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Wildlife Conservation Bond Saving Rhinos For Tomorrow

The World Bank came out with a $150 million Wildlife Conservation Bond (WCB), the first of its kind globally. an impact-focused Sustainable Development Bond to protect black rhinos in South Africa and support local communities. This intense publication discusses the Wildlife Conservation Bond issued by the World Bank. An in-depth analysis of the bond discusses various facets of the new financial innovative instrument. Includes a small note on social impact bonds binary exotic option structure.

Structured as an impact bond, the Wildlife Conservation Bond, WCB moniker Rhino Bond focuses on outcome-driven payment. It works like a development impact bond with the outcome payer, a non-government entity. The innovative financial instrument is part of blended finance to drive private capital for wildlife conservation and protection, focusing on protecting black rhinos in South Africa and supporting local communities. The bond proceeds’ vital purpose is to increase the final rhino population growth rate with the Global Environment Facility, the largest trust-based multilateral fund investing in nature, as the outcome payer. The Wildlife Conservation Bond, a collaborative instrument, involves multiple actors through the public-private partnership model to enhance funding for conserving, preserving, and improving wildlife and the biodiversity-ecosystem. These partnerships are essential in co-financing to enhance private capital within the development sector.

# South Africa in a nutshell

 South Africa, the third-largest economy in Africa, and a key emerging market globally registered a -6.43 percent growth rate in 2020 (OECD) due to the pandemic. The economy rebounded to 4.9 percent in 2021 according to Statistics department of South Africa. The country relies heavily on mining precious metals like platinum, where it remains a global leader with more than 80 percent of global reserves. Tourism is a vital industry hit due to COVID-19. But the country consistently suffers from a high unemployment rate, with 12.8 percent of the youth unemployed. South Africa has a dismissal employment rate defined as the ratio of employed to the working-age population. The working-age population refers to people aged 15 to 64. This indicator is seasonally adjusted, and it is measured in terms of thousand persons aged 15 and over; and in numbers of employed persons aged 15 to 64 as a percentage of the working-age population. The annual consumer inflation stood at 5.7 percent 1, which is most likely going up due to high food prices. The country depends on multilateral’s grants to solve complex problems within the development sector. Africa is the most youthful continent, with more people less than 30 years than any other continent, and unemployment remains one of the most significant problems. In such a situation, it’s more dependent on attracting additional capital for human development work.

Infographic: Mobilizing Investors to Protect Endangered Rhinos | The World Bank site 

#  Rhino Bond Blending All the Way  

Over the years, the population of rhinos has dwindled from a global population of 1,00,000 in 1960 to 5495 in 2017. Rhinos are a key species within the natural habitat as they protect other species and are a source of livelihood for humans residing in the surrounding ecosystem. Conserving black rhinos has many positive externalities; rhinos protect other species, enrich the biodiversity ecosystem for a richer flora and fauna, less carbon footprints etc. The impact instrument will create 2300 jobs, bring 15300 hectares under improved management and provide clean water and habitat for pollinators that support local citrus production. The Rhino Bond targets two wildlife-protected areas in South Africa – the Addo Elephant National Park (AENP) and THE Great Fish River Nature Reserve with proceeds marked for Park Managers to conserve, protect and grow the black rhino’s population.  One of its kind, the payment of the bond depends on the final rhino population growth rate. Issued by IBRD with a triple-A credit rating, structured by Credit Suisse, the sustainable development bond is backed by sustainable development bond principles. The bond has a higher rating than South Africa’s sovereign rating, appealing to private investors, such as asset managers, endowment funds, etc. Graph: The middle Road. The offering in financial jargon is like a structured financial instrument, a mix of capital protected and participation instrument. The capital guarantee is embedded in WCB. Financial participation securities have a variable interest or coupon linked to an underlying index example SOFR linked bonds. Financial institutions use zero-coupon bonds with embedded options to design capital-protected securities. A very innovative and exciting financial instrument, the Rhino Bond pays a balloon payment at the end of the tenure (principal + outcome linked income) rather than periodic coupon payments. The middle Road classifies these products under sustainable finance – sustainable bonds. At the same time, this financial instrument involves multiple actors or entities through a collaborative model e.g. outcome payer a non-government entity, evaluators. WCB has impact bond characteristics, to know more read about these bonds.    

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