FY21 Social Bond Impact Report

FY21 Social Bond Impact Report

Social Bond Impact Report Financial Year 2021

About IFC

Social Bond Impact Report Financial Year 2021

IFC – a member of the World Bank Group – is the largest global development institution focused on the private sector in emerging markets.We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2021 (running from July 1, 2020, to June 30, 2021), IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic. For more information visit www.ifc.org .

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Table of Contents

2 3 4 5 6 7

FY21 Highlights Cumulative Highlights A Letter from the Treasurer 4 Your Information with the VP of Economics and Private Sector Development

What is Eligible for IFC’s Social Bond Funding? IFC Social Bond ProgramOverview for FY21

8 9 10 12 14 16 18 20 22 32 36 36 38

Social Bond Eligible Projects: Commitments and Disbursements by Region Social Bond Eligible Projects: Commitments and Disbursements by Sector A Quick Update on IFC’s $8 billion Fast-Track COVID-19 Facility Featured Project: ElCat Sustainable Bonds: Bridging the Gap for Gender Equality Featured Project: Nobel İlaç Spotlight on IFC’s ESG Performance Indicators for Capital Markets Featured Project: LAPOMicrofinance Bank Social Bond Eligible Project Commitments for FY21 Appendix A: IFC Social Bond Program Process Appendix B: Description of Adjustments to Commitments and Disbursements from Previous Years Appendix C: Update onWorld Bank Group’s Operations in Russia and Belarus Authors and Disclaimer

Evelio Vasallo, owns a store in Bogota, Colombia. Photo: Luis Angel

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FY21 Social Bonds Issuances FY21 Highlights

IFC’s Social Bond Program FY17 - FY21 Cumulative Highlights

FY21 projects align with the following Sustainable Development Goals:

5-year Impact Summary 4 Reach 2,450,631 farmers Feed 3 million people Supply power to 7.3 million people 5

Provide 792,651 residential housing loans Reach 43,114,750 people with telecoms, media, and technology services Treat 1,600,000 malnourished children Integrate 102,361 micro, small and medium enterprises into the value chain Provide 19,971,162 microfinance loans Provide 34,185 agri-finance loans Enroll 137,441 students Distribute 6,470,579 loans for women and women entrepreneurs Expand access to medicine through 22,448 outlets Provide 832,000 hectoliters of water, equivalent to providing drinking water for 113,973 adults for a year 6 Reach 703,255 patients

IFC launched its Social Bond Program in 2017 after merging the Banking onWomen and Inclusive Business Bond Programs.

$762.4 million raised through 24 social bonds in 6 currencies 1

Over the next 5 years, IFC’s

Support 1,130 ride-hailing drivers to own vehicles

social bond eligible projects committed in FY21 are expected to:

42 new projects committed across 10 sectors including:

194 projects committed totaling $5.8 billion

Reach 13,040 farmers

$3.8 billion raised through 63 social bonds 3 in 11 currencies

Open 4,500 pharmaceutical stores

Provide 1,962,011 microfinance loans

Provide internet access to 54,750 people in rural households 2

Housing Finance

Gender Finance / Banking on Women

Infra- structure

Agri- business

Distribute 135,525 loans to women and women entrepreneurs

Provide 350,093 residential housing loans

Food & Beverages

COVID-19 Response Finance

Directly employ 5,500 people Support 1,130 ride-hailing drivers to own vehicles

Micro- finance

Health

Support 87,250

Provide 272,000 metric tons of poultry products

micro, small, and medium enterprises

Information and Communications Technology (ICT)

Education

3 These numbers specifically refer to bond issuances in the period FY17-FY21 and exclude $296 million issued in Inclusive Business bonds in FY15-FY16 and $268 million issued in Banking onWomen bonds in FY14-FY16. 4 The aggregate ex-ante figures include the targets from all commitments that were social bond eligible; some of these projects may have since closed 5 Figure includes connection and number of customer served (i.e. one connection is one customer) 6  https://www.who.int/water_sanitation_health/dwq/nutrientsindw.pdf

Provide 272,000 metric tons of poultry products to improve access to protein and micronutrients

1 Currencies: Australian dollar, Brazilian real, Chinese yuan, Russian ruble, South African rand, and US dollar 2 Assuming that one connection provides internet to a family of 5

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A Letter from the Treasurer

What is your role at IFC? I joined IFC in October 2021 as Vice President, Economics and Private Sector Development, where I lead a large staff of economists that provide economic analysis to support IFC investments. I am also responsible for the Anticipated Impact Measurement and Monitoring framework (AIMM) to assess the development impact of IFC investments; identifying opportunities to use blended concessional finance to enable investments in the lowest-income and fragile nations; and overseeing IFC’s research and thought leadership. What is your global outlook for 2022? We’re seeing a two-track global recovery with the world’s richest countries powering ahead, and emerging and developing economies being left behind. Overall emerging economies posted a strong recovery of 6.3 percent in 2021, but growth is projected to slow to 4.6 percent in 2022 and 4.4 in 2023 7 . This pace of growth is insufficient for countries to reverse the economic losses of the pandemic and to rejoin pre-COVID development paths.When you look at many low-income countries, they’re barely growing and output and investment will remain markedly below pre-pandemic levels, particularly in small states and fragile and conflict-affected countries. A lot of that is because of the unequal access to vaccines, tighter fiscal and monetary policies, and more persistent scarring from the pandemic. What are downside risks that cloud the outlook for emerging markets and developed economies? Various factors cloud the outlook, including more COVID-19 related disruptions, further supply chain bottlenecks, and higher than expected inflation and rising interest rates – all compounded by high levels of debt in many countries. Global debt levels have skyrocketed. At 263 percent of GDP, total global debt has reached its highest level in 50 years. More than half of the poorest countries are already in debt distress or at high risk of it. Rising inflation also remains a threat. In emerging markets we’ve seen increases in inflation across countries – and four 3 4 Your Information A Chat with Susan Lund, VP of Economics and Private Sector Development 1 2

John Gandolfo IFCVice President and Treasurer

T he need for innovative financial solutions to to theWorld Bank, the poorest 40 percent of countries have not yet begun to recover from the pandemic, reversing years of progress to reduce poverty. Meanwhile, the Russian invasion of Ukraine will have far-reaching impacts on energy prices, grain markets, and food insecurity – with serious spillovers in developing countries. Against this background there has been growing investor appetite for socially conscious financial instruments, and the market for bonds geared towards environmental and social issues has gained momentum since the start of the pandemic. Social bonds have been the fastest growing segment of this market. Social bonds raised $206 billion in funding in 2021 and are forecast to bring in $300 billion in 2022. address poverty in developing countries is greater than ever. Conflicts and the pandemic continue to threaten people’s jobs and livelihoods. According We are proud of the role that IFC has played to bring social bonds to the fore – leading the dialogue on standards and supporting efforts to channel investor capital into the market. In 2021, we continued to grow our social bond program apace. These issuances funded projects that helped women- owned enterprises and smallholder farmers get back on their feet, supported affordable housing and healthcare, and were integral to IFC’s efforts to shore- up businesses and preserve jobs. Throughout 2021, IFC stepped-up to meet the challenges of the moment and help developing countries build toward a green and inclusive recovery.

We continued to use the $8 billion Fast-Track COVID-19 Facility that we launched in March 2020 to provide liquidity to existing clients. By the end of the calendar year 2021, we had committed $6.2 billion of the facility – with about 43 percent expected to benefit the poorest countries and fragile and conflict affected states. We also continued to support our clients through a $4 billion health platform to increase the supply of medical equipment and improve local manufacturing and distribution of medical supplies. IFC also recently unveiled a $2-billion Sustainable Emerging Economy Debt (SEED) bond fund to help support pandemic relief efforts. The fund, managed by Amundi, Europe’s largest asset manager, is expected to catalyze up to $13 billion of capital from institutional investors in advanced economies into sustainable bonds issued in emerging markets. Bond proceeds will go towards projects that provide clean drinking water, affordable healthcare and housing, strengthen food security, and help build a green and inclusive recovery.We hope the fund will further strengthen the sustainable bond market and steer more resources towards projects that help the disadvantaged. One area where we would like to see more growth is in the market for gender- focused bonds. The pandemic has forced countless women out of the labor market. Yet only a small fraction of the sustainable bond market is aimed specifically at projects to help women. Together with UNWomen and the International Capital Market Association we recently developed a guide to help borrowers, underwriters, and bond issuers integrate gender equality into their sustainable debt products. The need for financial solutions that alleviate poverty is vast and it is heartening to see the growth of this market during such difficult times. Through this report, we present a list of projects eligible to be financed using the proceeds of our social bonds andmaking transparent their anticipated outcomes.

fifths of these countries saw an uptick in 2021, with about one third experiencing double-digit food inflation. Inflation in advanced economies is even more of a threat, as rising interest rates in those countries are causing global investors to turn away fromemergingmarkets.We can already see a sharp decline in private capital flows to emerging markets in January 2022 compared to the previous year in the expectation of the Federal Reserve increasing US interest rates. What longer-term opportunities are there in emerging markets? Despite the downsides, there are bright spots.We are seeing the outlines of a new development model where low-income countries have opportunities to develop in ways that previous generations of countries that moved up the income ladder didn’t. 4 One of those is manufacturing for a domestic market. Two years ago, nobody was talking about manufacturing vaccines in Africa. And now two years later, we realize each region has got to be able to produce its own essential critical goods. So, this has opened the door to manufacturing opportunities. Another bright spot is digital transformation.We arewitnessing a remarkablewave of digital innovation across the developing world. FinTech and mobile payments are the most notable. Sub-Saharan Africa has emerged as a leader in mobile money, accounting for almost half of mobilemoney accounts worldwide. Another example is e-logistics that help connect farmers to distributors andwholesalers. One of the biggest obstacles to nurturing the private sector in these countries is the lack of projects with enough financial backing and business promise to be considered“bankable“ by international investors. To address this, IFC is working proactively to help create conditions to stimulate the flow of private capital into productive investment in developing countries. We’re also creating more platforms for funding and broadening the pool of institutions that co-invest with us and we are aiming to mobilize two dollars for every one that we invest.We need to flush more capital into private-sector opportunities that help the poorest and most vulnerable in emerging markets.

7 World Bank Global Economic Prospects, 2022

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What is Eligible for IFC Social Bond Funding?

IFC Social Bond ProgramOverview for FY21

In financial year 2021, IFC sustained a steady pace of social bond issuances, achieving its second highest issuance volume since the launch of the Social Bond Program in 2017. IFC issued 24 social bonds – the largest number since the program’s inception – totaling $762.4 million in six currencies during FY21. This brought IFC’s cumulative social bond issuance to $3.8 billion across 63 bonds in 11 currencies as of June 30, 2021. The Kangaroo market offered exceptionally strong demand with the Australian dollar being the largest issuing currency for IFC social bonds in FY21, representing 65.5 percent of total issued volume for the year, followed by issuance in US dollars with 21.1 percent of total volume. In early February, IFC issued its first bond swapped from fixed rate to the Secured Overnight Financing Rate (SOFR) benchmark interest rate. The swap was executed for a ‘tap’ or reopening of IFC’s 155 million Australian dollar Kangaroo social bond that matures in April 2035, for which there was strong demand from Japanese investors, particularly life insurance companies. This reopening of the bond represented IFC's debut trade swapped to SOFR and is the first of a kind in the Kangaroo bond market.

The Social Bond Program supports projects that aim to achieve positive social outcomes especially but not exclusively for a target population. Social project categories as indicated within the Social Bond Principles include, but are not limited to, providing and/or promoting: A  Affordable basic infrastructure (e.g., clean drinking water, sewers, sanitation, transport, energy) B  Access to essential services (e.g., education and vocational training, healthcare, financing and financial services) C  Affordable housing D  Employment generation including through the potential effect of SME financing and microfinance E Food security F  Socioeconomic advancement and empowerment

These include projects financed by IFC that meet the criteria as stated above such as: IFC’s Banking on Women : Projects that lend to financial intermediaries with the requirement that IFC loan proceeds be on-lent to women-owned small and medium enterprises. IFC’s Inclusive Business : Projects with companies that integrate underserved people at the base of the pyramid into a company’s value chain. For example, projects that: • Provide health or education services • Develop affordable housing • Expand access to telecommunications, such as broadband or mobile phones

To meet continued demand from Japanese and U.S. life insurance companies and asset managers, the Kangaroo social bond was tapped eleven more times during the fiscal year, increasing the total

Cumulative Social Bond Issuances Volume: $3.8 billion Number of social bond issues: 63

raised by $451.9 million USD equivalent. Throughout the year, IFC executed private

FY21 Social Bond Issuance by Currency

placements predominantly with U.S. and Japanese investors, including official institutions, life insurers, and individuals, by issuing eight social bonds for a total amount of $233.8 million, providing market diversity in Australian dollars, Brazilian reals, Russian rubles, South African rands and U.S dollars. IFC issued two social bonds in Uridashi format for a total amount of $16.7 million in Brazilian reals and Chinese yuan, which is a new emerging market currency for the program. As a result of continued and active support of the Uridashi market, IFC was awarded“Best Uridashi Issuer” in the 2022 Leaders in Debt Capital Markets Awards issued by CMDportal . As in previous years, IFC continues to stimulate positive social impacts in developing countries while providing investors with a financial return on their investment alongside a path to support the sustainable development goals.

AUD 65.5% USD 21.1% BRL 7.6% RUB 3.3% ZAR 1.8% CNY 0.7%

• Provide electricity or water services • Source from smallholder farmers • Offer access to finance • Sell through small mom-and-pop retailers

Cumulative Social Bond Issuance by Currency

IFC’s COVID response projects : Projects selected from IFC’s $8 billion Fast-Track COVID-19 Facility. This package makes available fast-track financing to existing IFC clients who demonstrate a clear impact on their business due to the COVID-19 pandemic. Among other criteria, clients must be in good standing with IFC and compliant with environmental, social, and governance (ESG) requirements.

USD 50.4% AUD 33.4% SEK 9.0% BRL 3.0% MXN 2.1% RUB 0.9% ZAR 0.4% TRY 0.3% JPY 0.2% CNY 0.1% UYU 0.1%

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Social Bond Eligible Projects: Commitments and Disbursements by Region

Social Bond Eligible Projects: Commitments and Disbursements by Sector

(USD millions)

(USD millions)

As of June 30, 2021, IFC has committed 194 projects eligible for support from social bond proceeds. The total committed amount for these projects is $5.6 billion.

Information and Communications Technology

Agribusiness

Infrastructure

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21

Commitments 119 Disbursements 104

56 41

75 273

86

Commitments 20 Disbursements 13

- -

- -

28 20

10

Commitments Disbursements

- 137

15

-

3

Multi-Region

Commitments and Disbursements by Region FY17 FY18 FY19 FY20

FY17 FY18

FY19 FY20 FY21

31 168 129

8

-

31 105

9

-

FY21

Commitments Disbursements

- -

- -

- 120 - 120

- -

Europe and Central Asia FY17 FY18

Commitments 620 717 823 2,156 1,501 Disbursements 364 614 844 966 1,868

FY19 FY20 FY21 20 166 232

Commitments 109

177

Education

Gender Finance

Other Finance

Disbursements 107 154

41

76 224

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21

Commitments Disbursements

- -

5

- 106

40

Commitments - 241 253 407 130 Disbursements 40 189 215 326 212

Commitments Disbursements

3

4

- 1

- 1

-

1

1

-

57

-

1

2

Middle East and North Africa FY17 FY18

FY19 FY20 FY21

Latin America and the Caribbean

South Asia

Commitments Disbursements

12 106

7

116

27

FY17 FY18

FY19 FY20 FY21

7

5 108

21 107

FY17 FY18

FY19 FY20

FY21

Commitments 165 Disbursements 100

151 320

317 345

Food & Beverages

Housing Finance

COVID-19 Response Financing

Commitments Disbursements

42 108 205

319 395 227 285

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21

122

383 146 239

8

86

237

Commitments 29

37 15

18 29

56 20

31 76

Commitments Disbursements

- -

20 20

- 248 275

Commitments Disbursements

- -

- -

- 763 434

Disbursements

3

- 248

-

-

50 881

East Asia and the Pacific FY17 FY18

FY19 FY20 FY21

Sub-Saharan Africa

Commitments Disbursements

137

71

141 586 53 279

321 511

FY17 FY18

FY19 FY20 130 532

FY21

33 168

Health

Microfinance

Commitments 155 104

181

FY17 FY18 FY19 FY20 FY21

FY17 FY18 FY19 FY20 FY21 Commitments 449 150 424 179 333 Disbursements 205 316 405 125 343

Disbursements 109

79

22

97 502

Commitments Disbursements

- -

68

37 85

9 159 - 160

-

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A Quick Update on IFC’s $8 billion Fast-Track COVID-19 Facility

IFC’s $8 billion Fast-Track COVID-19 Facility

Envelope (USD millions)

Commitments (USD millions)*

Envelope (USD millions) Commitments (USD millions)* 4,000 1,200

R einvigorating the private sector in emerging markets and IFC is working to address the systemic healthcare vulnerabilities exposed by the pandemic. Developing countries need equitable access to vaccines and medical supplies to fight COVID-19 and other diseases. IFC is addressing market gaps, improving local manufacturing and distribution capacity, and supporting public-private partnerships to strengthen health system resilience. Access to capital is the biggest constraint on business growth in developing countries, with pre-pandemic >Page 1 Page 2-3 Page 4-5 Page 6-7 Page 8-9 Page 10-11 Page 12-13 Page 14-15 Page 16-17 Page 18-19 Page 20-21 Page 22-23 Page 24-25 Page 26-27 Page 28-29 Page 30-31 Page 32-33 Page 34-35 Page 36-37 Page 38-39 Page 40-41 Page 42-43 Page 44

www.ifc.org

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