GHANA/INDONESIA – The World Bank has launched a US$100 million bond devised to tackle the predicament of waste, with reimbursements tethered to the vending of plastic and carbon offset credits.
This groundbreaking bond is dedicated to funding projects for collecting and recycling plastics in Ghana and Indonesia.
It furnishes investors with a monetary return interlinked to Plastic Waste Collection Credits, Plastic Waste Recycling Credits (collectively referred to as plastic credits), and Verified Carbon Units (carbon credits) anticipated to be produced by two designated initiatives.
The chosen endeavors in Ghana and Indonesia aspire to curtail and repurpose plastic waste in susceptible communities, diminishing the influx of plastics into the natural environment and oceans. Citi played the role of Lead Manager in this transaction.
Moreover, the bond galvanizes private capital to bolster the funding of ventures with positive climate and developmental repercussions – gauged by the generation of plastic and carbon credits accredited on the Verra Registry.
Through this transaction, investors are extending around US$14 million in initial financing mandated by the projects to amplify capabilities at existing facilities, broaden to novel collection and recycling sites, and institute state-of-the-art food-grade recycling machinery.
In conjunction with diminishing plastic pollution, these initiatives instigate enhancements in local pollution and air quality, mitigate associated health consequences, and spawn employment opportunities in frequently disregarded and marginalized communities.
The inventive utilization of plastic credits in this transaction introduces an entirely unprecedented method of financing operations for plastic collection and recycling, simultaneously averting the leakage of plastic waste into the ocean.
Anshula Kant, Managing Director and World Bank Group Chief Financial Officer, remarked, “Given the colossal requisites for development, steering private capital to abet developmental challenges has been an intrinsic facet of our endeavors.
“Outcome bonds, like the Plastic Waste Reduction-Linked Bond, align incentives so that investors reap financial benefits when positive developmental outcomes transpire.
“They orchestrate a win-win scenario with local communities and ecosystems, reaping advantages from reduced pollution, and we will persist in issuing them.”
The bond is completely safeguarded in principle, with the proceeds of US$100 million deployed to bolster the World Bank’s sustainable development activities globally.
Investors relinquish a segment of regular coupon payments, with equivalent amounts redirected, through a hedge transaction with Citi, to fortify the financing of projects selected by Plastic Collective UK, overseeing the plastic and carbon credit programs of the projects.
In reciprocation, investors will obtain annual coupons comprising a fixed sum plus payments tethered to the sale of a portion of the plastic and carbon credits generated by the projects.
This bond proffers investors a potential financial advantage compared to standard World Bank bonds of similar maturity, contingent on the anticipated performance of the projects and the monetization of plastic and carbon credits by Plastic Collective UK.
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