughout the issuance and reporting process; and sharing knowledge and best-practices. The GB-TAP targets issuers but also the local bond ecosystem more broadly – thereby contributing to a strong, functioning capital market.
As of 2024, USD 1.4 billion have been invested by the AP EGO Fund into green bonds, with 48 bonds in 18 emerging countries in the portfolio throughout the year. The AP EGO Fund has played a key role in creating market familiarity and demand for emerging market green bonds. Its layered capital structure was crucial to mobilising private actors – for some, this was the first time investing in emerging markets and/or green bonds.
To meet the growing demand for these instruments, Amundi and IFC have effectively helped catalyse the supply of green bonds from emerging markets. The GB-TAP’s technical assistance programme has supported 30 issuances of green, social and sustainability (GSS) bonds from 20 financial institutions valued at USD 6.7 billion. In 2024, this included providing training to 196 participants – 34% of whom were female.
More broadly, the AP EGO Fund has also served as a proof-of-concept for similar funds aiming to mobilise private investment towards sustainable development in developing countries. For example, in 2024, IFC and Amundi closed the Sustainable Emerging Economy Development Debt (SEED) Fund: it raised USD 436 million from institutional investors towards emerging market sustainable bonds. To support issuances from low-income countries, the SEED Fund benefits from a partial credit guarantee from the International Development Association's Private Sector Window and also provides technical assistance.
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