New Outcome Bond Fuels Clean Cooking Initiative

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Innovative Financial Structure Supports Clean Cooking in Ghana

The World Bank has launched a groundbreaking financial instrument known as the Clean Cooking Outcome Bond. This bond, priced at US$200 million, is set to mature on 31 March 2032. Its primary objective is to make cleaner cooking solutions accessible to over one million people in Ghana.

Under the terms of this bond, a portion of the coupon payments that investors would normally receive will be redirected upfront to support projects aimed at distributing over 400,000 cleaner cookstoves in Ghana. The bond’s coupon structure includes both a fixed rate and a variable component tied to the sale of carbon credits generated from the use of these cookstoves. These proceeds will be used to fund sustainable development initiatives under the World Bank's global programs.

This innovative transaction highlights how investors can align their financial returns with tangible development outcomes. By expanding access to cleaner cooking solutions in Ghana, it demonstrates the potential of outcome bonds to address pressing development challenges. Strong investor interest reflects growing confidence in this type of financial structure.

Approximately USD 30.5 million in private capital is being mobilized to support these projects, which are designed and implemented by UpEnergy, an East Africa-based company. The initiative is expected to provide cleaner cooking solutions to 1.3 million people, significantly reducing reliance on biomass and cutting greenhouse gas emissions. In addition, it aims to reduce household air pollution, improve health outcomes, and create local jobs through the manufacturing and distribution of improved cookstoves and electric cookstoves.

Standard Chartered served as the sole Lead Manager and Bookrunner for this transaction. The bank emphasized its pride in partnering with the World Bank and UpEnergy to deliver the first Clean Cooking Outcome Bond. This bond showcases the power of Standard Chartered’s global network and expertise in capital markets, structuring, carbon, and commodities markets.

The bond is fully principal-protected, with the USD 200 million proceeds supporting the World Bank’s sustainable development activities worldwide. Investors in the bond will forego a portion of the ordinary fixed coupon payments, with the equivalent amount redirected through a hedge transaction with Standard Chartered to provide upfront financing for clean cooking projects in Ghana, delivered by UpEnergy.

These projects have received authorization from the Governments of Ghana and Switzerland and will generate carbon credits in the form of Internationally Transferred Mitigation Outcomes (ITMOs). ITMOs represent verified greenhouse gas emission reductions that can be transferred internationally under Article 6 of the Paris Agreement.

The KliK Foundation in Switzerland has committed to purchasing these carbon credits under an offtake agreement. A portion of the revenue from the carbon monetization will be paid to bondholders as the variable coupon component, in addition to the fixed minimum rate component from the World Bank. This marks the first time cash flows on a bond have been directly connected to the generation of ITMOs, introducing a new model for channeling private capital into smart development solutions.

Several other institutional investors have also expressed their support for the bond. Their participation underscores the growing interest in impact investments that combine financial returns with measurable social and environmental outcomes. These investors highlight the importance of such transactions in addressing the funding gap for clean cooking solutions and advancing the goals of the Paris Agreement.

The Clean Cooking Outcome Bond represents a significant step forward in leveraging innovative financial structures to achieve sustainable development. It not only provides cleaner cooking solutions to communities in Ghana but also contributes to global efforts to combat climate change and improve public health.