Climate finance is often discussed in abstractions such as bonds, instruments and capital flows. But in the Eastern Cape, the story starts with a plant.
Spekboom, a hardy, unassuming succulent shrub, has become one of the country’s most quietly powerful climate allies.
Native to the Albany thicket biome, it can lock away remarkable amounts of carbon, while stabilising soil, retaining water and creating the conditions for entire ecosystems to recover. Where it returns, degraded thicket landscapes begin, slowly, to heal.
Now the plant is at the centre of an ambitious new financial experiment.
The World Bank has priced a $120 million (about R2 billion) spekboom restoration outcome bond — its longest-dated outcome bond yet — aimed at funding large-scale ecosystem restoration in the Eastern Cape while tying investor returns directly to environmental outcomes.
Issued through the International Bank for Reconstruction and Development, the bond matures in 2040 and offers full principal protection, backed by the bank’s triple-A credit rating. Its returns are split: a fixed coupon and a performance-linked component tied to whether restoration succeeds.
For Michael Bennett, the head of market solutions and structured finance at the World Bank, the starting point is ecological decline.
“The objective of the project is land restoration, starting in the Eastern Cape, in what is known as the Albany thicket,” he said. Once dominated by spekboom, the area has been degraded over time — primarily through overgrazing by domestic animals, mainly goats — leading to erosion, reduced water retention and lower carbon sequestration.
The bond’s $120m proceeds will support the World Bank’s broader sustainable development lending globally. What distinguishes it is how part of the return is redirected.
Investors accept a lower fixed coupon than on a standard World Bank bond of similar maturity. The foregone portion is channelled, via a structured transaction arranged by BNP Paribas, into upfront financing for restoration.
The outcome bond has been structured to mobilise $25m of private capital to support a
50 000 hectare scale-up of a spekboom project, designed, developed and operated by Imperative, a private-company specialising in ecosystem restoration.
The ambition is both ecological and economic: reviving degraded landscapes while creating about 11 000 jobs, many through small and medium-sized enterprises involved in planting, harvesting, monitoring and land management.
“This is a project expected to have a much longer life, even longer than the 14.5-year life of our bond, so it is a combination of the two,” Bennett said.
“They are employing small and medium-sized enterprises on the ground and providing them with training. Therefore, the impact includes not only jobs created by this project but also training and knowledge transfer for the local folks on the ground who will be doing the actual work.”
For investors, the structure offers upside.
As spekboom grows, it generates carbon removal units that can be sold on voluntary markets. A significant share has been secured under a long-term agreement with Amazon, which will purchase the credits at a fixed price for more than a decade.
A portion of the revenue flows back to investors, again via BNP Paribas, as a performance-linked return. If the project delivers, the bond can outperform a standard World Bank bond. If not, investors still retain principal and the base coupon.
The project is registered under the Verra standard, ensuring independent monitoring and verification of carbon outcomes, essential in a model where financial returns depend on measurable environmental performance.
“This will be our seventh outcome bond,” Bennett said, placing it within a broader programme spanning reforestation in the Amazon, clean cookstoves in Ghana, water purification in Vietnam, recycling projects in Ghana and Indonesia, and a Unicef Covid-19 financing instrument.
It is also the second such bond in South Africa, after the wildlife conservation or “rhino” bond, which launched four years ago and is a first-of-its-kind, outcome based financial instrument that channels investments to achieve an increase in black rhino populations.
Spekboom, Bennett said, was well-suited to the model. “It’s a very efficient plant for water retention and from a carbon sequestration perspective, so it has qualities required for a bond of this type because it can produce a relatively high level of carbon sequestration for the cost of putting it into the ground, which is important for a bond of this type. We needed to produce enough carbon credits to repay the activity.”
Efficiency is crucial in a structure where returns depend on generating enough carbon credits to sustain the model.
“But it is also a native species of this area. So, it’s a story of restoring land that has been degraded over hundreds of years of human activity, back to its more native state,” Bennett said, adding that he had never heard of spekboom before work started on the project.
On the ground, the model was designed around partial land use rather than exclusion. Imperative works with landowners, leasing portions of farms and fencing off degraded areas while leaving surrounding land in use.
“In most cases, it’s not all of anyone’s farm that is being fenced off,” Bennett said. “It’s just a portion.”
The fencing primarily limited intensive grazing by goats — the main driver of degradation — while allowing broader wildlife movement across non-contiguous land parcels.
The overgrazing problem, he said, came mainly from goats being able to move freely through the area and feed without restriction, often standing in one patch of spekboom and “eating it until it is completely gone”.
In a more natural system, where both prey and predator species were present and able to move across the landscape and over fences, grazing on spekboom was more limited and controlled.
Animals remained alert, constantly scanning for predators, which prevented sustained pressure on any single area. That kind of lighter, intermittent grazing did not damage the thicket.
As spekboom returned, it formed a canopy that allowed other species to regenerate, improving biodiversity while stabilising soil and improving water retention. Over time, Bennett said, the landscape began to function again as an ecosystem.
The World Bank has priced a $120m spekboom restoration bond in South Africa’s Eastern Cape, linking investor returns to ecosystem recovery
