The World Bank said on Tuesday that it raised $225 million in the first-ever sale of bonds to specifically fund projects in the Amazon region of South America.
“It is the first bond linking investors’ financial return to the removal of carbon from the atmosphere, differing from past transactions linked to the sale of carbon credits from avoided emissions,” the US-based lender said Tuesday in a press release.
The World Bank issued the fixed-rate 2033 notes through its International Bank for Reconstruction and Development arm, pricing them at par to yield 4.362%, according to IFR News.
According to the World Bank, the bond’s coupon includes a fixed guaranteed component and a variable component tied to income from reforestation projects in Brazil’s Amazon regions. The generation of carbon removal units (CRUs) potentially offers investors additional benefits compared to regular bonds, it said.
“A portion of the revenue generated from this sale will be paid to bondholders in the form of CRU Linked Interest, in addition to the minimum guaranteed coupon the World Bank will pay investors,” the development bank said.
The bank said in June it had mandated HSBC to structure the deal.
Among the investors that participated were Canada’s Mackenzie Investments, UK investment firm Rathbones, Danish pension fund Velliv and US asset managers Nuveen and T Rowe Price, according to Tuesday’s press release.
Approximately $36 million of the total proceeds to provide financing for reforestation projects selected by Brazilian startup Mombak, it said.
The bank added that Mombak will use the funds to “acquire or enter into partnerships with landowners in the Amazon rainforest to reforest the land with native tree species” in order to bolster biodiversity and local economies.