The World Bank has raised $225m through a nine-year bond backed by a broad consortium of institutional investors, with part of the proceeds being committed to the reforestation of the Amazon Rainforest.
The €50bn Danish Velliv Pension Fund and and $41bn Swedish AP2 are among the backers of the bond, which has committed $36bn to support the reforestation activities of Mombak, a Brazil-based company.
Lead investors for the bond include Nuveen, T. Rowe Price, Mackenzie Investments, Rathbones, and Velliv. Additional investors participating in the transaction include AP2, Azimut, IMPAX, Muzinich, and RBC BlueBay Asset Management.
The Amazon Reforestation-Linked Outcome Bond is the largest outcome bond issued by the World Bank to date, with the lender hinting at a growing pipeline of outcome-oriented bonds.
“Velliv is very pleased to participate in the Amazon Reforestation-Linked Bond to support native reforestation of the rainforest biomass in Brazil with the objective of removing carbon from the atmosphere while supporting local wildlife biodiversity. At the same time, the investment will provide an attractive return profile for our pension savers,” said Anders Stensbøl Christiansen, CIO at Velliv Pension.
The bond offers investors a guaranteed return that is lower than the ordinary return paid on regular World Bank issuances of similar maturity. In this instance, an amount equivalent to the foregone coupon payments (the differential between the World Bank’s ordinary return and the fixed return) is used to support the reforestation projects.
Impact, or Outcome bonds have been growing in popularity among institutional investors with China emerging as the biggest issuer of impact bonds in 2023, followed by France, the US and Germany. The World Bank is the most prominent supra national issuer Outcome bonds. Debt issued by the World Bank is rated Aaa/AAA by Moody’s and S&P.
The World Bank stated that the bond is 100% principal-protected, with the $225m proceeds being used to support the World Bank’s sustainable development activities globally.