World Bank Takes Bold Step Against Plastic Pollution with First-Ever Plastic Waste Bond

The World Bank, through its International Bank for Reconstruction and Development (IBRD), has introduced a groundbreaking seven-year USD 100 million Plastic Waste Reduction-Linked Bond. This innovative financial instrument links investor returns to Plastic Waste Collection Credits, Plastic Waste Recycling Credits, and Voluntary Carbon Units generated by projects in Ghana and Indonesia.

The selected projects aim to address global plastic pollution challenges by reducing and recycling plastic waste in vulnerable communities. Citi served as the Lead Manager for this pioneering outcome bond, mobilizing private capital to support projects with positive climate and development impacts.

Investors in the bond contribute approximately USD 14 million upfront to enhance facilities, expand collection and recycling sites, and install food-grade recycling equipment. Beyond curbing plastic pollution, these projects target improving local pollution, air quality, reducing health impacts, and creating jobs in marginalized communities.

Investors Pioneer Plastic Waste Reduction with World Bank Bond

Investors in the Plastic Waste Reduction-Linked Bond are trailblazing initiatives to combat plastic pollution. The bond introduces a new financing approach, emphasizing prevention of plastic waste leakage into oceans. Investors, contributing USD 14 million upfront, will forego a portion of ordinary coupon payments, supporting the financing of projects managed by Plastic Collective UK.

The bond structure offers potential financial benefits if projects and credit monetization perform as expected, providing a win-win scenario for investors, local communities, and ecosystems.

Innovative Financing for Plastic Collection and Recycling Operations

The Plastic Waste Reduction-Linked Bond introduces an innovative approach to financing plastic collection and recycling operations. With a focus on preventing plastic waste leakage, the bond is 100% principal protected, with proceeds supporting the World Bank's sustainable development globally.

The bond's structure includes annual coupons for investors, comprising fixed amounts and payments linked to the sale of plastic and carbon credits produced by the projects. The unique financing mechanism aligns incentives to ensure financial benefits for investors when positive development outcomes are achieved.

Leading Investors Join Forces for Sustainable Impact

Leading investors, including Velliv, Skandia, Mackenzie Investments, T. Rowe Price, and Muzinich & Co., have participated in the Plastic Waste Reduction-Linked Bond. Their involvement underscores the bond's impact on reducing plastic waste and creating economic opportunities for underserved communities.

The bond marks a significant step toward addressing the global plastic crisis through innovative financial instruments, showcasing collaborative efforts between the public and private sectors.

Rewarding Impactful Investments:

Investors opting for this bond forego a portion of regular coupon payments. Instead, they receive:

• Fixed annual coupons: A guaranteed base return on their investment.

• Performance-linked payments: Additional payments tied to the successful collection and recycling of plastic waste, as well as the sale of carbon credits generated by the projects.

This structure potentially offers investors a higher return compared to regular World Bank bonds of similar maturity if the projects and monetization of plastic and carbon credits perform as expected.

Quotes that Capture the Innovation:

• Anshula Kant, Managing Director and World Bank Group Chief Financial Officer: "Outcome bonds, like the Plastic Waste Reduction-Linked Bond, align incentives, so that investors benefit financially when positive development outcomes are achieved. They create a win-win with the local communities and ecosystems that benefit from less pollution, and we will continue issuing them."

• Philip Brown, Global Head of Sustainable Debt Capital Markets at Citi: "The bond responds to investor appetite for transactions with direct and quantifiable development impact."