Deforestation
The Amazon rainforest in Brazil has seen significant deforestation from cattle ranching. The reforestation projects will acquire old unproductive cattle pastures and restore more than 100 native rainforest tree species, including endangered species to ensure resilience, with millions of new seedlings to be planted. 

Carbon Emissions
The Amazon rainforest serves as one of the world’s largest carbon sinks, representing more than half of the planet’s remaining tropical forest. Reforestation helps to sequester carbon from the atmosphere. 

Biodiversity Conservation
The Amazon rainforest accounts for more than half of the planet’s tropical forests, with 390 billion individual trees and is extremely rich in biodiversity, including many endangered species. The unique biodiversity of the Amazon Biome also benefits from the reforestation projects. 

Lack of funding
Reforestation projects and other nature-based solutions tend to be severely underfunded. The innovative ‘outcome bond’ financing structure helps to mobilise new capital from private investors towards conservation and impact projects such as reforestation of the rainforest. 

The Amazon Reforestation-Linked Bonds generates USD 36 million in funding specially to address the challenges in the Amazon rainforest in Brazil related to deforestation, carbon emissions and biodiversity conservation. The bond issued by the World Bank is the largest ever ‘outcome bond’ with a USD 225 million notional and a 9-year tenor.

Velliv and other investors in ‘outcome bonds’ will forego the normal coupon payments, which instead generate funding for specific impact projects. The investors will instead receive a return that is linked to the impact of the projects. It is the first bond linking investors’ financial return to removal of carbon from the atmosphere instead of carbon avoidance.

Microsoft has entered into an offtake agreement to purchase the related ‘carbon removal units’ (CRUs) generated by the projects, which will generate a cash flow for investors in the bonds. The expected return will thus be around 6.1% on an annual basis (consisting of a 1,745% fixed coupon plus an outcome-linked interest rate component of up to c. 4.36% depending on the generated CRUs) which helps to secure a stable return on investment for Velliv’s clients.

The Amazon Reforestation bonds generate funding of USD 36 million for reforestation projects in Brazil. This will allow Mombak to acquire, reforest and operate an additional 3,300 hectares of old deforested land in the rainforest.

The reforestation projects are expected to remove a total of 2 million tons of CO2 from the atmosphere over 50 years. On average, the annual expected yearly sequestration per hectare is 12.3 tons of CO2.

Biodiversity impact is monitored with a total 24 biodiversity indicators in partnership with Conservation International. The biodiversity quantification uses modern technology such as eDNA or Environmental DNA (soil bacteria, soil fungi, water vertebrates) to quantify biodiversity above and below ground, as well as acoustic monitoring (soundscape data of birds and bats) in addition to traditional forest inventory, drone and satellite imagery to get a complete picture of biodiversity uplift over time.

The reforestation projects also help to generate local high-quality jobs for the marginalised populations in the local area.