World Bank prices first U.N. carbon offset bond-lead
The World Bank on Monday priced a $25 million bond linked to United Nations-approved carbon emission offset credits, the market's first such bond, lead manager Daiwa Securities SMBC Europe said.
Payments on the bond are linked to Certified Emissions Reduction credits (CERs), which are issued under the Clean Development Mechanism, a trading scheme that allows rich nations to invest in clean energy projects in developing countries.
Trade in CERs, which holders can either sell for profit or use to meet emissions targets under the Kyoto Protocol, more than doubled to $13 billion last year, according to a World Bank report published in May.
The five-year bond initially pays a coupon of 3 percent, but then switches to a coupon linked to the future performance of CER market prices and the actual versus estimated delivery of CERs generated by a hydropower plant in China's Guizhou province, Daiwa SMBC said.
"Investors in this bond will be able to indirectly participate in the market for greenhouse gas emission reductions and support demand for CERs generated from a specific UNFCCC-registered clean energy project," it said. UNFCCC is the United Nations Framework Convention on Climate Change.
"The market for CERs contributes to a reduction of global greenhouse gas emissions and the transition to a low carbon growth economy," Daiwa SMBC said.