Plastic Credit Bonds

Context
The World Bank and Citi have collaborated to launch a $100 million bond aimed at addressing plastic waste.

Plastic Credit Bonds

 A plastic credit bond is a unique financial instrument designed to tackle plastic pollution by linking investor returns to the successful collection and recycling of plastic waste.

How it works:

1. Investment: Investors purchase the bond, providing upfront capital for plastic waste collection and recycling projects.
2. Plastic Credits: Each ton of plastic collected or recycled generates a “plastic credit,” which can be bought and sold like other commodities.
3. Performance-based returns: Investor returns are partially linked to the number of plastic credits generated by the projects supported by the bond. The more plastic collected and recycled, the higher the potential returns for investors.

Benefits:

• Financing plastic waste solutions: Provides much-needed funding for projects that aim to reduce plastic pollution.
• Incentivizing plastic collection and recycling: Creates a financial incentive for organizations and individuals to collect and recycle plastic
• Investor opportunity: Offers investors a unique opportunity to support environmental initiatives while potentially achieving financial returns.

The World Bank issued the first-ever Plastic Waste Reduction-Linked Bond in January 2024. This bond supports plastic collection and recycling projects in Ghana and Indonesia, with investor returns linked to the number of plastic credits generated by these projects.