Current Affairs 2022: Wildlife Conservation Bond
Wildlife Conservation Bond
The World Bank has issued the world's first Wildlife Conservation Bond (WCB), also known as the "rhino bond," raising USD 150 million to support efforts for the conservation of the black rhino population in South Africa. As a first-of-its-kind outcome-based bond, it will aid in the financing of conservation activities, and it will transfer project risk from donors to investors in conjunction with funding from the Global Environment Facility (GEF). Thus, it serves as a financial instrument channelling investments to achieve conservation outcomes – in this case, increasing the black rhino population.
The transaction raises private capital to help fund black rhino conservation efforts in two South African protected areas, Addo Elephant National Park (AENP) and Great Fish River Nature Reserve (GFRNR).
Wildlife Conservation Bond: Background
The annual funding gap for biodiversity and ecosystem conservation is estimated to be up to USD 800 billion. The conservation desperately needs financial instruments that can attract more private capital. Rhinos play an important role in Africa's wild ecosystem, which benefits other species as well as South Africa's national economy through tourism and job creation. Black rhinos, on the other hand, are critically endangered due to poaching and habitat loss. The black rhino populations at AENP and GFRNR account for a sizeable proportion of South Africa's and the world's black rhino populations
Focus on Rhino Conservation
Rhinos are an "umbrella" species that rely on a healthy ecosystem. Rhino conservation benefits far more than the species itself, as it helps to protect ecosystems and many other species that share the rhinos' habitat. The activities funded by this project will aid in the conservation of a 1,53,000-hectare area that is home to a variety of other species as well. The parks protect water catchment areas, act as a carbon sink, and provide a haven for other fauna and flora species.
Objectives of the Wildlife Conservation Bond (WCB)
The goal of the WCB project is to secure and grow the black rhino population, provide over 2,000 jobs for the local community and improve the management of a 1,53,000 hectare area through conservation activities.
Importantly, the WCB transaction represents the first test of a new model for conservation financing in which investors accept project outcome risk in exchange for a potential payout if the project is successful. The structure allows for private investment in conservation, which is supported by sound quantifiable metrics and models.
Financial Solution
The WCB is a five-year principal-protected World Bank Sustainable Development Bond denominated in US dollars. Coupon payments are not made to WCB investors. The World Bank will instead make conservation investment payments to the two protected conservation sites – AENP and GFRNR – to fund rhino conservation activities. At maturity, investors will receive a successful payment tied to the growth rate of the black rhino population in the two parks, paid by the World Bank with funds provided by the GEF. Over the term of the bond, the rhino growth rate will be calculated and verified by independent parties, Conservation Alpha and the Zoological Society of London. The financial structure was created in collaboration with Credit Suisse and builds on previous preparatory work at the parks. Investors will receive their principal investment back from the World Bank at maturity, regardless of rhino growth rate or project implementation risk, providing investors with AAA-rated investment with the potential for an additional return if conservation outcomes are achieved.
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Apart from writing, Ayush Jain loves to explore different aspects of life. He is a minimalist and an avid modern-age electronic music fan.
