Institutional investors inject $166m into World Bank bond

The World Bank has priced the $166 million (US$120m) Spekboom Restoration Outcome Bond to unlock support for large-scale ecosystem restoration and job creation in South Africa's Eastern Cape province.

Maturing in 2040, the bond is the World Bank's longest-dated outcome bond and provides investors with full principal protection and a coupon which includes a fixed rate component and potential additional variable components linked to the restoration of the native plant.

Spekboom, a succulent plant native to South Africa, is prized for its drought resilience and high carbon sequestration.

Major institutional investors include MetLife, BNP Paribas, Nuveen, Morgan Stanley, AllianceBernstein, Impax Asset Management, L&G, Mackenzie Investments and Skandia.

World Bank said its restoration improves soil quality, water retention and climate resilience, while fostering microclimate and soil conditions needed to revitalise the biodiverse ecosystem that support other plant and animal species.

The outcome bond has been structured to mobilise US$25 million of private capital to support a 50,000 hectare scale-up of a spekboom project, designed, developed and operated by Imperative, a private-company specialising in ecosystem restoration. The project aims to restore degraded land and create 11,000 local jobs including through small and medium sized enterprises that will deliver spekboom harvesting, planting, monitoring and ongoing land management.

"Innovative financing is essential to address complex development challenges," World Bank chief financial officer Anshula Kant said.

"This outcome bond shows how capital markets can be mobilized to support large land restoration projects while aligning investor returns with measurable results that strengthen livelihoods and create jobs."

The bond's principal is fully protected by the triple-A credit strength of the World Bank, with the US$120 million proceeds used to support the World Bank's sustainable development lending activities globally.

Investors in the bond have agreed to receive a fixed coupon that is lower than the return on regular World Bank bonds of similar maturity. An amount equal to the remaining portion of the coupon that would otherwise have been paid to investors under a regular bond will be channelled to Imperative, through a hedge transaction with BNP Paribas, as upfront financing for the spekboom restoration project.

"We are pleased to have supported the World Bank on this innovative transaction that aims to channel private capital towards measurable environmental outcomes, while maintaining principal protection and a stable income profile for investors," BNP Paribas global head of primary market Frederic Zorzi.

"The structure illustrates how a collaborative approach - bringing together the World Bank, Amazon and institutional investors - can accelerate private capital mobilization while advancing the World Bank's development objectives and provide investors with a product that aligns perfectly with their mandates and sustainability goals."

Nuveen head of ESG/impact for global fixed income Stephen Liberatore said it is thrilled to continue its partnership with World Bank.

"This investment will further display the potential that spekboom restoration presents to positively impact biodiversity degradation on the African Continent while also providing employment opportunities for local communities," he said.

AllianceBernstein chief responsibility officer Erin Bigley added: "AllianceBernstein is pleased to support another investment through the World Bank's innovative outcome bond structure, which meaningfully de-risks important ecosystem restoration projects by aligning incentives and securing commitments from a credible offtaker."

BNP Paribas Cardif global chief investment officer Matthieu Bonte said it is proud to participate in the Spekboom Restoration Outcome Bond as it supports nature-based solutions that generate environmental positive impact and create benefits for local communities.

"This investment is marking BNP Paribas Cardif's first participation in an outcome bond and contributes to our biodiversity roadmap. It demonstrates how sustainable finance can simultaneously protect ecosystems and empower the communities that depend on them," Bonte said.

MetLife Investment Management head of EMEA fixed income Todd Howard said this is the second investment in an outcome-based structure MetLife has participated in.

"The bond will provide vital funding for a nature-based project in South Africa, focused on the large-scale planting of native Spekboom to sequester carbon, restore degraded ecosystems, and support local livelihoods," Howard said.

"This investment reflects the continued evolution of fixed income markets in facilitating opportunities to direct capital to impactful initiatives that explicitly links financial performance to measurable real-world outcomes, alongside clearly defined risk and return profiles.

"Crucially, these kinds of structures enable investors to tap into high-impact areas like targeted ecosystem restoration, effectively bridging the gap between mainstream capital markets and highly specific sustainability goals."

Morgan Stanley managing director, global head of fixed income ESG strategy and research Anuk Gulati added: "Morgan Stanley Investment Management is pleased to support the World Bank's latest outcome bond. This transaction demonstrates once again the potential of capital markets to advance nature-based solutions at scale while delivering measurable environmental and social outcomes. By directly linking investor returns to project performance, the bond creates a clear and transparent pathway from financing to impact."