
© Oliver Paaske
Nature-based Solutions (NbS) are increasingly seen by policy-makers and financial markets as powerful concepts to address, climate change, food security and other social issues and problemsThe International Union for Conservation of Nature (IUCN), a membership union composed of both government and civil society organisations, developed an international standard to best manage global challenges. The definition of NbS created by IUCN is:
"Actions to protect, sustainably manage andrestore natural or modified ecosystems that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits.”
Captital markets contribute towards sustainability by providing innovative solutions for investors and issuers of financial instruments.Deforestation is a significant problem for the world – accelerating climate change and threatening the natural capital base that underpins the economic strength of a number of countries.One of the innovative concepts on the fixed income segment of the market is a Deforestation-Linked Sovereign Bond (DLSB) which can help countries with valuable state-owned forests to fund their transition to a sustainable economy. A DLSB would align the government’s fiscal and sustainability incentives, and boost the country’s sovereign health.A Deforestation-Linked Sovereign Bond is a type of Performance Bond, a flexible financial instrument that does not restrict a government in terms of the use of proceeds, but which commits the sovereign to coupons which vary depending on its success or failure in meeting specific Sustainability Performance Targets (SPTs), in this case, deforestation.In a webinar hosted by Z/Yen’s FS Club, a global executive knowledge network for technology and finance, Brazil will be used as a DLSB case study.Date: Wednesday, 15 September, 2021Time: 15-15:45 BSTIncreasing deforestation remains the biggest threat to Brazil’s natural capital base, accelerating global warming, harming biodiversity, and impacting Brazil’s rainfall and temperature patterns.As a result, Brazil’s current climate trajectory is rated ‘highly insufficient’ by ClimateActionTracker.org (on a path to 3-4oC by 2050 compared to the Paris target of 2oC).Agenda:- Why Performance bonds (or Sustainability-Linked Sovereign Bonds) are a particularly useful addition to the ESG-labelled bond market
- What lessons sovereign issuers can learn from the corporate Sustainability-Linked Bond market
- How to measure the Sustainability Performance Target (SPT)
- What other considerations are key including the coupon step-up or down, SPT verification and monitoring, and governance
- What other advantages might arise from issuing a DLSB