A ‘biodiversity bond’ with a tailored nature-specific structure, distinct from a green bond, is planned to issue for $50 million from BBVA Colombia in collaboration with the International Finance Corporation (IFC).
The money raised through the “first biodiversity bond” will be used to finance projects focusing on the regeneration of natural forests on degraded land, mangrove conservation, climate-smart agriculture, and wildlife habitat restoration, BBVA said.
“It is not a green bond with biodiversity characteristics. This bond has a unique validation protocol created by BBVA and the IFC that makes it possible to define and validate the use of resources that have a positive impact on biodiversity,” David Pacheco, head of sustainability at BBVA Colombia, told Carbon Pulse.
The prospective issuance is built upon the recommendations in the IFC Biodiversity Financing Guide. Updated in May 2023, the guide identifies eligible use of proceeds that constitute biodiversity finance – building upon the Green Bond Principles.
The financing guide has three basic investment categories:
- Investment activities that seek to generate biodiversity co-benefits
- Investments in biodiversity conservation as the primary objective
- Investments in nature-based solutions to conserve biodiversity
The alignment with the guide enables BBVA to track the positive impact the initiatives have on biodiversity and the economy, Pacheco said.
Although biodiversity-related issuances have been increasing over the last few years, these have mostly been related to green or sustainability-linked bonds – with none saying they are distinctively ‘biodiversity bonds’.
“The biggest difference lies in the validation of the use of resources and their impact on biodiversity. A green bond generally has categories focused on decarbonisation, such as investments in renewable energy, and measures their impact with indicators like tonnes of greenhouse gases either from the reduction of fossil fuel or energy use,” said Pacheco.
“Meanwhile, in this bond, we have indicators like surface area of managed wetlands, absolute number of native species per square kilometre – large fauna, or square metre – small fauna and flora, before and after the project.”
The capital will finance small, mid-sized, and large private companies, alongside public institutions, he said.
The transaction is subject to the approval of the board of IFC, which will also advise on the indicators. IFC is the private finance arm of the World Bank.
Alfonso Garcia Mora, vice president of the IFC for Europe, Latin America and the Caribbean, said the initiative was the “first of its kind on a global scale”.
“This future bond issue has the potential to increase access to the financing available for initiatives that conserve, restore and protect biodiversity in Colombia,” he said.
The amount of private money committed to nature could help the total amount raised reach sufficient levels to reverse biodiversity loss, if investment rates continue, the UN Environment Programme Finance Initiative said on Monday.
By Thomas Cox – t.cox@carbon-pulse.com
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