Pioneering green finance in the developing world: The Fijian Sovereign Green Bond


In November 2017, the Fijian government successfully issued a sovereign green bond and raised Fijian dollars (FJD) 100 million (~USD 50 million; long-term average conversion rate: 1 USD = 2 FJD) to help finance its transition towards a low-carbon and climate-resilient economy. Green bonds are fixed income financial instruments for raising capital from investors through the debt market. The bond issuer raises a fixed amount of capital from investors over a set period of time (i.e. the ‘maturity’) and repays the capital as well as an agreed amount of interest when the bond matures. A green bond is different from a regular bond in that it is being ‘labelled’. That means that it is designated as ‘green’ by the issuer or another entity, with a commitment to use the proceeds of the green bond in a transparent manner and solely finance ‘green’ projects, assets or business activities with an environmental benefit (OECD, 2015, p.5). Fiji became the first developing country to use this innovative financial instrument. In April 2018, the Fiji Sovereign Green Bond (FSGB) was successfully listed on the London Stock Exchange International Securities Market, which enabled the FSGB to reach broader investor segments.

For the bond’s issuance, Fiji developed a Green Bond Framework through a transparent process with sound plans for strengthening the country’s climate actions and in strong alignment with the International Capital Market Association’s (ICMA) Green Bond Principles. These principles were developed by a group of investment and multilateral banks, including the World Bank and the International Finance Corporation (IFC), and are voluntary guidelines for a broad market use. To institute credibility, the Fijian government also engaged a second opinion provider, Sustainalytics, to review and verify the green and sustainable aspects of the framework. Following Sustainalytics’ analysis, the framework was revised and further strengthened. Fiji’s Green Bond Framework (FGBF) targets climate change mitigation and adaptation, sustainable land use and biodiversity protection and, in addition, helps achieving the Sustainable Development Goals (SDG).

There is an increasing need for innovative financing options that have minimum implications for fiscal stability for developing economies and that enable them to efficiently mobilise private, bilateral and multilateral financing. As a developing country vulnerable to climate impacts, it was imperative for Fiji to balance its developmental aspirations and climate goals. Fiji saw the global green bond market as an opportunity to address capacity and resource gaps in meeting these goals, and tapped into its potential. With high-level political endorsement, the FSGB allowed Fiji to reach an untapped international investor base and also enabled it to be ambitious in planning its future climate actions. By encouraging domestic investors to help finance green projects through this bond, the Fijian government was able to gain significant subscriptions. The robust and transparent process set by Fiji is likely to pioneer and establish a roadmap for other developing countries to follow in using innovative financial instruments for financing their climate needs and actions.

Impact of activities

The FSGB puts emphasis on resilience building and adaptation-focused projects, with around 90 % of the proceeds from the bond being channelled to climate resilience and adaptation projects. Thus, the bond supports this under-funded segment, reflecting Fiji’s local needs and priorities. The remaining 10 % of the proceeds were used for mitigation projects that denote Fiji’s commitment to the Paris Agreement and its low-carbon ambitions. Considering the projects were selected from a list of on-going projects based on the potential for maximum effectiveness, the FSGB has been able to deliver and capture tangible impacts within a year of its issuance. The key impacts arising from the use of proceeds are depicted below (Ministry of Economy, 2018):

  • Clean Water Supply: The implementation of 120 rural water schemes provided 42,670 people in 120 rural communities throughout Fiji with access to water emanating from a clean and well-managed source. To this date, the installations of two ecological purification systems (EPS) have benefitted 6,122 people out of 42,670 by providing them with access to 20,000 litres of clean, treated water. The remaining households will have this benefit by August 2020. Through the installation of water tanks, the rainwater harvesting programme has benefitted more than 40,245 people through the hygienic storage of at least 40.2 million litres of water.
  • Cyclone Rehabilitation: In total, 1,283 schools and related structures were rebuilt, 65 of which can also be used as evacuation centres during disasters. The rehabilitation of these schools benefits 33,209 students.
  • Emergency Road Works: The project activities resulted in 1,177 roads being restored, 176 bridges rehabilitated, more than 1,200 km of drainage being improved, and around 3 km of coastal protection measures constructed.
  • Access to Green Energy: 2635 cyclone-resilient solar home systems in rural communities were installed, which are expected to reduce up to 1,038 tonnes of CO2 emissions annually.
  • Forest Conservation: 2001 native and indigenous trees were planted to create carbon sinks and support Fiji’s natural biodiversity. This project is expected to reduce up to 1,919 tonnes of CO2 emissions annually.
  • Sustainable Waste Management: FJD 2.85 million (~USD 1.4 million) was allocated towards the expansion of Fiji’s largest waste-disposal facility. The expansion of the selected waste-disposal facility would enable 5 times more capacity for waste collection, and would also make the facility feasible for waste-to-energy systems by providing the necessary economies of scale.
Institutions involved

The Green Bond Steering Committee is ultimately responsible for the FSGB. The committee includes high-level representatives from the Reserve Bank of Fiji, the Ministry of Economy, the Office of the Solicitor General and the International Financial Cooperation as technical advisors.

The Head of Climate Change and International Cooperation (Ministry of Economy) is responsible for managing the project identification process and coordinating with all line ministries to identify potential green projects. The issuance of the FSGB was the responsibility of the Debt Management Unit (Ministry of Economy) and the Reserve Bank of Fiji (RBF). The financial management and disbursement of bond proceeds is the responsibility of the Treasury Division (Ministry of Economy).

Given that the FSGB has a 5-year and 13-year tenure, the Climate Change and International Cooperation Division will be responsible for coordinating ongoing monitoring, evaluation and reporting of projects with respective government agencies over the next 5 and 13 years.

Source details
  • IKI NDC Support Cluster