How is the World Bank Funding Carbon Removal in the Amazon?

Investment in forests is an investment in people, economies and the health of our planet.

Years ago, many discussions about sustainability centred around deforestation – and for good reason. Since the end of the last ice age 10,000 years ago the world has lost one-third of its forests, with three quarters of that occurring in the last 300 years. Two billion hectares of forest — equivalent to twice the size of the US — has been cleared, primarily for agriculture.

The peak of deforestation took place in the 1980s, and has since been in decline – good news for biodiversity, global carbon levels and the local communities.

However, whilst deforestation is dropping, reforestation has not reached the necessary levels and much of the land is still at risk of deforestation.

The need to restore native landscapes remains critical – reforestation offers immense benefits by sequestering carbon in trees and soil, while also boosting biodiversity and supporting socioeconomic development in local communities.

In recognition of this, The World Bank has launched a bond to support reforestation in the Amazon rainforest, supported by companies including Microsoft.

“This new outcome bond is a remarkable win-win, creating a bridge between capital markets investors seeking to support positive development and environmental impact in the Amazon with reforestation projects that will help safeguard one of our most valuable natural resources with rich biodiversity, climate and social benefits,” says Jorge Familiar, Vice President and Treasurer, World Bank.

The first form of the bond was launched in its first form in July 2024, however the now-largest World Bank outcome bond ever priced has a new fixed guaranteed component and a variable component linked to the generation of Carbon Removal Units (CRUs) from reforestation projects in the Amazon rainforest regions of Brazil.

This is not the first time that the World Bank has launched projects to support the Amazon rainforest: in fact, it has been supporting the rainforest through multiple projects over many years.

What is the World Bank's Amazon Reforestation-Linked Outcome Bond?

The World Bank estimates that the Amazon rainforest in Brazil alone generates an economic value of US$317bn annually for local communities. 

Beyond its regional impact, the Amazon plays a crucial role globally. As the world's largest tropical rainforest, it acts as one of the most significant carbon sinks, with Brazilian regions contributing an estimated US$210bn in annual value to the planet.

The World Bank's Amazon Reforestation-Linked Outcome Bond is a US$225m, 9-year principal-protected bond issued by the International Bank for Reconstruction and Development (IBRD or the World Bank).

The bond is a financial tool that integrates capital and carbon markets to support large-scale sustainable forest management by providing resources to local communities. These tools encourage decisions that prioritise the value of local ecosystems. 

Carbon removals in the rainforests

A growing sector within carbon markets is carbon removals, which involves removing carbon from the atmosphere through activities like reforestation and afforestation. The environmental benefits of carbon removals are often easier to verify, as they involve reforesting degraded land, compared to avoided deforestation credits that protect land from potential future deforestation. 

“The World Bank Amazon Reforestation-Linked Outcome Bond demonstrates that corporate offtake agreements for carbon removal are crucial for innovative financing mechanisms for nature-based carbon removal projects,” says Brian Marrs, Senior Director for Energy & Carbon Removal at Microsoft. 

“Unlocking low-cost, institutional debt financing is essential for the growth of the Voluntary Carbon Market (VCM). The World Bank’s innovative approach to conservation finance in the Amazon supports forest protection and sustainable livelihoods and offers new tools for private investment in environmental initiatives.”

The bond features a unique structure in which investor returns are tied to the issuance and monetisation of CRUs, which are becoming increasingly valuable in global carbon markets, as private entities seek them to meet voluntary climate change mitigation goals.

Approximately US$26m is mobilised through the bond for projects by Mombak, which specialises in large-scale reforestation projects. 

“We are happy to partner with the World Bank and HSBC in the largest outcome bond deal to date. This first debt transaction for biodiverse reforestation will help unlock debt capital markets for the industry,” said Gabriel Silva, co-founder and CFO of Mombak.

In the Amazon, the Brazilian company rebuilds forests by developing high-integrity carbon removal projects, reforesting degraded Brazilian pastureland using native and biodiverse tree species.

Microsoft’s support for the project comes in the form of CRUs purchased from Mombak, which then in turn support Microsoft’s journey to net zero – as well as the Amazon.

“Microsoft's journey to become carbon negative by 2030 involves pioneering projects with partners like Mombak and their Amazon Reforestation Fund,” explains Brian.

“Our carbon removal work with partners such as Mombak is paving the way for new investors in conservation.”

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