Ethical Investing: The Credit Suisse & World Bank ‘Rhino Bond’News
In a collaborative effort between different international organizations and financial institutions, the ‘Wildlife Conservation Bond’ came into existence. This bond is the first of its kind that directs private investment into conversation outcomes. The outcome of the Wildlife Conservation Bond is measured by reference to an increase in the black rhinoceros’ population in target protected areas in South Africa, which is why the bond is also referred to as ‘Rhino Bond’.
What is a bond?
To understand how the Rhino Bond works, one needs to understand the general concept of a bond. A bond is a loan by an investor to a government or a corporation, which is paid back with an additional return over a set timeframe.
The Rhino Bond
The Rhino Bond was issued to raise USD 150 million for various sustainable development projects, and USD 10 million to be directed towards conservation efforts in South Africa. The bond is innovatively structured, because never before was private finance raised through a traditional debt capital market for an ethical purpose.
Credit Suisse acts as the sole bond structurer for the Rhino Bond. The maturity of the Rhino Bond is 5 years, which is slightly longer than maturity for bonds generally lasts (3-4 years). Upon maturity, the World Bank will repay the investors the bond principal, which is not linked to rhinoceros population growth. The Conservation Success Payment is the interest earned on the bond, which is funded by the Global Environment Facility.
The bond is considered successful if the rhino population growth rate in certain areas of South Africa increases. This rate will be calculated by Conservation Alpha and thereafter verified by the Zoological Society of London. The bond therefore aims not only to increase the rhinoceros’ population, but it is also a ground-breaking way to fund ethical purposes, whereby investors still receive a financial return on an ethical investment.