• Largest World Bank outcome bond: $225M Amazon Reforestation-Linked Bond ties financial returns to carbon removal and reforestation.
• Innovative investment model: Mobilizes private capital to support Amazon reforestation, enhancing biodiversity and socioeconomic development.
• Broad investor support: Global investors like HSBC, Nuveen, and T Rowe Price back the bond, citing its measurable environmental and financial benefits.

The World Bank has priced its largest-ever outcome bond, a $225 million Amazon Reforestation-Linked Bond, designed to tie financial returns directly to the success of reforestation projects in the Amazon. Unlike traditional carbon credit bonds, this innovative bond links returns to the generation of Carbon Removal Units (CRUs) from the reforestation of Brazil’s Amazon rainforest, making it a groundbreaking approach to mobilizing private capital for environmental impact.

Jorge Familiar, Vice President and Treasurer of the World Bank, emphasized the bond’s significance: “As demonstrated by the historic level of participation in today’s transaction, private investors are eager to connect their financial return to positive development outcomes in the Amazon region.”

The bond is fully principal-protected, with a dual coupon structure. Investors receive a fixed guaranteed component and a variable component linked to CRUs generated by Mombak, a Brazilian reforestation company. The proceeds are channeled into Mombak’s projects, which involve partnering with landowners to reforest the Amazon with native species, thereby not only removing carbon but also boosting local biodiversity and supporting community development.

HSBC played a crucial role in structuring the transaction, with Greg Guyett, CEO of Global Banking & Markets, highlighting the significance: “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.”

Global investors, including Nuveen, T Rowe Price, and Mackenzie Investments, have shown strong support for the bond. Stephen M. Liberatore of Nuveen noted, “The removal of carbon from the atmosphere through the generation of Carbon Removal Units… aligns with our focus on investing in securities that have a direct and measurable social and/or environmental impact.”

The bond’s success signals growing interest in outcome bonds as a vehicle for achieving significant environmental outcomes while offering attractive financial returns. As Matt Lawton of T Rowe Price commented, “This innovative, outcomes-based transaction offers a unique combination of attractive financial return potential alongside material and measurable positive impact.”

Mackenzie Investments also praised the bond’s structure, with Hadiza Djataou stating, “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.”

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Investors like Velliv Pension have echoed the sentiment, recognizing the bond’s alignment with their environmental and social priorities. Thor Schultz Christensen, Deputy Chief Investment Officer at Velliv, remarked, “This impact investment goes very well hand in hand with both the carbon-reduction, social and biodiversity priorities of Velliv.”

The Amazon Reforestation-Linked Bond represents a significant step forward in financing sustainable development, offering a template for future initiatives that seek to address critical global challenges through innovative financial mechanisms.