Green bonds worth $225 mi announced for Amazon

With the aim of attracting investments for reforestation in the Amazon, the International Bank for Reconstruction and Development (Bird) announced last week the issuance of $225 million (approximately BRL 1.2 billion) in green bonds. These securities will be offered as outcome bonds, a financial instrument designed to fund projects with socio-environmental impact. According to the announcement, this is the largest results-linked issuance the institution has ever undertaken.

According to Alexander Marinho, a manager of structured funds certified by the Brazilian Association of Financial and Capital Market Entities (Anbima), this type of bond operates similarly to other debt securities transactions. One party seeks funding, while the other provides investment capital. Intermediary agents play a key role by analyzing projects, structuring financing, and negotiating resources among available sources.

Marinho explains that this process involves the investor providing a loan in exchange for compensation from the borrower, as outlined in a prior agreement. "This agreement formalizes the loan and covers various terms, including the repayment period, installment schedule, interest rate, guarantees, governance, and other key details," he notes.

The agreement foreseen for the announced green bonds has a duration of nine years, to be settled in 2033. The terms include an interest rate of 1.745 percent per year, with a variable component that could add up to an additional 4.362 percent annually. The specialist explains that this is the main difference in the impact bond modality. "In addition to the fixed remuneration, there is a variable component that depends on the project's results. It's like a reward for the project's success, which can also serve as a negotiating tool to secure lower interest rates," he says.

The goal is to reforest deforested areas in the Amazon using a Brazilian startup. This initiative aims to generate revenue through Carbon Removal Units (CRUs) from areas restored with native vegetation. Notably, this is the first project that not only focuses on emission reduction but also includes the removal of greenhouse gases that have already been emitted into the atmosphere.