IFC Makes Landmark Investment to Boost Climate Resilience in Zagreb, Croatia

IFC has stepped in as an anchor investor in the first municipal utility sustainability-linked bond in central and southern Europe, with a subscription of EUR 72.5 million in the EUR 305 million issuance. IFC's first investment in Zagrebački Holding will free up capital to allow the City of Zagreb to make critical investments in infrastructure that will improve resource efficiency and climate resilience. 

The bond issuer is Zagreb Holding d.o.o. (Zagreb Holding), a municipal holding company solely owned by the city of Zagreb. The innovative bond structure will incentivize Zagreb Holding to make waste management and renewable energy investments.  These investments are expected to avoid 132,000 tons of landfill waste by 2027 and increase Zagreb Holding's renewable energy consumption from 50 percent to 70 percent of its total energy consumption between 2023 and 2028. 

Croatia's economy is highly vulnerable to climate change as agriculture, fisheries, hydropower, and tourism together account for over 25 percent of GDP. IFC's aim is to support the country's decarbonization and climate adaptation strategy through helping Zagreb implement its sustainability strategy and infrastructure investment plan. 

After a slow recovery from the global financial crisis of 2007-2008, followed by the COVID-19 pandemic and two devastating earthquakes in 2021, Croatia managed a strong, yet short-lived, economic rebound, due to the uncertainty caused by Russia's invasion of Ukraine. 

Dubravko Karačić, Member of the Management Board of Zagreb Holding said: "We value IFC's fundamental role in anchoring a successful bond issuance and look forward to continuing the partnership and building on our common focus on sustainability and climate". 

"To accelerate economic growth again, Croatia will need to focus on industries and services concentrated in large cities. With this critical investment, IFC can raise the competitiveness of Zagreb, one of central and southern Europe's leading cities, and help it become an engine of growth and job creation", said Ary Naïm, IFC's Regional Manager for Central and Southern Europe. 

IFC's investment in the sustainability-linked bond will help deepen Croatia's domestic capital market, establish corporate and municipal sustainability-linked bonds as an asset class, and encourage sustainable finance instruments across the region. The transaction is also supported by the European Bank for Reconstruction and Development. 

Sustainability-linked finance is a powerful tool for mobilizing capital as the world moves towards a more sustainable future. Since 2020, IFC has invested more than $5 billion in green and sustainability-linked financing to infrastructure companies in emerging markets. IFC's sustainable finance offering also includes complementary client services, such as project preparation support and climate advisory. 

In the cities space, IFC mobilizes commercial financing to help connect cities with capital markets and diversify their investor base. Since 2004, IFC has invested and mobilized over $10 billion in more than 320 projects in urban infrastructure.