Denmark’s Velliv is among investors in a new nine-year bond issued by the World Bank, which is designed to raise capital to support reforestation in South America’s Amazon region, having invested $17m (€15.4m) in the bonds.

The International Bank for Reconstruction and Development (IBRD), the lending arm of World Bank Group, announced on Tuesday the $225m issue of the principal-protected Amazon Reforestation-Linked Bond.

Thor Schultz Christensen, deputy chief investment officer of Velliv, said: “Velliv is very pleased to participate in the Amazon Reforestation-Linked Bond.

“This impact investment goes very well hand in hand with both the carbon-reduction, social and biodiversity priorities of Velliv.”

The bond’s coupon includes a fixed guaranteed component and a variable component linked to the generation of Carbon Removal Units (CRUs) from reforestation projects in the Brazil’s Amazon rainforest regions.

The World Bank said the issue was the first bond to link investors’ financial return to the removal of carbon from the atmosphere, differing from previous deals linked to the sale of carbon credits from avoided emissions.

Around $36m of capital is being raised through the issue to support the reforestation activities of Brazil-based company Mombak.

The firm is using the money to acquire or enter into partnerships with landowners in the Amazon rainforest to reforest the land with native tree species.

As well as removing carbon, the reforestation enhances biodiversity and fosters socio-economic development in local communities, the World Bank said in its statement.

The bond issue is structured so that investors forego a portion of the ordinary coupon payments, with the equivalent amounts instead being provided – via a hedge transaction with HSBC – to support the financing of the Mombak projects.

Schultz Christensen said Velliv was pleased the bond transaction had identified Mombak to carry out the groundwork and succeed with its “important objective”.

Nuveen is the largest investor in the Amazon Reforestation-Linked Bond. Other investors include T Rowe Price, Mackenzie Investments and Rathbone, according to the issuer’s statement.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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