Designing Investor-Friendly Carbon Markets: Lessons from the IFC Forests Bond
International Finance Corporation (IFC)
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Abstract: Clear incentives for investors, transparent carbon markets, the backing of a partner with real financial or business clout. These are some of the features IFC believes will make a successful outcome more likely for issuers of â??forests bonds,â?? debt issued to raise money for tackling deforestation where interest rates are tied to the borrower meeting predetermined targets. These conclusions are based on the lessons learned from IFCâ??s role in the first ever forests bond, issued in 2016 that matured five years later. With 10 million hectares of forest lost every year worldwide1, triggering desertification, erosion and reducing the earthâ??s natural ability to absorb carbon dioxide, the need to raise funds is becoming ever more urgent.