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Sovereign Climate Debt Instruments: An Overview of the Green and Catastrophe Bond Markets
Author:
Mr. Sakai Ando
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https://orcid.org/0000-0003-2785-4375
,
Mr. Francisco Roch https://isni.org/isni/0000000404811396 International Monetary Fund

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Ursula Wiriadinata https://isni.org/isni/0000000404811396 International Monetary Fund

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Mr. Chenxu Fu
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Series:
Staff Climate Notes
Volume/Issue:
Volume 2022: Issue 004
Language:
English
Publication Date:
07 Jul 2022
DOI:
https://doi.org/10.5089/9798400210006.066
ISBN:
9798400210716
ISSN:
2789-0600
Pages:
28
Keywords:
Green bonds; greenium; catastrophe bonds; financial innovation; IMF staff Climate note; Climate debt instruments; IMF staff Climate Note 2022/004; catastrophe bond; IMF analysis; Climate finance; Bonds; Sovereign bonds; Climate change; Natural disasters; Europe
Legal-disclaimer:
The IMF Notes Series aims to quickly disseminate succinct IMF analysis on critical economic issues to member countries and the broader policy community. The IMF Staff Climate Notes provide analysis related to the impact of climate change on macroeconomic and financial stability, including on mitigation, adaptation, and transition. The views expressed in IMF Staff Climate Notes are those of the author(s), although they do not necessarily represent the views of the IMF, or its Executive Board, or its management.
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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. Yet, the issuances at the sovereign level 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. The issuance of these instruments could provide an additional source of stable financing with more favorable market access conditions, mitigate the stress of climate risks on public finances and facilitate the transition to greener low-carbon economies. Emerging market and developing economies stand to benefit the most from these financial innovations.
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Cover Staff Climate Notes
Staff Climate Notes
Publisher:
International Monetary Fund