Sunday Bonus: $150 million raised for Rhinos?
The World Bank (International Bank for Reconstruction and Development, IBRD) today priced the Wildlife Conservation Bond (WCB) in support of South Africa’s efforts to conserve endangered species. Also known as the “Rhino Bond,” this five-year $150 million Sustainable Development Bond includes a potential performance payment from the Global Environment Facility (GEF), which will contribute to protecting and increasing black rhino populations in two protected areas in South Africa, the Addo Elephant National Park (AENP) and the Great Fish River Nature Reserve (GFRNR).
The WCB is a first-of-its-kind, outcome-based, financial instrument that channels investments to achieve conservation outcomes – measured in this case by an increase in black rhino populations. Rhinos are considered an umbrella species that play a crucial role in shaping entire ecosystems on which countless other species depend. Through the WCB, investors are supporting the financing of activities to protect and grow a critically endangered species with clear conservation targets, contributing directly to biodiversity, and bringing jobs to local communities through the creation of conservation-related employment in a rural and underserved region of South Africa.
Impact investing isn't new. It's a general investment strategy that seeks to generate financial returns while also creating a positive social or environmental impact. Investors who follow impact investing consider a company's commitment to corporate social responsibility or the duty to positively serve society as a whole.
However, this move can surely have some interesting aspects aligned in the future if this is a success.
How will it work?
The amount raised via this bond will be used towards conserving the animals (medicine, food, protection, etc.) and the holders of the bond will receive a payment from the Global Environment Facility based on the targets for population growth.
How about the interest payments?
If the population goes through a decline, no payment will be made. If the population grows between 0-2%, some amount will be paid, from 2-4% higher amounts will be paid and the highest payment will be for a growth rate of more than 4%.
Such bonds can help create social impact by harnessing the power of finance. It is a way for private players to invest in public/social goods (e.g. environment, biodiversity, etc.). Hoping to see more such innovations in the world of finance.
Cheers!
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