Sovereign Climate Debt Instruments: An Overview of the Green and Catastrophe Bond Markets
Staff Climate Notes, July 7, 2022
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Bibliographic details
- Authors: Sakai Ando, Francisco Roch, Ursula Wiriadinata, Chenxu Fu
- Published: July 7, 2022
- Series: Staff Climate Notes
- DOI: https://doi.org/10.5089/9798400210006.066
Summary and Purpose
- Financial markets will play a catalytic role in financing the adaptation and mitigation to climate change.
- Catastrophe and green bonds in the private sector have become the most prominent innovations in the field of sustainable finance in the last fifteen years.
- Sovereign-level issuances have been relatively recent and not well documented in the literature.
- This Note discusses the benefits of issuing these instruments as well as practical implementation challenges impairing the scaling-up of these markets.
- Emerging market and developing economies stand to benefit the most from these financial innovations.
Benefits of Sovereign Green and Catastrophe Bonds
- Provide an additional source of stable financing with more favorable market access conditions.
- Mitigate the stress of climate risks on public finances.
- Facilitate the transition to greener low-carbon economies.
- Leverage innovations in private-sector sustainable finance (green bonds, catastrophe bonds) at the sovereign level.
Practical Implementation Challenges (as highlighted)
- Recent and limited sovereign issuance history constrains empirical documentation and lessons learned.
- Scaling-up of these markets is impaired by practical implementation challenges (specific challenges are discussed in the Note).
Target Audience and Policy Relevance
- Relevant for policymakers, debt managers, and sovereign issuers evaluating climate-related debt instruments.
- Particularly relevant to emerging market and developing economies seeking to mobilize market-based climate finance.
Publication and Metadata
- Authors: Sakai Ando, Francisco Roch, Ursula Wiriadinata, Chenxu Fu
- Date: July 7, 2022
- Series: Staff Climate Note No 2022/004
- Issue: 004
- Volume: 2022
- Pages: 28
- DOI: https://doi.org/10.5089/9798400210006.066
- Stock No: CLNEA2022004
- ISBN: 9798400210006
- ISSN: 2789-0600
- Subject: Economic sectors, Environment, Financial crises, Financial institutions
- Keywords: Bonds; catastrophe bond; catastrophe bonds; Climate change; Climate debt instruments; Climate finance; Europe; financial innovation; Green bonds; greenium; IMF analysis; IMF staff Climate note; IMF staff Climate Note 2022/004; Natural disasters; Sovereign bonds
Staff Climate Notes — “Sovereign Climate Debt Instruments: An Overview of the Green and Catastrophe Bond Markets”, Sakai Ando, Francisco Roch, Ursula Wiriadinata, Chenxu Fu, July 7, 2022.
Content in this bundle
- Sovereign Climate Debt Instruments: An Overview of the Green and Catastrophe Bond Markets; July 2022