Generating Wealth by supporting Social causes
Since 1996, black rhinos have been listed as a critically endangered species. The number of black rhinos has decreased dramatically from 65000 in 1970 to around 2600 today. This is because heavy poaching in the 1970s, 1980s, and early 1990s wiped out an estimated 85% of the population.
What if we said that you can generate wealth as well as save the Rhinos?
The World Bank issued a wildlife conservation bond in March 2022 to support South Africa's efforts to save the endangered black rhino. It's a five-year, $150 million Sustainable Development Bond to help protect and increase black rhino populations in two South African protected areas, the Addo Elephant National Park (AENP) and the Great Fish River Nature Reserve (GFRNR).
Following the initial investment, all proceeds will be used to fund black rhino conservation. Investors will be paid back their principal and the coupon after 5 years, based on the population of black rhinos at the time.
Prior to the commencement of the five-year period, target numbers of Rhinos will be established, which will serve as the foundation for the bond's performance. If the population grows over the next five years, investors could see a return of between 3.7% and 9.2%.
They would receive nothing if the black rhino population doesn't change.
Where will the money come from to pay back investors?
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The outcome based payment structure is an innovative financing mechanism in which investors provide up-front capital to service providers, with the potential for a return if selected outcomes are achieved. This type of model has been gaining popularity to fund various health and education projects.
The traditional donors such as governments and multilateral organisations will be the final ones who will disburse money only on results.
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