Investment from Swedish and Danish pension funds in World Bank's bond initiative geared towards reforestation efforts.

The World Bank has made a significant stride in sustainable development with the issuance of a nine-year bond, raising $225 million. This Amazon Reforestation-Linked Outcome Bond is the largest outcome bond issued by the World Bank to date, and it marks a significant step towards global reforestation efforts, particularly in the Amazon Rainforest.

The bond, which is 100% principal-protected, has attracted a consortium of institutional investors, including Velliv Pension, the Danish Velliv Pension Fund, and the Swedish AP2. Other participants in the transaction include AP2, Azimut, IMPAX, Muzinich, and RBC BlueBay Asset Management, Nuveen, T. Rowe Price, Mackenzie Investments, Rathbones, and Velliv.

Anders Stensbøl Christiansen, CIO at Velliv Pension, expressed pleasure in supporting the reforestation of the Amazon Rainforest. "We are delighted to be part of this initiative, which not only offers a guaranteed return but also contributes to a vital cause," he said.

The bond offers investors a guaranteed return that is lower than the ordinary return paid on regular World Bank issuances of similar maturity. The differential between the World Bank's ordinary return and the fixed return is used to support the reforestation projects.

The institution that supported the World Bank's Amazon rainforest-linked yield bond with $225 million is the Inter-American Development Bank (IDB). The World Bank, as the most prominent supra-national issuer of Outcome bonds, has hinted at a growing pipeline of outcome-oriented bonds.

Impact, or Outcome bonds, have been growing in popularity among institutional investors. Debt issued by the World Bank is rated Aaa/AAA by Moody's and S&P, providing investors with a secure investment option.

Part of the proceeds from the bond will be used for the reforestation of the Amazon Rainforest. The bond has committed $36 million to support the reforestation activities of Mombak, a Brazil-based company.

As the world grapples with the effects of climate change, the issuance of this bond marks a significant step towards sustainable development. With China leading the way as the biggest issuer of impact bonds in 2023, followed by France, the US, and Germany, it is clear that impact investing is gaining traction among global investors.

Investment from Swedish and Danish pension funds in World Bank's bond initiative geared towards reforestation efforts.