SAO PAULO, June 13 (Reuters) - The World Bank will issue

a new bond expected to raise some $200 million to support

reforestation efforts in Brazil's Amazon rainforest, it said on

Thursday, choosing banking giant HSBC ( HSBC ) to structure the

transaction.

The principal-protected bond will provide financing for

reforestation initiatives selected by Brazilian startup Mombak,

which buys degraded land from farmers and ranchers or partners

with them to replant native species in the world's largest

rainforest.

Mombak's business model generates CO2 removal credits that

can be sold in carbon markets. A portion of the bonds' targeted

return will be linked to the value of credits generated by the

projects, the international lender said.

"This transaction is a continuation of this market we're

trying to develop," World Bank Vice President Jorge Familiar

told Reuters, referring to the so-called "outcome bond" model

the bank launched earlier this decade.

Such bonds, according to the lender, allow investors to

support specific sustainable projects and their outcomes. They

harness private capital and transfer project performance risk to

investors, who are rewarded if the activities are successful.

Similar initiatives by the World Bank include a $100 million

bond to finance plastic-reduction projects in Ghana and

Indonesia and a $150 million bond to support efforts to increase

the endangered black rhino population in South Africa.

Mombak, which is backed by investors such as Bain Capital

and AXA and has sold carbon credits to firms like McLaren and

Microsoft ( MSFT ), hopes the move will be a game changer for

the nascent carbon removal industry in Brazil.

Seen as risky by many investors, the sector has faced a hard

time getting loans to reduce the cost of capital and finance

operations, which are expensive as firms need to buy land and

plant trees, Mombak co-founder Peter Fernandez said.

"You need a lot of money to do reforestation; and because

it's so new, the cost of capital is quite high," he noted,

adding the transaction might help unlock debt markets for others

in the industry.

Critics of carbon offset markets, including Greenpeace, say

they allow emitters to continue to release greenhouse gases.

Separately, the World Bank's IFC arm and the Inter-American

Development Bank's IDB Invest arm said 22 new banks and other

types of finance firms, including Citi and Visa, had joined the

Amazonia Finance Network that the two development banks launched

late last year. It takes the total to 46.