SAO PAULO, June 13 (Reuters) - The World Bank said on

Tuesday it will issue a new bond expected to raise some $200

million to support its sustainability activities and

reforestation in Brazil's Amazon, and has chosen HSBC ( HSBC )

to structure the transaction.

The principal-protected bond will support the World Bank's

sustainable development activities and provide financing for

reforestation projects selected by Brazilian startup Mombak

through the foregone coupon payments.

Mombak, which buys degraded land from farmers and ranchers

or partners with them to replant native species in the world's

largest rainforest, generates CO2 removal credits that can be

sold in carbon markets.

"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 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.

"The principal will support World Bank operations, but the

coupon will support a project that is not a World Bank project

but is very important, in a very important area," Familiar said.

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 struggled to

get 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," Fernandez

noted, adding that 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. That takes the total to 46.