WASHINGTON, August 13, 2024 — The World Bank has successfully launched a groundbreaking $225 million Amazon Reforestation-Linked Bond, marking the largest outcome bond ever issued by the institution. This innovative 9-year bond ties investors’ financial returns directly to measurable environmental outcomes, specifically the generation of Carbon Removal Units (CRUs) through reforestation projects in Brazil’s Amazon rainforest.
The bond mobilizes $36 million to fund Mombak, a Brazilian company focused on reforesting land in the Amazon with native tree species. The initiative not only aims to remove carbon from the atmosphere but also to enhance biodiversity and foster socioeconomic development in local communities.
Jorge Familiar, Vice President and Treasurer of the World Bank, highlighted the importance of diverse partnerships and financing tools to support the Amazon, emphasizing the strong investor interest in linking financial returns to positive development outcomes. The bond structure, which includes a mix of guaranteed and variable returns based on CRU generation, represents a new model for mobilizing private capital towards reforestation efforts.
Investors will receive a minimum guaranteed coupon from the World Bank, with additional returns linked to the success of the reforestation projects. If the projects generate and monetize CRUs as expected, investors could see higher financial returns compared to traditional World Bank bonds of similar maturity. The bond proceeds will support the World Bank’s sustainable development initiatives worldwide.
“We are pleased to work alongside the World Bank on this innovative bond which aims to support the reforestation of thousands of hectares of the Brazilian Amazon rainforest. We are committed to helping our clients fund sustainable development projects that make a difference in the climate challenge. It was a privilege for HSBC to structure the transaction and act as sole lead manager on the World Bank’s largest-ever outcome bond issuance to-date,” said Greg Guyett, CEO of Global Banking & Markets, HSBC.
“We are excited to be the largest investor in the World Bank’s innovative transaction that provides attractive relative valuation through the deployment of capital to reforestation projects within the Amazonian rainforest in a template-like structure. The removal of carbon from the atmosphere through the generation of Carbon Removal Units that will be subject to ongoing verification by an independent third party, enhanced biodiversity and socioeconomic development in local communities align with our focus on investing in securities that have a direct and measurable social and/or environmental impact,” said Stephen M. Liberatore, CFA, Senior Managing Director/Head of ESG/Impact – Global Fixed Income, Nuveen.
“T Rowe Price is very proud to be a lead investor in the World Bank’s pioneering Amazon Reforestation-Linked Outcome Bond. This innovative, outcomes-based transaction offers a unique combination of attractive financial return potential alongside material and measurable positive impact. We believe this bond will help deliver additionality through removing carbon, improving biodiversity, and supporting job creation,” said Matt Lawton, CFA, Global Impact Credit Portfolio Manager, T Rowe Price.
“Mackenzie Investments is proud to partner with the World Bank by investing in the USD 225 million Amazon Reforestation-Linked Outcome Bond. This transaction, in partnership with Mombak, offers a landmark opportunity in nature positive investment while supporting land stewardship principles. We believe the bond’s unique structure will prove to be both a strong investment and a catalyst for further innovation in the sustainable fixed income market,” said Hadiza Djataou, Vice President, Portfolio Manager, Fixed Income, Mackenzie Investments.
“We are delighted to be an initial investor in the World Bank Amazon Reforestation-Linked Outcome Bond and support an innovative transaction, that will provide funding to reforestation efforts in the Brazilian Amazon – a globally crucial region. We believe this particular bond offers both the exciting prospect of measurable environmental impact, and potentially attractive financial returns for our Ethical and Global Sustainability bond funds,” said Stuart Chilvers, co-fund manager of the Rathbone Greenbank Global Sustainability Bond Fund and portfolio manager for Rathbone Ethical Bond Fund.
“Velliv is very pleased to participate in the Amazon Reforestation-Linked Bond. This impact investment goes very well hand in hand with both the carbon-reduction, social and biodiversity priorities of Velliv. Velliv is pleased the transaction has identified Mombak to carry out the groundwork and succeed with this important objective,” said Thor Schultz Christensen, Deputy Chief Investment Officer, Velliv Pension.
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