An increasing number of private investors are supporting outcome bonds that link financial returns to measurable and impactful development outcomes. The World Bank (International Bank for Reconstruction and Development, IBRD) has priced a 9-year USD 225 million principal-protected Amazon Reforestation-Linked Bond, marking the largest World Bank outcome bond ever issued. This bond offers investors a coupon with both a fixed guaranteed component and a variable component tied to the generation of Carbon Removal Units (CRUs) from reforestation projects in Brazil's Amazon rainforest.
The transaction mobilizes approximately USD 36 million to support Mombak, a Brazilian company focused on reforestation. Mombak will use these funds to acquire or partner with landowners in the Amazon rainforest to reforest areas with native tree species. In addition to carbon removal, these efforts aim to enhance biodiversity and foster socioeconomic development in local communities. The innovative use of CRUs introduces a new model for mobilizing private capital for reforestation finance.
“A variety of partners and financing tools are needed to support the Amazon and help the people there pursue better livelihoods, protect its incredible biodiversity, and safeguard its global role in mitigating climate change,” said Jorge Familiar, Vice President and Treasurer at the World Bank. “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 proceeds supporting the World Bank’s sustainable development activities globally. Investors will forego part of their ordinary coupon payments, which will be redirected through a hedge transaction with HSBC to fund Mombak's projects. The generated CRUs will be purchased via an off-take agreement by a CRU off-taker, with part of this revenue paid as CRU Linked Interest alongside a minimum guaranteed coupon.
Greg Guyett, CEO of Global Banking & Markets at HSBC, commented on their role: “We are pleased to work alongside the World Bank on this innovative bond which aims to support the reforestation of thousands of hectares of the Brazilian Amazon rainforest.”
Stephen M. Liberatore from Nuveen highlighted their commitment: “The removal of carbon from the atmosphere through generating Carbon Removal Units that will be verified by an independent third party aligns with our focus on investing in securities that have direct social or environmental impact.”
Matt Lawton from T Rowe Price expressed similar sentiments: "This innovative transaction offers attractive financial return potential alongside material positive impact."
Hadiza Djataou from Mackenzie Investments emphasized their partnership: “This transaction offers a landmark opportunity in nature-positive investment while supporting land stewardship principles.”
Stuart Chilvers from Rathbone Greenbank mentioned: "We believe this particular bond offers both measurable environmental impact and potentially attractive financial returns."
Thor Schultz Christensen from Velliv Pension noted: "This impact investment aligns well with Velliv’s priorities on carbon reduction, social impact, and biodiversity."