Conservationists use green bonds to fund new trees

Saving trees, protecting rhinos. The multi-trillion dollar sustainable finance market is now branching out to support conservation.

The Conservation Fund, an environmental non-profit, recently raised $150 million through a debut issue of green bonds to fund tree cultivation. It could be a roadmap for other similar deals.

“This could potentially be a blueprint for other conservation groups to use as a model for tapping the bond market,” said Mallory Rutigliano, a green and sustainable finance analyst at BloombergNEF.

Corporations and governments have been issuing green bonds at a record pace to fund environmentally-friendly projects, like solar panels, wind turbines and energy efficiency projects. Companies and public sector issuers including the World Bank have sold a record $146 billion of global green bonds so far this year, up from $89.1 billion in the same period a year earlier, according to data compiled by Bloomberg.

The Conservation Fund’s deal supports a plan to acquire and secure privately-held working forests — land that’s managed to provide a renewable supply of wood — considered to be at risk, according to John Gilbert, executive vice president and chief financial officer. Goldman Sachs Group Inc. was sole underwriter on the 10-year investment-grade bond sale.

Reducing carbon
It follows a first-of-its kind $50 million rhino impact bond, announced in July, aimed at preserving the endangered black rhino in Kenya and South Africa. Last month’s tree bond had the added benefit of using nature to suck carbon out of the atmosphere, suggesting another way conservation green bonds could grow.

“The markets are receptive and this intersection of climate change, actual on-the-ground conservation and protecting rural economies is kind of all coming together,” said Gilbert. Relying on philanthropic and other types of support isn’t enough to address the losses — forests will need access to a bigger balance sheet to fight climate change, he said.

Such deals answer a call from investors seeking assets they “view as appropriate from an ESG perspective,” according to Colin Purdie, a chief investment officer of credit at Aviva Investors, which managed 346 billion pounds ($426 billion) as of 30 June.

“It’s not a huge surprise that people are looking at a slightly different avenue to get money off the fixed income space,” Purdie said. “My guess would be they are relatively small in size compared to other issuance, and probably quite niche in terms of the investors that are buying them.”

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