World Bank To Release Bond To Support Amazon Reforestation Efforts

by | Jun 14, 2024 | Daily News, Environmental News

Home » Environmental News » World Bank To Release Bond To Support Amazon Reforestation Efforts

The World Bank announced this week that it plans to issue a new bond to raise $200 million. The goal is to support sustainability and the Amazon reforestation efforts. HSBC has been chosen to structure this significant transaction.

Amazon Reforestation

Supporting Sustainability and Amazon Reforestation

This bond will back the World Bank’s sustainable development projects and finance reforestation initiatives led by Brazilian startup Mombak. The bond is principal-protected, meaning the initial investment is secure. The foregone coupon payments will fund these reforestation projects.

Mombak’s approach involves purchasing degraded land from farmers and ranchers or partnering with them to replant native species in the Amazon. This helps generate CO2 removal credits that can be sold in carbon markets. “This transaction is a continuation of this market we’re trying to develop,” said Jorge Familiar, World Bank Vice President. He referred to the “outcome bond” model, which the bank introduced earlier this decade.

Outcome bonds let investors support specific sustainable projects. They leverage private capital and shift project performance risk to investors, who receive rewards if the projects succeed. The World Bank has launched similar initiatives before. These include a $100 million bond for plastic-reduction projects in Ghana and Indonesia and a $150 million bond to protect the endangered black rhino in South Africa.

Boosting the Nascent Carbon Removal Industry

Mombak, supported by investors like Bain Capital and AXA, has sold carbon credits to firms such as McLaren and Microsoft. Co-founder Peter Fernandez sees this bond as a potential game-changer for the emerging carbon removal industry in Brazil. The sector has faced challenges in securing loans to lower capital costs and finance expensive operations, which involve buying land and planting trees. “You need a lot of money to do reforestation, and because it’s so new, the cost of capital is quite high,” Fernandez said. He believes this bond could help open up debt markets for others in the industry.

Critics of carbon offset markets, such as Greenpeace, argue that they allow companies to continue emitting greenhouse gases. Despite these criticisms, the bond is seen as a positive step for sustainable development and environmental conservation.

Expanding the Amazonia Finance Network

In a related development, the World Bank’s IFC arm and the Inter-American Development Bank’s IDB Invest arm announced that 22 new banks and financial firms have joined the Amazonia Finance Network. This network was launched late last year to support financial initiatives in the Amazon region. With the addition of these new members, including Citi and Visa, the network now boasts a total of 46 participants.

The World Bank’s bond issuance and the expansion of the Amazonia Finance Network represent significant strides in global efforts to combat climate change and promote sustainability. These initiatives aim to harness private capital for public good, supporting critical environmental projects like Amazon reforestation in one of the world’s most vital ecosystems.

Also Read: Devastating Forest Fires Ravage Brazil’s Pantanal Wetlands

Author

  • Sarah Tancredi

    Sarah Tancredi is an experienced journalist and news reporter specializing in environmental and climate crisis issues. With a deep passion for the planet and a commitment to raising awareness about pressing environmental challenges, Sarah has dedicated her career to informing the public and promoting sustainable solutions. She strives to inspire individuals, communities, and policymakers to take action to safeguard our planet for future generations.

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