Investment by Swedish and Danish pension funds in World Bank's reforestation bond

In a significant step towards preserving the Amazon Rainforest, the World Bank has issued the largest outcome bond to date, raising $225 million through a nine-year bond. The bond, known as the Amazon Reforestation-Linked Outcome Bond, has garnered support from a consortium of institutional investors, including lead investors such as Nuveen, T. Rowe Price, Mackenzie Investments, Rathbones, and Velliv.

The Brazil-based company Mombak, associated with the AM Pro-Sustainability project, will receive $36 million from the bond's proceeds to support its reforestation activities. The AM Pro-Sustainability project, implemented by the State of Amazonas, aims to stimulate bioeconomy enterprises and sustainable forest product income.

China has emerged as the biggest issuer of impact bonds in 2023, with France, the US, and Germany following closely. However, the World Bank remains the most prominent supra-national issuer of outcome bonds. The bond issued by the World Bank is rated Aaa/AAA by Moody's and S&P, offering investors a guaranteed return that is lower than the ordinary return paid on regular World Bank issuances of similar maturity.

The bond is 100% principal-protected, meaning investors' initial investment is guaranteed. Part of the bond's proceeds will be used for the reforestation of the Amazon Rainforest. An amount equivalent to the foregone coupon payments will support the reforestation projects.

Anders Stensbøl Christiansen, CIO at Velliv Pension, expressed his pleasure in supporting the reforestation of the Amazon Rainforest. Velliv Pension, along with the Danish Velliv Pension Fund and the Swedish AP2, are among the backers of the bond.

The lender hinted at a growing pipeline of outcome-oriented bonds, indicating a continued focus on sustainable development activities. Impact or Outcome bonds have been growing in popularity among institutional investors. Additional investors participating in the transaction include AP2, Azimut, IMPAX, Muzinich, and RBC BlueBay Asset Management.

The World Bank's Amazon reforestation linkage fund, which partially supports Mombak, is one of the largest funds dedicated to reforestation in the world. This initiative underscores the World Bank's commitment to combating climate change and preserving biodiversity.