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Citi Working With Nations on More Sustainable-Development Debt

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(Bloomberg) -- Citigroup Inc. is building a pipeline of emerging-nation clients who see bond sales as a way to meet sustainable development goals.

Fresh from managing such offerings for Benin and Uzbekistan last week, the bank anticipates marketing similar deals in the second half, Philip Brown, head of public sector debt capital markets at Citi, said in an interview.

”We’re in detailed discussion with a handful of other sovereigns across all continents who are looking closely at sustainable bond issuance,” Brown said. “I expect we’ll see a number of these materialize in the second half of this year.’”

Benin on Friday became the first African nation to sell a bond linked to the United Nations’ sustainable development goals, or SDGs. Earlier in the week, Uzbekistan sold a similar bond, making it central Asia’s first environmental, social and governance (ESG) issue. Citi led the underwriting syndicate for both deals, said Brown.

So far, two of the most urgent goals being financed are efforts to combat climate change and to provide affordable, clean energy. Brown expects the list of purposes to increase and include spending on agriculture, health care, education, affordable housing and job creation.

Related: Investors Face Baffling $2 Trillion Rainbow of Ethical Debt

Several banks including Citigroup project global issuance of ESG bonds will surpass $1 trillion for the first time this year. Ghana, for example, is planning to issue green and social bonds totaling as much as $2 billion by November.

While some environmental experts warn the financing surge is being over-hyped, new sales of green, social, sustainability and sustainability-linked bonds from corporations and governments worldwide have reached $596.2 billion year-to-date, compared with $477.6 billion all of last year, according to data compiled by Bloomberg.

Read more: Bonds That Fight Poverty Are Booming in Covid-Struck Nations

Robust investor demand for ESG-linked bonds has allowed borrowers to lower their costs. The next step in “this evolution” is for investors in all debt markets to consider whether a bond sale meets the goals of green, sustainable or transition initiatives, Brown said.

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