World Bank Green Bonds: Funding Option for Biofuels Projects

Alternative forms of financing for next generation biofuels are needed and one of the best ways to fund bioenergy projects is through the World Bank Green Bonds, according to the head of the environmental finance at the Citigroup, Inc.

In 2008, the World Bank launched the "Strategic Framework for Development and Climate Change" to help stimulate and coordinate public and private sector activity to mitigate the effects of climate change. The World Bank Green Bonds is an example of the kind of innovation the World Bank is trying to encourage within this framework.

The World Bank Green Bonds offer a very good alternative to traditional capital raising via the equities markets which has proved difficult for biofuel companies. Green Bonds dedicated for projects aimed at reducing greenhouse gas emissions do not require collateralization and securitization, so bondholders are shielded from risk. This scheme of financing, along with measures such as the US Renewable Fuel Standard, is expected to encourage lending for next-generation biofuel projects and stimulate further investment, says Managing Director Michael Eckhart.