The World Bank has appointed HSBC to structure a new outcome bond aimed at addressing reforestation efforts in the Brazilian Amazon. This principal-protected outcome bond is expected to have a nominal value of approximately $200 million.
It will support the World Bank’s sustainable development activities.
Additionally, it will mobilize private capital from the foregone coupon payments to finance reforestation projects in Brazil, aiming to generate positive climate and development co-benefits.
Jorge Familiar, Vice President and Treasurer of the World Bank expressed in a statement, “We are excited to unveil plans to expand our suite of outcome bonds, aligning investors’ financial returns with measurable and impactful outcomes in the fight against climate change.”
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The World Bank Amazon Reforestation Outcome Bond is structured to offer up-front financing for reforestation initiatives chosen by Mombak, a Brazil-based company specializing in large-scale reforestation projects in the Amazon.
The press release highlights that the deal aims to support Mombak’s efforts to restore approximately 25 forests in deforested areas of the Brazilian Amazon biome.
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A portion of the bond’s expected return will be tied to the value of carbon credits generated by the reforestation projects. Instead of paying the usual coupon payments to investors, an equivalent amount will be used to finance the restoration of deforested and degraded lands.
The investment returns on the bond will thus depend on the value of the carbon credits produced by these reforestation efforts.
Similar initiatives by the World Bank include a US$100 million bond to finance plastic-reduction projects in Ghana and Indonesia and a US$150 million bond to support efforts to increase the endangered black rhino population in South Africa.