The World Bank has made history by issuing a $225 million, principal-protected nine-year bond tied to reforestation efforts in the Amazon. This groundbreaking 2033 bond offers investors a return based on the creation of carbon removal units through reforestation projects in Brazil’s Amazon rainforest.
This issuance represents a significant shift in the world of finance, as it is the first bond to connect investors’ financial gains to carbon removal rather than the sale of carbon credits from avoided emissions. Nearly $36 million from this bond will support the reforestation activities of Mombak, a Brazilian company collaborating with local landowners to replant native tree species in the Amazon. Additionally, tech giant Microsoft has agreed to purchase the carbon removal units.
With 100% principal protection, the $225 million raised will fund the World Bank’s sustainable development initiatives globally. The bond guarantees a minimum annual return of approximately 1.745%, with a potential return of up to 4.362% based on project performance.
Jorge Familiar, Vice President and Treasurer at the World Bank, expressed optimism about the strong investor interest in connecting financial gains to positive development outcomes in the Amazon region. He highlighted the success of this largest-ever outcome bond and the growing support for this innovative structure across various sectors.
Issued by the International Bank for Reconstruction and Development, this bond was priced at par and is set to mature on July 31, 2033, with settlement scheduled for Aug. 20.
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This article discusses the World Bank’s issuance of a $225 million bond tied to Amazon reforestation, marking a significant development in sustainable finance. Investors can now earn returns based on carbon removal units generated by reforestation efforts in the Amazon. This innovative approach aligns financial gains with positive environmental outcomes, demonstrating a shift towards impact investing and sustainable development. By supporting initiatives like these, investors can contribute to global efforts to combat climate change and protect vital ecosystems like the Amazon rainforest.