Environmental Finance's Sustainable Debt Awards 2024

Award for innovation - bond structure (sustainability bond): World Bank

The World Bank's $50 million Emission Reduction-Linked bond provides investors a return linked to the issuance of Verified Carbon Units (VCUs) expected to be produced by a water purification project in Vietnam.

Through the transaction, investors support the up-front financing required to manufacture and distribute water purifiers. The project aims to manufacture 300,000 water purifiers and distribute them to approximately 8,000 schools and institutions in Vietnam, expecting to benefit two million children with clean water and reduce greenhouse gas emissions by almost three million tons of carbon dioxide over five years.

The bond is an outcome-based financial instrument. The principal is 100% protected with the $50 million proceeds used to support the World Bank's sustainable development activities.

Michael BennettInvestors forego the ordinary coupon payments, with the equivalent amounts instead being provided, through a hedge transaction with Citi, to support the up-front financing of the water purifier project managed by a private project developer. Instead of ordinary coupons, investors will receive semi-annual coupon payments linked to the issuance of VCUs generated by the project on the Verra Registry.

"The unique structure of this bond mobilises private capital to support a project in Vietnam while at the same time providing principal protection for the investors. The World Bank continues to look for ways to leverage our presence in the capital markets to create innovative solutions for our member countries," said Michael Bennett, head of market solutions and structured finance.

Award judges praised the bond for its interesting approach and innovative structure.

Deal highlights:

Issuer: The World Bank (IBRD)
Size: $50 million
Maturity: 31 March 2028
Coupon: Linked to the number of Verified Carbon Units issued by Verra for the project. Paid semi-annually subject to a cap.
Use of proceeds: World Bank sustainable development projects and programmes
Lead managers: Citi
Credit rating: S&P Global (AAAp)