Amundi and a member of the World Bank Group are working together to create the world's largest green bond fund concentrated on emerging markets, the groups have announced.

The $2 billion Green Cornerstone bond fund launched by Amundi and IFC aims to deepen local capital markets and expand financing for climate investments.  The fund aims to be fully invested in green bonds within seven years.

IFC, which is a large global development institution focused on the private sector in emerging markets, will invest up to $325 million, while Amundi will raise the remainder from institutional investors across the globe.   

Amundi's London-based emerging market fixed income team will manage the strategy. 

The new fund will buy green bonds issued by banks in developing countries. IFC and Amundi said the fund will encourage more local financial institutions to issue green bonds and join the expanding market for them.

IFC will provide first-loss coverage, which will help to lower the risk and mobilise financing from the private sector. This will ensure that the fund can operate in challenging markets and conflict-affected areas.