World Bank Launches Largest-Ever Outcome Bond to Support Amazon Reforestation

The bond is fully principal-protected, with proceeds used to fund global sustainable development activities by the World Bank.

The World Bank (International Bank for Reconstruction and Development, IBRD) has priced a landmark 9-year, USD 225 million Amazon Reforestation-Linked Bond, the largest outcome bond ever issued by the institution. This innovative bond links investors’ financial returns to the removal of carbon from the atmosphere, a novel approach compared to previous bonds tied to carbon credits from avoided emissions.

The bond features a combination of a fixed guaranteed coupon and a variable component based on 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 reforesting land with native tree species. This initiative not only aims to sequester carbon but also enhances biodiversity and fosters socioeconomic development in local communities.

Jorge Familiar, Vice President and Treasurer of the World Bank, highlighted the significance of the bond, stating, “A variety of partners and financing tools are needed to support the Amazon and its people, protect its biodiversity, and mitigate climate change. The historic level of participation in this transaction reflects the strong interest from private investors in aligning financial returns with positive development outcomes.”

The bond is fully principal-protected, with proceeds used to fund global sustainable development activities by the World Bank. Investors will receive a minimum guaranteed coupon, while a portion of their ordinary coupon payments is redirected through a hedge transaction with HSBC to finance Mombak’s reforestation efforts. CRUs generated by these projects will be sold through an off-take agreement, with revenue partially distributed to bondholders as CRU Linked Interest, alongside the guaranteed coupon.

HSBC, which structured and acted as the sole lead manager for the bond, praised the innovative transaction. “We are proud to have structured this landmark bond that supports significant reforestation in the Brazilian Amazon. Our commitment is to help fund sustainable development projects that address climate challenges,” said Greg Guyett, CEO of Global Banking & Markets at HSBC.

Investors such as Nuveen, T Rowe Price, Mackenzie Investments, Rathbone Greenbank, and Velliv have expressed enthusiasm for the bond’s dual benefit of financial return and environmental impact. Stephen M. Liberatore of Nuveen emphasized the bond’s alignment with their ESG and impact investing goals, while Matt Lawton of T Rowe Price highlighted its potential to deliver both financial and positive environmental outcomes.

The bond was funded by the Government of Japan through the ILO/Japan Fund for Building Social Safety Nets in Asia and the Pacific, reflecting a global commitment to innovative financing solutions for sustainable development.