Around 15% of the bonds to be facilitated by the UN Development Programme (UNDP) to help support tiger ecosystem protection in four Asian countries could be monetised through the sale of “high integrity biodiversity credits”, depending upon the ability to de-risk the credits through guarantee provisions.

Discussions are ongoing with international assistance agencies from the Global North to provide guaranteed assurance for the biodiversity credits, according to Maxim Vergeichik, senior nature economist at the UNDP, speaking at the UK University of Lincoln’s First Annual Conference on Nature-based Solutions using Carbon and Biodiversity Credit Funding on Thursday.

He added that the bonds themselves may be raised as sovereign bonds, commercial bonds, or multilateral development bank bonds depending on the country in question.

The bond issuance is expected to generate $50-200 million to support tiger ecosystem protection, with eligible activities including green agriculture and habitat restoration.

“Every country would have their own contexts and different fiscal parameters [for this tiger bond] – it boils down to making a very careful analysis of how exactly the work is going to proceed through which instrument – whether through a sovereign, commercial or a multilateral development bank issue, such as by ADB or IFC – we are talking to several but we don’t have any confirmation yet,” he said.

“Banks themselves have to actually make some analysis with respect to bankability and the impact appetite from investors who they work with,” he added.

By the end of the year, UNDP hopes to have clarity for Cambodia, Thailand, and Malaysia on the bond provider, whereas for India, there is a “clear use case for sovereign issue” thanks to the nation’s fiscal health, Vergeichik said.

The list of target countries is tentative and no definite agreement has been reached with any country, as conversations are ongoing.

The organisation Bankers Without Boundaries is supporting UNDP on the financial structuring of the tiger bond project.

TERMS OF BONDS

The term length for the tiger ecosystem conservation bonds would likely be more than five years and ideally structured in cycles with a first phase of potentially five-year investment, followed by a subsequent five-year investment and so-forth, suggested Vergeichik.

It would be landscape-scale investment, so wouldn’t make sense to have a term shorter than that, he said.

NOT MORE THAN 15%

Biodiversity credits would be unlikely to account for more than 15% of the bond repayment because they would focus on specific areas that do not generate profit in themselves and so cannot repay the bond, such as protected areas within a wider landscape that simply need to be left alone in order to regenerate.

The remaining portion of the bond would be repaid by green activities that are economically viable such as regenerative agriculture, organic agriculture, agroforestry and eco-tourism – all of which do not pose threats to tigers, and also present additional benefits beyond increasing tiger population levels.

This approach will be presented as part of the landscape conservation plans with investors, said Vergeichik.

READY METHODOLOGIES

Through Vergeichik’s work with the Biodiversity Credit Alliance (BCA), he has assurance that there are methodologies available to be able to deliver biodiversity credits into protected areas in the tiger landscapes, including those being developed by certifiers Verra and Plan Vivo.

However, it’s too early to say yet as to which methodology might be used given that investor assurance is still required to move forward with biodiversity credit monetisation.

By Bryony Collins – bryony@carbon-pulse.com

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