Washington, DC, August 20, 2024 - The World Bank (International Bank for Reconstruction and Development, IBRD) today issued the Amazon Reforestation-Linked Outcome Bond. The 9-year USD 225 million bond was priced on August 13, 2024, and is due July 31, 2033. Outcome bonds, pioneered by the World Bank, link investors' financial return to measurable and impactful development outcomes in a liquid, high-grade fixed income product. Through the transaction, approximately USD 36 million of additional capital is mobilized from investors to support the reforestation activities of Mombak, a Brazilian based company.
The Amazon Reforestation-Linked Outcome Bond, the largest outcome bond to-date, capitalizes on a growing investor desire to support positive development impact. The transaction attracted many repeat World Bank outcome bond investors, as well a new crop of first-time participants. Looking forward, the World Bank is exploring a growing pipeline of outcome bond transactions that will replicate and build upon prior structures, providing opportunities for bond investors to support positive development outcomes across a range of sectors.
Similar to other World Bank outcome bonds, investors receive a guaranteed return that is lower than the ordinary return paid to investors for regular World Bank issuances of similar maturity. In this instance an amount equal to the foregone coupon payments (the differential between the World Bank ordinary return and the fixed return) are used to support the reforestation projects. The bond is 100% principal protected with the USD 225 million proceeds used to support the World Bank's sustainable development activities globally.
The World Bank's efforts at the forefront of sustainable capital markets have been welcomed by the lead investors in the Amazon Reforestation-Linked Outcome Bond: Nuveen, T Rowe Price, Mackenzie Investments, Rathbone, and Velliv, as well as by additional investors participating in the transaction including AP2, Azimut, IMPAX, Muzinich, and RBC BlueBay Asset Management (quotes below in alphabetical order):
"AP2 is very excited to continue our cooperation with the World Bank. The concept of outcome bonds enabled by the World Bank's Amazon Reforestation-Linked Outcome Bond makes channeling capital into specific projects with a clear and measurable impact easier for AP2 - without having to face the whole financial risk of the project. We are pleased that the transaction can support AP2's three key areas as part of its sustainability strategy: Climate, Biodiversity and Human Rights," said Ole-Petter Langeland, Head of Fixed Income, AP2.
"Azimut Group is very proud to be an investor in the innovative World Bank Amazon Reforestation-Linked Outcome Bond, helping Mombak to develop large-scale native reforestation projects in the Amazon and fostering socioeconomic development in the local communities. Through their participation in this bond, Azimut's pension fund: Azimut Sustainable Future, and AZ Bond - Green & Social, are helping to provide direct and measurable impact outcomes. At the same time, the development of high-quality Carbon Reduction Units further aligns with Azimut's mission of giving companies the right instruments to push forward their decarbonization strategies while giving investors attractive returns," said Giorgio Medda, CEO and Global Head of Asset Management & Fintech at Azimut Group.
"Impax is honored to partner with the World Bank on this innovative bond helping to support reforestation. While offering an attractive coupon and total return potential, it will help deliver a high-quality restoration project in a region whose forests are key to avoiding the climate crisis," said, Tony Trzcinka, CFA, Senior Portfolio Manager, IMPAX.
"Mackenzie Investments is proud to partner with the World Bank by investing in the USD 225 million Amazon Reforestation-Linked Outcome Bond. This transaction, in partnership with Mombak, offers a landmark opportunity in nature positive investment while supporting land stewardship principles. 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," said Hadiza Djataou, Vice President, Portfolio Manager, Fixed Income, Mackenzie Investments.
"We are proud to continue to partner with the World Bank. This is the second outcome bond in which Muzinich has invested on behalf of our clients this year. The first was a plastic-waste reduction-linked bond, used to fund the collection and recycling of plastic in Ghana and Indonesia. The outcome bond structure designed by the World Bank offers private investors the opportunity to invest in high impact projects whilst protecting on the downside. This can help mobilize additional funds to high impact projects and opens new investment opportunities for private clients," said Tatjana Greil Castro, Co-Head of Public Markets at Muzinich & Co.
"We are excited to be the largest investor in the World Bank's innovative transaction that provides attractive relative valuation through the deployment of capital to reforestation projects within the Amazonian rainforest in a template-like structure. The removal of carbon from the atmosphere through the generation of Carbon Removal Units that will be subject to ongoing verification by an independent third party, enhanced biodiversity and socioeconomic development in local communities align with our focus on investing in securities that have a direct and measurable social and/or environmental impact," said Stephen M. Liberatore, CFA, Senior Managing Director/Head of ESG/Impact - Global Fixed Income, Nuveen.
"We are delighted to be an initial investor in the World Bank Amazon Reforestation-Linked Outcome Bond and support an innovative transaction, that will provide funding to reforestation efforts in the Brazilian Amazon - a globally crucial region. We believe this particular bond offers both the exciting prospect of measurable environmental impact, and potentially attractive financial returns for our Ethical and Global Sustainability bond funds," said Stuart Chilvers, co-fund manager of the Rathbone Greenbank Global Sustainability Bond Fund and portfolio manager for Rathbone Ethical Bond Fund.
"We are pleased to be an investor in the World Bank's Amazon Reforestation-Linked Outcome Bond. This innovative debt structure adds to a new and growing asset class of investment instruments that we believe fixed income investors are uniquely placed to participate in by creating an opportunity to drive greater levels of private capital into conserving biodiversity and tackling climate change, as well as holding the potential to provide attractive returns for its bondholders," said Harrison Hill, Impact-Aligned Bond Strategy Portfolio Manager, RBC BlueBay Asset Management.
"T Rowe Price is very proud to be a lead investor in the World Bank's pioneering Amazon Reforestation-Linked Outcome Bond. This innovative, outcomes-based transaction offers a unique combination of attractive financial return potential alongside material and measurable positive impact. We believe this bond will help deliver additionality through removing carbon, improving biodiversity, and supporting job creation," said Matt Lawton, CFA, Global Impact Credit Portfolio Manager, T Rowe Price.
"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, Chief Investment Officer, Velliv Pension.
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