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PRESS RELEASE June 27, 2016

World Bank Issues the Second Series of Pilot Auction Facility Emission Reductions Notes to Effect Climate Change Solutions

Washington, DC, June 27, 2016 – Following the success of the first Pilot Auction Facility (PAF) Emission Reductions Notes (PAFERNs) issued in October 2015, and to further incentivize climate change mitigation, the World Bank (International Bank for Reconstruction and Development, IBRD) has issued a second series of notes to the winning bidders of the second PAF auction

The PAFERNs are zero coupon notes that are structured to reward private sector investors with a guaranteed floor price for Emissions Reductions (ERs), often called carbon credits, if they deliver eligible credits at maturity. 

“These innovative emission reduction-linked notes are an excellent example of how capital markets can help solve development challenges like climate change. This second transaction is testament to the continued collaboration between the World Bank and private sector partners for urgent climate action,” said Arunma Oteh, Vice President and Treasurer of the World Bank.

“PAF is demonstrating that pairing auctions with tradeable price guarantees for emission reductions is effective in leveraging private sector investment for climate impact," said John Roome, Senior Director for Climate Change at the World Bank Group. “This is a model that we would like to see scaled-up and applied to other sectors.”

The second series of notes was issued to the winning bidders in the auction conducted on May 12, 2016. Auction winners paid $1.41 for a guaranteed price of $3.50 per unit of eligible ER that is delivered at maturity. The notes were issued in a series of four tranches, with one tranche maturing during each of the next four years. The PAFERNs will be freely tradable in the secondary market, thereby ensuring that the price guarantee will end up with noteholders that value it the most.

“We looked at a number of possible structures to supply this price guarantee to the market, from bilateral option contracts to exchange traded options. Ultimately, we determined that embedding the price guarantee in a bond – a freely tradable capital market instrument – would maximize the benefits of the guarantee,” said Michael Bennett, Head of Derivatives and Structured Finance at the World Bank.

Summary Terms for the PAFERNs (PAF Emission Reduction Notes):


World Bank (International Bank for Reconstruction and Development, IBRD)

Principal Amount:

US$19.99 million (aggregate)


Four tranches; maturing in 2017, 2018, 2019 and 2020

Settlement Date:

June 27, 2016



Redemption Amount:

US$3.50 per eligible certified emission reductions delivered at maturity

Issue Price:

40.2857143% (or $1.41 per eligible emission reduction unit)

Global Agent, Registrar and Settlement Agent and Calculation Agent:


Verification Agent:

KommunalKredit Public Consulting GmbH

Legal Adviser to Issuer:

Linklaters LLP, London and New York

About the World Bank

The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization created in 1944. It operates as a global development cooperative owned by 189 nations. It provides its members with financing, expertise and coordination services so they can achieve equitable and sustainable economic growth in their national economies and find effective solutions to pressing regional and global economic and environmental problems. The World Bank Group has two main goals: to end extreme poverty and promote shared prosperity. The World Bank (IBRD) seeks to achieve them primarily by providing loans, risk management products, and expertise on development-related disciplines to its borrowing member government clients in middle-income countries and other creditworthy countries, and by coordinating responses to regional and global challenges. The World Bank has been issuing bonds in the international capital markets for over 60 years to fund its sustainable development activities and achieve a positive impact. Information on bonds for investors is available on the World Bank Treasury website: