BHP Billiton will underwrite cash repayments on what the International Finance Corporation is calling a world-first $US152 ($198m) million bond that will help limit deforestation while providing competitive returns. Source: The Australian
The unique feature of the IFC Forests Bond is that its 1.546% coupon can be received in either cash or carbon credits.
BHP, as part of efforts to curb global warming, will chip in up to $US12m to provide a cash coupon to investors who do not want to take the carbon credits. BHP will then take investors’ carbon credits.
The bond, which will trade on the London Stock Exchange, is being taken up by heavyweight institutional investors such as TIAA-CREF, Australian insurer QBE and JPMorgan.
Funds will support the UN’s Kasigau Corridor Reducing Emissions from Deforestation and Forest Degradation scheme by buying carbon credits from the project.
“It is exciting and extremely encouraging to see the climate finance market continue to move forward with a steady stream of unique deals that offer attractive valuations for investors, at the same time delivering a positive environmental impact,” TIAA’s head of ESG fixed income strategies, Stephen Liberatore said.
IFC vice president Jingdong Hua said 5.5 million hectares of tropical forest was disappearing every year, making protecting forests critical to hitting targets to limit global warming.
“IFC’s Forests Bond demonstrates the power of innovative capital market mechanisms to unlock private sector funds for forest protections,” he said.
BHP sustainability and climate change president Fiona Wild said the miner’s support of the bond was part of its commitment to addressing climate change.
“While low-emissions technology is becoming more effective and commercially viable, it is important to identify robust and cost-effective offsets to help meet future reduction commitments,” Dr Wild said.
