A £152 million green bond to support private sector development and prevent deforestation in developing countries has been launched.
The five-year bond has been sold to major global institutional investors including CalSTRS, Theehouse Investments, TIAA-CREF and QBE. The bond will be listed on the London Stock Exchange.
It has been issued by the International Finance Corporation (IFC), a member of the World Bank.
The bond also gives investors the option of getting repaid in either cash or carbon credits.
Investors who choose the carbon credit coupon can use them to offset corporate greenhouse gas emissions or sell them in the market.
To pay investors carbon credit coupons, IFC will buy them from a project that follows the United Nations Reducing Emissions from Deforestation and Forest Degradation.
Around 5.5 million hectares of tropical forest are deforested annually, said the IFC.
Protecting forests is critical to keep global warming under 2°C while offering an important opportunity to boost rural livelihoods and protecting vital ecosystems, it added.
Jingdong Hua, IFC Vice President and Treasurer said: “Halting deforestation is essential to meet the global community’s climate goals. To do that, we need to mobilise $75 billion (£61.5bn) to $300 billion (£246bn) in the next decade. Much of this needs to come from the private sector. IFC’s Forests Bond demonstrates the power of innovative capital-market mechanisms to unlock private sector funds for forest protection.”