Facilitating Thematic Bonds for Corporates and Private Institutions

Recognising the pivotal role that the private sector plays in advancing sustainable development, UNDP extends its thematic debt expertise to corporates and private institutions. This dedicated offer aims to facilitate the issuance of thematic bonds by private sector entities, unlocking additional capital for projects that deliver significant environmental and social benefits.
 

Key Areas of Work

1. Pre-Issuance: 

   1.1 Technical Assistance and Capacity Building

   • Support bond issuers in developing and implementing their impact strategies, including SDGs prioritisation, setting impact goals, and developing theories of change. 
   • Strengthen bond issuers’ internal management approaches to optimise their SDG contributions, embed the SDG Impact Standards into management decision-making, enhance impact performance, and facilitate higher quality disclosures.
   • Provide comprehensive support for structuring bonds.
   • Establish robust frameworks for use of proceeds.
   • Set up impact measurement and management systems to ensure transparency and accountability.
   • Offer support for holistic impact analysis to identify all material positive and negative impacts, improve performance, and reduce risks.  
   • Develop transparent reporting mechanisms.
   • Ensures bonds meet international standards and appeal to a broad range of investors.

   1.2. Framework Development

   • Successful track record in framework development across sovereigns.
   • Embedding the SDGs and aligning with governing principles like the International Capital Markets Association (ICMA) Principles and the SDG Impact Standards for Bonds Issuers.
   • Enhance attractiveness to investors.

   1.3. Market Access and Advocacy

   • Supporting issuers in accessing national and international capital markets.
   • Raising the profile of corporate thematic bonds through advocacy and strategic partnerships.
   • Attracting a diverse and extensive investor base interested in sustainable finance products.
     
      
2. Post-Issuance: Impact Measurement and Reporting
   • Refining and operationalising the rigorous impact measurement and reporting systems.
   • Defining clear impact metrics aligned with the SDGs, considering relevant baselines, targets, and thresholds
   • Defining a monitoring and data collection plan, including tools, processes, governance, and systems.
   • Ensuring mechanisms for using data collected for decision-making through internal reporting.
   • Establishing mechanisms for regular learning, adjustments, external reporting, and verification.
   • Enhancing transparency, building investor confidence, and increasing the likelihood of achieving stated sustainability outcomes.

Attracting Diverse Investors to Sovereign Thematic Bonds

UNDP’s sovereign thematic debt offer is uniquely positioned to attract a broader and more diverse array of investors to thematic bonds issued by Supranationals in developing countries. This potential expansion in investor base enhances both the appeal and success of these financial instruments.

Overview of Sovereign Thematic Bonds

• Purpose: Designed to fund projects with positive impacts tied to SDG delivery.
• Recent Trends: Significant traction in recent years due to increasing investor interest in sustainable finance. For instance, global issuance of thematic bonds surpassed $800 billion in 2023.

Advantages for Private Sector Investors

1. Risk Mitigation through Diversification
   • Opportunity for portfolio diversification.
   • Reduces overall investment risk by spreading it across different geographies and sectors.
2. High Demand and Oversubscription
   • Often experience high demand leading to oversubscription.
   • Example: Egypt’s first sovereign green bond issuance in 2021 was oversubscribed by nearly five times (meaning the bond was in high demand and received more investment orders than the available amount).
   • Indicates a strong secondary market, enhancing liquidity.
3. Alignment with ESG Mandates
   • Direct avenue for institutional investors to fulfil ESG criteria.
   • Projects are earmarked to contribute to the SDGs.

UNDP’s Role

• Enhancing Credibility and Visibility: Leveraging global network and expertise.
• Technical Assistance and Capacity Building: Helping developing countries structure and market their bonds effectively, ensuring impacts are considered holistically and aligned with the SDGs.
• Attracting Diverse Investor Base: Includes ESG-focused investors, impact investors, and traditional institutional investors.

Track Record of Issuances

UNDP has a proven track record of supporting the issuance of thematic bonds for sovereigns. This history demonstrates the success and high demand for these financial instruments, as well as the diverse range of projects funded through these bonds.

To provide transparency and keep stakeholders informed, we maintain a detailed record of all past issuances. This record highlights the successful bond issuances facilitated by UNDP, showcasing the scale and impact of these initiatives.