The capital-protected bond will finance reforestation initiatives selected by Brazilian company Mombak, which buys degraded land from farmers and ranchers or partners with them to replant native species in the world’s largest rainforest.
Mombak’s business model generates CO2 removal credits that can be sold on carbon markets. A portion of the expected returns on the bonds will be linked to the value of credits generated by the projects, the international lender said.
“This transaction is a continuation of this market that we are trying to develop,” World Bank Vice President Jorge Familiar told Reuters, referring to the “performance bonds” model the bank launched earlier this decade.
These bonds, according to the lender, allow investors to support specific sustainable projects and their results. They leverage private capital and transfer the risk of project outcomes to investors, who are rewarded if the activities are successful.
Similar World Bank initiatives include a $100 million bond to finance plastic reduction projects in Ghana and Indonesia and a $150 million bond to support efforts to increase the population of endangered black rhinos in South Africa.
Mombak, which is backed by investors including Bain Capital and AXA and has sold carbon credits to companies including McLaren and Microsoft MSFT.O, hopes the move will be a game-changer for Brazil’s nascent carbon removal industry.
Add Comment