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Credit Suisse acts as Sole Conservation Bond Structurer on World Bank's 'Rhino Bond'
This is a financial promotion - investments in this bond will put capital at risk if not held to maturity.
Credit Suisse is pleased to announce the pricing of the World Bank's Wildlife Conservation Bond (WCB), also known as the 'Rhino Bond', raising USD 150 mn for sustainable development projects and approximately USD 10 mn (ZAR 152 mn) directed towards conservation efforts in South Africa. The bank acted as sole conservation bond structurer and a joint bookrunner on this new type of bond that has a maturity of 5 years.
The WCB, which priced yesterday, is a first-of-its-kind structure that has the potential to shift the conservation funding model, harnessing donor funds in a blended finance approach to mobilize private sector funding through traditional debt capital markets.
The bond supports conservation finance through an outcome-driven bond, issued by the World Bank (International Bank for Reconstruction and Development (IBRD)) by channeling coupon amounts to delivering specific outcomes. In this case, the desired outcome is biodiversity performance which is determined based on an increase in the black rhinoceros' populations in target protected areas in South Africa. Black rhinoceroses are categorized as critically endangered species, the next categorization being extinct in the wild, and their shrinking population reflects broader issues in biodiversity and conservation.
This Sustainable Development Bond is issued off the IBRD's Global Debt Issuance Facility. Proceeds from the USD 150 mn bond will be used for the World Bank's sustainable development projects and programs. Instead of paying coupons on the WCB, approximately USD 10 mn, will be paid to two South African protected conservation areas: Addo Elephant National Park and Great Fish River Nature Reserve. The black rhinoceros' populations in both parks represent a meaningful proportion of South Africa's rhinoceroses. Funds paid in lieu of the coupons will be used only for predefined conservation interventions and the rhinoceros population growth rate at each site will be assessed over the period and independently verified. The World Bank will pay investors the bond principal, which is not linked to rhinoceros population growth, as well as a Conservation Success Payment linked to the growth rate in the rhinoceros population funded by the Global Environment Facility, which is the outcome payer in this transaction. This structure transfers the outcome risk to private investors, who stand to gain a contingent success payment dependent upon biodiversity performance, allowing these key stakeholders to participate in biodiversity conservation with capital protection.
From an environmental perspective, it is hoped that the bond will:
- Secure the current population of rhinoceroses and encourage further population growth
- Protect broader biodiversity and support improvements in planetary health through improved management effectiveness of the ecosystems that rhinos inhabit
- Change conservation funding strategies, providing a model of investment for investors looking for a financial return while supporting biodiversity conservation
In addition to the environmental impact, the bond aims to deliver social benefits by catalyzing social-economic development in South Africa's Eastern Cape province, including by creating jobs in a sector that has been significantly impacted by the COVID-19 pandemic.
Oliver Withers, Biodiversity Lead within Global Sustainability at Credit Suisse, said: "The WCB model provides a new blueprint for the way conservation is financed and has the potential to be a key enabling tool for the delivery of the post-2020 Global Biodiversity Framework. It will draw in private sector investment into conservation and biodiversity, a pressing environmental concern globally, and we are hopeful that this structure can be replicated across various geographies and for the conservation of various species. We are delighted to have been a part of the collaborative effort to bring this innovative transaction to life."
Michael Bennett, Manager for Market Solutions and Structured Finance, World Bank Treasury, said: "This outcome-based bond mobilizes much needed private capital for conservation, leveraging the World Banks regular bond issuance platform, triple-A rating, and track record of innovation in capital markets to test a new financing model that links the investment return of a bond to conservation outcomes."
Jens Welter, Global Co-Head of Banking and Head of Investment Banking Capital Markets for EMEA at Credit Suisse, said: "We are pleased to have been a part of this innovation in capital markets to help create and distribute an investable debt instrument designed to have a meaningful impact on conserving an endangered species. Importantly, we see the WCB as a steppingstone, one that provides the market with a framework to channel the power and scrutiny of capital markets towards identifying projects and refining strategies to address some of the world's most challenging and pressing environmental and social issues."
Dr Andrew Terry at the Zoological Society of London (ZSL) said: "The launch of the Wildlife Conservation Bond – the world's first financial instrument dedicated to protecting a species -- is a watershed moment for wildlife conservation. ZSL has spent more than five years working with many outstanding organisations to lay the groundwork for this innovative new financing mechanism that will bring a much-needed injection of new and long-lasting capital into rhino conservation efforts in Africa and help put nature at the heart of financial decision making."
In addition to being the issuer, IBRD is an implementing agency of the Global Environmental Facility, which is the outcomes payer, providing the grant to pay for outcomes up to the maximum Conservation Success Payment to be paid to investors subject to the Rhino Population Growth Rate. Conservation Alpha Southern Africa is acting as the Rhino Population Growth Rate Calculation Agent appointed by the Issuer; it will be working closely with the Verification Agent, ZSL, also appointed by the Issuer, to facilitate the verification process. The scientific and best-practice foundations for the WCB were laid by the Rhino Impact Investment Project, with funding and technical support from key conservation stakeholders including Fauna and Flora International, the IUCN Species Survival Commission African Rhino Specialist Group, Oak Foundation, Rufford Foundation, the UK Government through the Illegal Wildlife Trade Challenge Fund, The Royal Foundation of the Duke and Duchess of Cambridge, the World Wildlife Fund and ZSL.
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This media release is approved by Credit Suisse (UK) Limited and does not constitute an offer or an invitation to any person to buy or sell any investment. Potential investors should seek to obtain appropriate financial advice. Credit Suisse (UK) Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority for the conduct of investment business in the United Kingdom. The registered address of Credit Suisse (UK) Limited is Five Cabot Square, London, E14 4QR.