Money Business in the World of Fixed Income

From non-fungible tokens to cryptocurrency, exotic investments are en vogue these days. This story takes exotic to another level.

Soon, investors will be able to invest in so-called “Rhino bonds” with economic returns varying depending on the outcome of Rhino conservation efforts.

Rhino Returns

According to Bloomberg, the instrument will be the world’s first-ever wildlife conservation bond. The instruments, which are being sold by the World Bank, will have a five-year maturity and are expected to raise 670 million rand ($45 million).

How’s It Work? The bonds will be structured under an “outcome payments” model — a concept where investors receive financial returns only on the successful and measurable completion of the objective:

• Investors will forgo an annual coupon and will instead receive their original capital and an additional payout depending on how much the rhino population at two South African preserves grows over five years.
• The principal of the bond, as well as a possible payout at maturity, will be paid by the Global Environment Facility, which has received donations from more than 40 countries.
• Credit Suisse, the Swiss investment bank, is advising on the project.

While the rhino security is a first, “sustainable” bonds have been used to finance a variety of outcomes from marine and fisheries projects in the Seychelles to girls education in rural India. Rhinos are under threat from poaching, primarily because of demand from Vietnam and China for the powder from their horns that are believed to cure cancer and improve virility.

Looking Ahead: If successful, the program could be expanded to protect black rhino populations in Kenya as well as other wildlife species such as lions, tigers, gorillas, and orangutans.