Linklaters advises the World Bank on first-of-its-kind carbon removal bond to fund Amazon reforestation
Linklaters has advised the World Bank (International Bank for Reconstruction and Development, IBRD) on the issuance of its nine-year US$225 million, principal-protected Amazon Reforestation-Linked Bond – the largest World Bank outcome bond ever.
The bond will provide investors with a coupon that includes a fixed guaranteed component and a variable component linked to the generation of Carbon Removal Units (CRUs) from reforestation projects in the Amazon rainforest regions of Brazil. It is the first bond linking investors’ financial return to the removal of carbon from the atmosphere, differing from past transactions linked to the sale of carbon credits from avoided emissions.
Through the transaction, approximately US$36 million of capital will be mobilised to support the reforestation activities of Mombak, a Brazilian based company. The company will use these funds to acquire or enter into partnerships with landowners in the Amazon rainforest to reforest the land with native tree species. In addition to removing carbon, the reforestation enhances biodiversity and fosters socioeconomic development in local communities. The innovative use of CRUs in this outcome bond structure introduces a new model for mobilising private capital to support reforestation finance.
The Linklaters team was led by Capital Markets partner Elaine Keats and managing associate Sirae Chen.
Elaine Keats commented:
“The Amazon Reforestation-Linked Bond marks a milestone in aligning private capital with tangible environmental and socioeconomic change. We are pleased to have supported the World Bank on another innovative bond which goes beyond traditional structures to create substantial mutual benefits among financial markets, environmental goals, and community development.”
Linklaters Capital Markets team remains at the forefront of the market advising on the most innovative transactions, particularly in connection with ESG-linked initiatives.
Read more about the details of the bond here.
