Each year, 5.5 million hectares of tropical forest area—an area approximately the size of Costa Rica–are deforested. Protecting forests is critical to keeping global warming under 2 degrees Celsius while offering an important opportunity to boost rural livelihoods and protect vital ecosystems. Investors were offered a choice between a cash or carbon-credit coupon. A carbon credit is a tradable certificate or permit representing the right to emit one ton of carbon dioxide or another greenhouse gas with an equivalent to one ton of carbon dioxide. Investors choosing the carbon credit coupon can retire the credits to offset corporate greenhouse gas emissions, or sell them on the carbon market.
IFC issued the first Forest bond in October 2016, a first-of-its-kind bond that gave investors the option of getting repaid in either carbon credits or cash, raising $152 million to support private sector development and prevent deforestation in developing countries.