The EU and partner institutions sign the Green Bond Fund: up to €20 billion for sustainable infrastructure

Brussels – A new public-private investment vehicle to mobilise up to €20 billion in private capital for sustainable infrastructure projects in low- and middle-income countries. It is the Global Green Bond Initiative Fund (GGBI), which was signed today (24 April) by the European Union and its development finance partner institutions. “This is more than just a financial operation: it is a strategic choice to combine economic resilience with climate justice, for the sake of our planet and future generations,” commented the President of the European Commission, Ursula von der Leyen, adding that “with the Global Green Bond Initiative Fund, Europe is reaffirming its leadership in sustainable finance.” With this instrument, “we will mobilise billions in private investment to achieve our climate and environmental goals” and “together with our partners, we are redefining the way the world finances its future.” 

So, billed as a means of financing emerging economies, at least 20 per cent of the investments will be directed towards the world’s least developed countries, with support for bonds issued in both local currency and euros. According to Brussels, “this will help to strengthen local capital markets and promote the international use of the euro.” And, “as the world’s leading issuer of green bonds, the EU will promote high environmental standards and share best practices with partner countries.”

The GGBI is one of the three pillars of the broader Global Green Bond initiative, described as a “flagship” of the European Global Gateway strategy. The other two are: a technical assistance programme to share EU expertise and provide support in project design, and the Green Coupon Subsidy Facility, which will help reduce financing costs for issuers facing particularly prohibitive interest rates. The aim of the GGBI is to unlock up to €3 billion in green bonds in partner countries and to help finance activities that support climate and environmental objectives. “The fund will invest exclusively in bonds issued on primary markets, giving priority to first-time issuers such as governments, local authorities, and businesses,” the EU executive states.

The structure and management of the fund

The fund will operate exclusively in primary markets, that is, markets where new securities are issued and sold for the first time by companies or public bodies before being traded between investors, and will give priority to issuers entering this market for the first time, such as governments, local authorities, and companies. 

The fund is structured as a complex, multi-tiered financial mechanism that combines public and private capital, European guarantees, government contributions, and technical support instruments, under the joint management of international financial institutions and one of Europe’s leading asset managers. The fund’s specific objective is to mobilise up to €3 billion in green bonds in partner countries. The capital will consist of approximately €1 billion from public investors, which is expected to attract up to €2 billion from private European and international shareholders. A consortium of European financial institutions will contribute nearly €800 million: it will be led by the European Investment Bank (EIB), together with the European Bank for Reconstruction and Development, as well as the Spanish Agency for International Development Cooperation (AECID), the Italian development bank Cassa Depositi e Prestiti (CDP), the European Bank for Reconstruction and Development, the Dutch development bank FMO, the German development bank KfW, and the French development finance institution Proparco. 

There are three complementary pillars: the GGBI Fund, which mobilises private capital on a large scale for sustainable investments in developing countries through green bonds; a comprehensive technical assistance programme that will share EU expertise and support issuers in partner countries in designing and issuing green bonds and projects; and the Green Bond Coupon Grant Facility, which will help reduce financing costs for issuers facing particularly prohibitive interest rates, under certain circumstances. “More specifically, through this Green Coupon Grant Facility, the EU will subsidise part of the coupons for green bond issuers facing very high interest rates. This will enable partner countries to grow more rapidly in the green bond market and raise the necessary funds for their citizens and their economies,” explains the Berlaymont Building.

“Strong global partnerships matter more than ever. As the EU’s financial arm, the European Investment Bank is proud to lead this new consortium,” said Nadia Calviño, President of the European Investment Bank, highlighting that the consortium’s role “will strengthen global capital markets and help us mobilise private financing to build sustainable infrastructure projects that contribute to stability and shared prosperity around the world.” 

The European Commission will provide credit protection through the guarantee of the European Fund for Sustainable Development Plus (EFSD+). This amount will be supplemented by equity contributions from the Government of the Grand Duchy of Luxembourg, channelled through LuxDev, the agency for development cooperation, which is almost entirely owned by the Luxembourg State, and subsequently by additional funding provided under the Green Climate Fund. Operational management, however, is entrusted to Amundi, a French asset management company controlled by Crédit Agricole: it is the largest asset manager in Europe and one of the world’s leading investment managers.