NEW YORK (Reuters) – The World Bank has issued a $225 million principal-protected nine-year bond tied to Amazon reforestation (NASDAQ:), the global lender said on Tuesday, calling it the largest outcome bond it has ever priced.
The 2033 bond offers investors a return tied to the creation of carbon removal units from reforestation initiatives in Brazil’s Amazon rainforest, the bank said.
The World Bank said this issuance is the first bond to tie investors’ financial returns to carbon dioxide removal, a departure from previous deals tied to the sale of carbon credits from avoided emissions.
Nearly $36 million will be spent to support the reforestation activities of Mombak, a Brazilian company that works with local landowners to replant native tree species in the Amazon. Separately, Microsoft (NASDAQ:) agreed to purchase the carbon removal units.
The bond is 100% principal protected, with the $225 million proceeds used to support the World Bank’s sustainable development initiatives globally, the lender said.
According to the World Bank, the issue has a minimum guaranteed annual return of approximately 1.745%, and up to 4.362% if the projects perform as expected.
“As evidenced by the historic level of participation in the current transaction, private investors are eager to link their financial returns to positive development outcomes in the Amazon,” said Jorge Familiar, Vice President and Treasurer of the World Bank.
“With this largest ever performance bond, we remain encouraged by the growing interest in the structure and the extensive list of sectors supported.”
The bond, issued by the International Bank for Reconstruction and Development, had a nominal price and matures on July 31, 2033. Settlement is scheduled for August 20.
