DEAL: world’s first forest bond

Author: Lizzie Meager | Published: 3 Nov 2016

In a world first, the International Financial Corporation (IFC), an arm of the World Bank, has issued a so-called forest bond.

The $152 million instrument, which priced on Monday, is designed with the express purpose of reducing deforestation and encouraging further private sector investment in low-carbon projects. The IFC’s presence on the deal is important for that reason.

The world loses around 13.6 million acres of tropical forest per yearBacked by Australian commodities firm BHP Billiton, the deal is listed in London. Investors have the option to receive coupons either in cash, in the form of carbon credits generated by the forest, or a combination of the two, offering a potentially more lucrative option depending on the state of the market.
"The idea was to create a tool that’s familiar to international investors, but would also solve the conservation issue. To some extent it’s very simple in structure," said...