The World Bank Group, South African Government and Partners have ventured into a US$150 million, five year, sustainable wildlife conservation bond that will be calculated against Addo Elephant National Park (AENP) and the Great Fish River Nature Reserve capabilities to conserve the black Rhino population under the monitoring of London Zoology.
“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 #SustainableDevelopment Bond includes a potential performance payment from the Global Environment Facility.” A press statement issued by the World Bank this week read.
With the Black Rhino labelled an endangered species as according to RED list, the bond can be viewed as a new approach in fostering for the #conservation of endangered species and biodiversity with calls for more conservation bonds.
“The pay-for-success financial structure protects an endangered species and strengthens South Africa’s conservation efforts by leveraging the World Bank’s infrastructure and track record in capital markets. Importantly, it can be replicated and scaled to channel more private capital for other conservation and climate actions and development objectives around the world.” World Bank Group President David Malpass said.
The bond is guaranteed by a performance based grant from the banks flagship development fund Green Environment fund (GEF), and will be listed on the Luxembourg Stock Exchange while calculated by Conservation Alpha with Zoological Society of London making verifications.
“Investors in the WCB will not receive coupon payments on the bond. Instead, the issuer will make conservation investment payments to finance rhino conservation activities at the two parks. If successful, as measured by the rhino growth rate independently calculated by Conservation Alpha and verified by the Zoological Society of London, investors will receive a success payment at maturity, paid by the IBRD with funds provided by a performance-based grant from the GEF, in addition to principal redemption of the bond.” Malpass also said.
South Africa acknowledged the excitement the boost to their efforts in wildlife conservation had met in this first ever Wildlife Conservation Bond and emphasised commitment to advance the county’s broader and rural economic capabilities through wildlife conservation.
“As South Africa we are excited to be at the forefront of an innovative new financial instrument aimed at boosting our efforts to protect the world’s largest rhino population. We would like to acknowledge and express our appreciation for the considerable effort by numerous role players over the last few years that has resulted in this much needed injection of funding into the biodiversity sector. Barbara Creecy, the Minister of Forestry, Fisheries and the Environment, South Africa said.
Furthermore, “We are confident that this will assist in increasing the rhino growth rate and stimulate the development of additional novel market-based mechanisms to support the objectives of the New Deal for People with Nature. South Africa is committed to securing nature’s contribution to people through well-managed and expanding Conservation Areas that contribute to inclusive rural economic growth in thriving Biodiversity Economy Nodes,” said Minister Barbara Creecy also said.
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.” Minister Creecy said.
The bond is a new approach from which other Private Public Partnership funding alternatives can be sourced for the betterment of biodiversity conservation.
“The pay-for-success financial structure protects an endangered species and strengthens South Africa’s conservation efforts by leveraging the World Bank’s infrastructure and track record in capital markets. Importantly, it can be replicated and scaled to channel more private capital for other conservation and climate actions and development objectives around the world.” World Bank Group President David Malpass also emphasised.
This represents a new approach in conservation financing that passes project risks to capital market investors and allows donors to pay for conservation outcomes. Credit Suisse was the sole structurer and joint book runner with Citibank while Global Environment facility is the guaranteer.
“This innovative conservation bond, which the Global Environment Facility is delighted to support, opens a new avenue for financing biodiversity protection at a critically important time. This is a great example of how capital markets can meet both investor and conservation priorities,” said Carlos Manuel Rodriguez, GEF CEO and Chairperson.
Furthermore, “The GEF’s financial backing for this bond gave it the risk/return profile that investors needed to enter the biodiversity space, and I am confident that their engagement will only grow from here, with future conservation bonds that benefit other umbrella species and their ecosystems.”
Rhino protection helps other species that share their habitat. This ecosystem contributes to South Africa’s national economy through tourism, job creation, and as an important source of foreign exchange. However, black rhinos are critically endangered mainly due to poaching and habitat loss.
“The launch of the WCB – 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,” said Dr. Andrew Terry, Director of Conservation and Policy, Zoological Society of London.
The Issuer will pay a Conservation Success Payment to Noteholders at maturity, which will be determined based on the rhino population growth rate in AENP and GFRNR over the term of the bonds. The maximum Conservation Success Payment is US$13.76 million.