World Bank Issues $225 Million Bond to Support Amazon Reforestation Efforts

On Tuesday, the World Bank announced the launch of a $225 million nine-year bond, fully protected against principal loss, to fund reforestation efforts in the Amazon rainforest. This bond, set to mature in 2033, is described by the World Bank as the largest "outcome bond" it has ever offered.

Unlike previous bonds linked to carbon credits from avoided emissions, this innovative financial instrument ties investor returns directly to the success of carbon removal initiatives in Brazil's Amazon. The World Bank highlighted that this is the first time a bond has connected financial returns to carbon removal outcomes.

Approximately $36 million from this bond will be allocated to Mombak, a Brazilian company engaged in replanting native tree species in partnership with local landowners in the Amazon. In a separate agreement, Microsoft has committed to purchasing the carbon removal units generated by these projects.

The bond guarantees the return of the full $225 million principal, with an annual return ranging from a minimum of 1.745% to a maximum of 4.362%, contingent on the performance of the reforestation projects. These funds will also support the World Bank's broader sustainable development goals worldwide.

Jorge Familiar, the World Bank's vice president and treasurer, remarked on the overwhelming investor interest in this bond, noting that it reflects a growing desire among private investors to link their financial returns to positive environmental outcomes in the Amazon.

Issued by the International Bank for Reconstruction and Development, the bond was priced at par and is scheduled for settlement on August 20, 2024, with a maturity date of July 31, 2033.