World Bank raises $300 mln climate bond finance

LONDON, April 24 (Reuters) - The state of California has bought $300 million in green bonds to help the World Bank lend to developing country projects to prepare for climate change and curb greenhouse gas emissions.

It is the World Bank's second issuance of such green bonds, considered an innovative way to raise up-front finance from developed countries to help fight global warming.

The Bank will lend the money at low or zero interest rates to help developing countries cut carbon emissions, for example by deploying renewable energy, and prepare for climate changes such as higher seas for example by planting mangroves.

"Buying these green bonds makes financial sense for California," said Bill Lockyer, California State Treasurer.

"It strengthens our portfolio's diversity while adding a sound investment with a triple-A rated issuer."

The bonds pay a floating coupon according to London interbank lending rates (LIBOR).

The funds will add to several billion dollars that the World Bank already distributes annually for environmental projects in developing nations, and follows a $350 million bond issuance to Scandinavian investors in November.

Green bonds have attracted increasing attention as a possible means to continue a global fight against climate change during recession, to draw investors which would normally invest in stock markets and are now looking for alternative ways to earn a return.

Separately, the World Bank invests in climate change projects through its carbon finance unit, which has $2 billion in assets under management in carbon offset markets.

In addition, developed country donors have pledged $6.1 billion to the Bank's climate investment funds which will also invest in projects to prepare for and slow climate change.

U.N.-led climate talks are meant to culminate this year in a deal in Copenhagen in December to replace or extend the Kyoto Protocol after 2012, and raising sufficient climate funds for developing countries has been one sticking point.