Investments that make a difference
The Amazon rainforest accounts for more than half of the planet's tropical forests, with 390 billion individual trees. The rainforest is also extremely rich in biodiversity, with one out of every ten known species living in the rainforest, making it the largest collection of living plant and animal species on Earth.
Velliv has made two impact investments focused on conservation and reforestation of the Amazon rainforest: Biocorredor Amazónico Bonds and Amazon Reforestation Bonds. These investments are part of Velliv’s overall investment universe and are included in our VækstPension Aktiv and VækstPension Aftryk products.
While these investments make a significant difference locally, they also have an impact on your returns. The bonds are structured to not only contribute to sustainable development but also provide an attractive risk-adjusted return profile. This is a prerequisite for us to invest in such projects. Our primary goal is to ensure that you receive the best possible return on your pension savings.
Velliv has invested USD 40 million in 'Biocorredor Amazónico' bonds, which aim to protect the rainforest and biodiversity in the Amazon Basin in Ecuador. A total of USD 460 million is being mobilised for nature conservation in one of the most diverse ecosystems on Earth.
Ecuador has committed to protecting 30 per cent of its land and marine areas by 2030 through the Kunming-Montreal Global Biodiversity Framework. Currently, 24 per cent of Ecuador's land areas and 19 per cent of its marine areas are protected. The Biocorredor Amazónico programme will increase the protected land area by an additional seven percentage points with at least 1.8 million hectares of protected rainforest in the Amazon Basin, including 18,000 km of rivers. In addition to this, the management of 4.8 million hectares of existing protected rainforest areas will be improved. The projects will also benefit and empower the indigenous population, which consists of 11 ethnic groups living in the area. Some of these tribes live in voluntary isolation from civilisation.
The bond principal amount of USD 1 billion has been used to repurchase USD 1.53 billion of the Republic of Ecuador's existing government bonds at a discount (average price of 63) through a debt conversion. This reduces both Ecuador's outstanding sovereign debt and lowers interest costs. The total savings to Ecuador’s public finances will amount to USD 800 million over the next ten years. The interest savings will also be shared with an independent nature conservation trust fund (”Fondo del Biocorredor Amazónico”), which over the next 17 years will have USD 323 million for nature conservation in partnership with the nature Conservancy (TNC) as project coordinator. In addition, USD 4.5 million will be deposited annually into an endowment fund, which is expected to grow to USD 137 million over 17 years, after which the endowment fund’s returns will ensure financing for rainforest conservation efforts in the future, also after the loan has been repaid in 2042.
Principal amount: USD 1,000 million
Velliv investment: USD 40 million
Maturity: 17 years (2042)
Coupon: 6.03 % p.a.
Credit rating: 'AA'
Security: Political Risk Insurance (PRI) from the US International Development Bank (US DFC) as well as a liquidity guarantee from the Inter-American Development Bank (IDB).
In May 2023, Ecuador carried out a similar debt swap that secured USD 450 million for the conservation of the marine ecosystems around the Galápagos Islands. At that time, Velliv contributed with an investment of USD 25 million.
Velliv has also invested USD 17 million in 'Amazon Reforestation' bonds from the World Bank, which aim to acquire deforestated land such as unproductive cattle pastures in the Amazon rainforest in Brazil in order to reforest and restore local flora and fauna. A total of USD 36 million is being mobilised to reforest 3,300 hectares of new rainforest, also benefiting the unique biodiversity of the Amazon Biome.
The project is implemented by the local project developer, Mombak, who either acquires old unproductive cattle pastures directly or enters into partnerships with local landowners to reforest the rainforest in Brazil. The planted trees are expected to remove a total of 2 million tons of CO2 over 50 years. Mombak has entered into an offtake agreement with Microsoft to purchase the related ”Carbon Removal Units” to support the company’s green 2030 ambitions. The project will be certified by the independent non-profit organisation Verra in accordance with the organisation's Verified Carbon Standard (VCS). Co-benefits are certified under Climate, Community & biodiversity Standards (CCBS).
The bond issued by the World Bank is the largest ”outcome bond” ever with a USD 225 million notional. Investors will receive a fixed 1.745% coupon plus an outcome-linked interest rate component of up to c. 4.36% depending on the generated ”Carbon Removal Units”. The expected return will thus be around 6% on an annual basis.
Principal amount: USD 225 million
Velliv investment: USD 17 million
Maturity: 9 years (2033)
Coupon: Up to c. 6.10% p.a. (1.745% guaranteed interest + 4.36% outcome interest)
Credit rating: 'AAA'
Security: Principal protection from the World Bank (IBRD).