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 limiting global warming while offering an important opportunity to boost rural livelihoods and protect vital ecosystems.
The IFC forest bond channels funding to a private sector project that creates viable alternatives to deforestation. The project follows the Reducing Emissions from Deforestation and Forest Degradation (REDD) scheme, offering economic incentives to reduce deforestation and invest in low-carbon growth.
Investors of the forest bond are 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, raising $152 million.