ASIATODAY.ID, JAKARTA – The International Bank for Reconstruction and Development (IBRD) issued a Plastic Waste Reduction-Linked Bond worth $100 million with a maturity of seven years.
IBRD is an international financial institution that provides loans to developing countries that is part of the World Bank Group.
These bonds provide investors with returns related to Plastic Waste Collection Credits, Plastic Waste Recycling Credits (collectively referred to as plastic credits) and Verified Carbon Units (carbon credits) expected to be earned from two projects in Ghana and Indonesia.
Both projects aim to support the reduction and recycling of plastic waste in areas that are vulnerable to natural and ocean pollution. Citi acted as Lead Manager in this transaction.
These bonds also encourage private capital to support funding for climate-friendly and development projects, and can be measured through plastic credits and carbon credits issued on the Verra Registry.
Investors can provide initial funding of approximately $14 million in this transaction, for projects aimed at increasing the capacity of existing facilities, expanding waste collection and recycling areas, and procuring food-grade recycling equipment.
Apart from recycling plastic waste, these projects also support improving air quality, reducing negative health impacts, and creating jobs for marginalized communities.
The innovative use of plastic credit in this transaction provides a new alternative for funding plastic collection and recycling operations that have the potential to pollute the ocean.
“Seeing the increasing urgency of development, we are committed to encouraging private capital that can support solution efforts to answer current development challenges. Outcome Bonds, such as Bonds for Plastic Waste Reduction, play a role in aligning incentives so that investors have the potential to get returns when achieved development has been seen. In this way, investors also contribute in providing a favorable situation for local communities and ecosystems which have always needed clean air with minimal pollution. Therefore, we will continue to issue Outcome Bonds like this,” said Managing Director and World Bank Group Chief Financial Officer, Anshula Kant in an official statement, quoted on Sunday, February 25 2024.
The World Bank ensures that this bond is 100 percent protected by $100 million in funds previously used to support its sustainable development activities globally.
However, the funds do not include plastic collection and recycling projects in Ghana and Indonesia.
Therefore, this bond allows investors to set aside a portion of the regular coupon payment, in an equivalent amount, through a hedge transaction with Citi, to support the funding of projects that have been curated by Plastic Collective UK, the party that manages the program plastic credits and carbon credits from these projects.
Annual Coupon
Investors will receive an annual coupon consisting of a fixed amount plus proceeds from the sale of a portion of the plastic credits and carbon credits generated by the projects.
Compared with regular World Bank bonds of the same maturity, these bonds offer more prospective returns for investors if projects and monetization of plastic credits and carbon credits by Plastic Collective UK proceed as expected, the World Bank said.
Citi’s Global Head of Sustainable Debt Capital Markets, Philip Brown, said that his party was very proud of the collaboration between the World Bank, Plastic Collective and Citi in launching this fourth bond.
“This joint effort plans to use VERRA-registered plastic credits to support two projects to reduce plastic pollution – a global challenge that has a devastating impact, especially in today’s emerging markets. This Outcome Bond allows fixed income investors to supporting development projects that are difficult to obtain funding. Our efforts are in response to investors’ growing interest in transactions that have a direct positive impact on development and can be measured. We hope that transactions like this can be an inspiration to the community and beyond that, driving positive change in general,” said Philip Brown.
Then the Senior Portfolio Manager of Velliv Pension, Asbjørn Purup Andersen, also said that his party was very happy to be the main investor in the World Bank Plastic Waste Reduction Bond.
“This investment will support developing countries with local infrastructure in realizing plastic waste collection and recycling projects to reduce pollution in land and ocean areas. At the same time, these projects will also help reduce poverty by providing a sustainable source of income for local waste scavengers,” he concluded.
“Skandia welcomes the opportunity to participate in the Bond for Plastic Waste Reduction. This program is an excellent example of how retirement savings can benefit customers while being part of the solution to the current global challenge.
The huge amount of plastic pollution is a “The responsibility of the whole community. I am very happy that Skandia can participate and contribute to being part of the solution,” said Alexander Onica, Head of Fixed Income and FX, Skandia.
Vice President, Portfolio Manager, Fixed Income, Mackenzie Investments, Hadiza Djataou said “Mackenzie Investments is very pleased to be able to participate in the issuance of the Outcome Bond as one of the main investors. This bond has a significant impact on the environment and social, reducing plastic waste, while creating economic opportunities for disadvantaged groups in society. In addition to being a pioneer, we believe that our unique results-oriented structure will provide attractive returns for our investors in Canada, allowing them to profit through their positive efforts.”
“We are proud to partner with the World Bank in the issuance of the Bond for Plastic Waste Reduction. This innovative transaction will provide much-needed funding to support plastic collection and recycling efforts in Indonesia and Ghana. We believe this yield-based bond offers a combination of environmental impact measurement and social impact with attractive economic results,” said Matt Lawton, CFA, Global Impact Credit Portfolio Manager, T. Rowe Price.
“We want to contribute to an innovative structure that allows funds to be allocated to ambitious projects that have a positive impact. We are pleased to be one of the first investors to support the issuance of this Bond for Plastic Waste Reduction,” said Tatjana Greil-Castro, Co-Head. of Public Markets, Muzinich & Co. (ATN)
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