To support the financing of climate action the World Bank – in partnership with investors and Swedish bank SEB – launched the world’s first green bond in 2008.
Designed to raise funds for environmental projects and promote climate resilience, green bonds have become incredibly successful over the past two decades.
All about bonds
A bond is a financial instrument that represents a loan made by an investor to a borrower – typically a government, municipality or corporation. When you buy a bond, you’re essentially lending money in exchange for periodic interest payments (known as coupon payments) and the return of the bond’s face value when it matures. Bonds are often used by institutions to raise capital for projects, infrastructure or operations, while investors value them for their relative stability compared to stocks.
There are several main types of bonds. Government bonds are issued by national governments and are usually considered low-risk – examples include US Treasuries or UK Gilts. Corporate bonds are issued by companies and carry higher risk but potentially greater returns. Municipal bonds are sold by local governments to fund public projects like roads or schools, often offering tax advantages.
Other variations include zero-coupon bonds, which pay no periodic interest but are sold at a discount and pay in full at maturity, and convertible bonds, which allow investors to convert debt into company shares.