Rhino Bond Sold by World Bank in First Issuance of Its Kind

The World Bank said it has priced the world’s first wildlife bond, raising $150 million that will be partly used for the conservation of black rhinos in South Africa.The five-year bond will pay returns determined by the rate of growth in populations of the animals in two South African reserves, the Addo Elephant National Park and the Great Fish River Nature Reserve, the World Bank’s International Bank for Reconstruction and Development said in a statement late Wednesday.“The Wildlife Conservation Bond is a first-of-its-kind, outcome-based, financial instrument that channels investments to achieve conservation outcomes — measured in this case by an increase in black rhino populations,” the World Bank said in the statement.If successful, the program could be expanded to protect black rhino populations in Kenya as well as other wildlife species such as lions, tigers, gorillas and orangutans, an earlier proposal said.There are five rhino species globally, with most of the animals in South Africa and almost all them white rhino. Black rhino numbers have dropped to about 2,600 from 65,000 in 1970, and may once have been as high as 850,000, according to documentation from the World Bank. The animals are found in three other African countries, and can weigh as much as 1.4 tons — much smaller than the white rhino. Instead of paying a coupon, the issuer will make contributions toward conserving the animals and the buyers of the bond will receive a payment from the Global Environment Facility based on preset targets for population growth. To receive the maximum payment the rhino population will need to increase by more than 4% per annum.“The pay-for-success financial structure protects an endangered species and strengthens South Africa’s conservation efforts by leveraging the World Bank’s infrastructure and track record in capital markets,” David Malpass, World Bank president, said in the statement. “It can be replicated and scaled to channel more private capital for other conservation and climate actions and development objectives around the world.”Credit Suisse Group AG structured the bond and acted as joint bookrunner with Citigroup Inc.Under ThreatThe bond was sold at 94.8% of its “nominal aggregate amount” and will pay out a maximum success payment of $13.8 million, the World Bank said. Conservation Alpha has been tasked with determining the success of the program and its payments. The verification agent is the Zoological Society of London.Rhinos are under threat from poaching, mostly because of demand in Vietnam and China for the powder from their horns, which is believed to cure cancer and improve virility. Addo is a 1,640 square kilometer (633 square-mile) reserve, while Great Fish is a 450 square-kilometer park. Both are in South Africa’s Eastern Cape province and are state run. The number of rhinos in the parks have not been disclosed for security reasons. Together they will receive 152 million rand ($10.4 million).The rest of the money go into a pool of money that is spent on a mix of green and social projects in World Bank member countries, the lender said in a response to queries.“We think this is a useful structure,” Michael Bennett, head of market solutions and structured finance in the Treasury department of the World Bank, said in an interview. “This changes the paradigm a little on donor funding. The success risk is being transferred to the investors.” The minimum investment in the bond, which will be finalized on March 31, is $100,000. Those who are buying the bond include institutional investors such as Nuveen Asset Management LLC and high net worth individuals, Bennett said.In earlier documents the backers of the bond said it may be replicated to protect rhino populations at three Kenyan reserves.While the rhino security is a first, so-called sustainable bonds have been used to finance a variety of outcomes from marine and fisheries projects in the Seychelles to girls’ education in rural India.