The World Bank (International Bank for Reconstruction and Development, IBRD) has priced a five-year US$50 million, principal-protected Emission Reduction-Linked Bond that provides investors a return linked to the issuance of Verified Carbon Units (VCUs) expected to be produced by a project in Vietnam.
The project aims to manufacture 300,000 water purifiers and distribute them to approximately 8,000 schools and institutions in Vietnam. It is expected to make clean water available to around two million children and to reduce greenhouse gas emissions by almost 3 million tons of carbon dioxide over 5 years.
The bond is 100% principal protected with the US$50 million proceeds used to support the World Bank’s sustainable development activities globally.
The Vietnam water purifier project is not a World Bank project. Investors in the bond will forego ordinary coupon payments, with the equivalent amounts instead being provided, through a hedge transaction with Citi, to support the financing of the water purifier project managed by a private project developer.
Instead of ordinary coupons, the investors will receive semi-annual coupon payments linked to the issuance of VCUs by the water purifier project on the Verra Registry.
“Financing innovative, outcome-based solutions is part of Citi’s commitment to help create a fair and inclusive transition to a low-carbon economy,” said Paco Ybarra, CEO of Citi’s Institutional Clients Group.
“This transaction demonstrates the important role we can play in supporting connectivity between the capital markets and institutions like the World Bank that can help reduce emissions, expand the availability of clean drinking water, and bring scale to voluntary carbon markets.”
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