Executive summary

The mandate and the six heads of terms

EPC seeks JPMorgan Chase as the sole Main Book Holding partner for the multi-decade Conservation-Backed Security (CBS) programme. The mandate is exclusive, multi-decade, and structured around six heads of terms drawn from JPMorgan’s normal product set. Confirmation of terms within 10 days; first benchmark issuance within 10 weeks of confirmation.

The six heads of terms

Mandate commercials

Why we have approached JPMorgan first

CBS requires a single counterparty that can simultaneously structure the senior tranche, distribute it to insurance / pension / SWF / reserve accounts, run the corporate balance-sheet placement programme on the CFA layer, and intermediate the carbon and ecosystem-service offtake markets. The combination is rare. JPMorgan sits at the top of the list of institutions with this combination at the required scale.

Regulatory landscape, comparable ABS sub-classes, distribution book

CBS does not exist in a regulatory or structural vacuum. It sits within Basel III HQLA, CRR III specialised-lending RW bands, the US Basel III endgame, EU SFDR Article 9, TNFD reporting, and the institutional fixed-income mandates that are reshaping institutional balance sheets. This section maps the position.

Regulatory landscape — the seven structuring conditions for HQLA L1 / 0% RW eligibility

Important framing. The seven §13 conditions are EPC structuring conditions necessary, not sufficient, for HQLA L1 assessment. Securitisations are excluded from HQLA L1 under LCR DR Art 7(1)(g) regardless of guarantor credit; the senior tranche’s HQLA path therefore depends on structuring as a direct sovereign issuance with the SPV as paying agent only, or on qualification under L2A/L2B routes per LCR DR Art 11–13. Per-jurisdiction counsel opinion is the operative gate, not §13. Where the senior CBS tranche qualifies as a direct sovereign obligation in domestic currency under LCR DR Art 10(1)(c) and CRR Art 114, the §13 conditions are:

1. Direct sovereign obligationThe senior CBS tranche is issued or guaranteed by the sovereign (or a sovereign-equivalent entity) in a manner recognised under LCR DR Art 10(1)(c).
2. Domestic currencyDenomination in the sovereign’s domestic currency, or in a Reserve currency where the sovereign is recognised as a Tier-1 reserve issuer.
3. Tier-1 sovereign creditThe sovereign is rated investment-grade by at least one of Moody’s, S&P or Fitch, or qualifies through an alternative recognised credit-quality assessment under CRR Art 114.
4. Public-issuance demonstrable secondary marketThe sovereign has demonstrable secondary-market activity in the issuing currency consistent with LCR DR Art 7 liquidity tests.
5. No material credit enhancement from non-sovereign sourcesThe senior tranche cannot rely on multilateral / DFI / philanthropic credit enhancement to achieve its rating; the capital-pool corpus and the sovereign-equivalent backing must carry the rating on a standalone basis.
6. Operational requirementsStandard LCR operational requirements per LCR DR Art 8 — clearance through recognised payment systems, custodial arrangements consistent with HQLA standards.
7. No regulatory constraint on the issuanceThe sovereign has not issued any prior regulatory determination that would exclude a CBS-class issuance from HQLA recognition; the proposed issuance documents do not contain provisions inconsistent with HQLA L1 status.

Where any condition is not met, the issuance is structured to qualify as Level 2A or Level 2B HQLA (or unrated) per the alternative paths in LCR DR Art 11–13. The DD pack identifies which sovereigns qualify for which HQLA tier on a per-issuance basis.

CRR III specialised-lending RW bands

Where the senior tranche does not qualify for HQLA L1 / 0% RW — for example, where the issuer is a sub-sovereign entity or where the sovereign is not Tier 1 — the instrument may fall into the CRR III specialised-lending risk-weight band per Art 153(5) (IRB slotting) or Art 501a (where eligible):

Comparable ABS sub-asset classes

Distribution book mapping — senior CBS by buyer type

The three-tier construction

CBS is the institutional senior tranche on top of a two-tier government-issued construction. Each tier is a structurally distinct credit instrument; each serves a different audience. The tier separation is the architectural decision that lets a Tier-3 sovereign support an AAA senior tranche through a Tier-1-mandated capital-pool corpus, without external credit enhancement from DFC, MDBs or philanthropic backers.

Why the three-tier separation matters for credit

A single sovereign green bond exposes the investor to country credit risk on the entire instrument. The three-tier construction routes credit risk through three structurally distinct layers:

This separation is what allows a Tier-3 sovereign to support an AAA senior tranche through a Tier-1-mandated corpus, without external credit enhancement.

The Capital Pool form — derivation

The capital-pool form is the structural innovation of the QG ABS Factory. Senior-tranche proceeds enter a bankruptcy-remote SPV holding a corpus invested in HQLA-eligible instruments under a published Mandate. The corpus serves as the standing-funding mechanism for programme operations; the senior coupon is serviced by post-stabilisation programme cashflows; the corpus is preserved through the life of the structure.

Mathematical statement

The 84/16 mechanic precedent

The capital-pool form was first articulated as the 84% Opex / 16% Capex split on the Tree Note in the V7 Forestry Finance brochure (March 2025). Each Tree Note was fully paid up at issuance: 16% representing the seedling Capex, 84% sized to fund the operations of the tree to harvest as a managed corpus return. The QG Thesis generalises this from per-tree to per-programme:

Mandate text — what the published Mandate fixes

Each CBS issuance is governed by a published Mandate (AiGLe Criteria Paper No. 3) that fixes:

1. Investment policy of the corpusPermitted instruments (HQLA L1, HQLA L2A subject to concentration tests); duration band; FX-hedging requirements; counter-party and sovereign-concentration limits.
2. Operational drawdown frameworkAnnual drawdown formula based on corpus value × yield and programme operations need; reserve-tier preservation; approval framework for above-band drawdowns.
3. Senior-coupon waterfallSource of senior coupon (programme stacked-revenue cashflows); allocation order; deferral mechanics if cashflow is insufficient (corpus is not drawn for senior coupon under the standing Mandate).
4. Programme-completion conditionsConditions under which the corpus rolls into successor issuance; conditions under which residual corpus reverts to sovereign; limited-recourse provisions.
5. Custodial arrangementsTier-1 custodian; segregation of corpus from sovereign general account; bankruptcy-remote SPV jurisdictional choice.
6. Reporting and auditAnnual independent audit of corpus and programme; quarterly NAV publication; AiGLe Four-Pillar re-grading on a biennial cadence.

AiGLe Four-Pillar Framework calibration

Every CBS issuance is graded by AiGLe Limited under the Four-Pillar Framework. AiGLe is a UK-incorporated analytics company providing analytical opinions on natural-asset-backed securities — under the UK CRA Regulation, AiGLe outputs are analytical opinions, not formal credit ratings; formal ratings are issued by Moody’s, S&P or Fitch via the bookrunner’s rating-agency engagement.

Grading scale

AiGLe analytical opinions use a 7-grade scale: AAA / AA+ / AA / A+ / A / BBB+ / BBB (sub-investment-grade outputs are not issued under the Four-Pillar Framework; programmes that would fall sub-IG are advised to remediate before AiGLe grading is sought).

Tranche architecture and waterfall

The indicative tranche architecture is 70% Senior AAA / 20% Mezzanine / 10% Junior equity. Final structure depends on sovereign credit profile, designated estate, comparator analysis, and bookrunner appetite. The waterfall is structured to make the senior tranche AAA-eligible without external credit enhancement, with mezzanine and junior tranches providing graduated risk-and-return profiles.

Waterfall — payment priority

Sponsor risk-retention position (17 CFR Part 246)

The bookrunner sponsor holds 5% of the issuance under 17 CFR Part 246 sponsor risk-retention requirements. The retention is structured as a horizontal residual interest (junior-equity-style strip) rather than as a vertical slice across all tranches, on the basis that the operational upside on carbon and ecosystem-service flows is more naturally aligned with a residual interest. The sponsor RR position carries:

• Cash yield band: illustrative steady-state gross cash yield 8–14% on retained notional, dependent on programme stacked-revenue performance and corpus-pool reinvestment yield.
• Capital treatment: SEC-SA / SSFA risk-weight up to 1,250% per CRR III Art 261; treated as alignment cost, not standalone income source.
• Holding period: 5 years per Regulation RR sunset, after which the bookrunner may transfer or sell the retained position subject to the residual mandate.

SRT recognition framework

Significant Risk Transfer (SRT) under CRR Articles 244–245 may be available on the structure where the senior tranche placement transfers a substantial portion of the credit risk to third-party institutions and the supervisory non-objection process is followed. This proposal does not assume SRT recognition — SRT is treated as a potential downstream upside rather than baseline economics. The bookrunner’s securitisation team would lead the SRT assessment with the sovereign supervisor and any relevant home-state regulator on a per-issuance basis.

Why this works where REDD, REDD+, GCS, DFN swaps and blue bonds have not

A full comparator analysis across the existing conservation-finance instruments — methodology layers (REDD, REDD+, GCS), debt instruments (DFN swaps, blue bonds, green bonds), and project-finance vehicles. CBS resolves the structural mismatch between the underlying conservation asset and the institutional capital-formation requirement.

Real-world precedent transactions for each comparator are listed in Appendix B.

Who buys this and why — full buyer mapping

CBS / CFA places into three structurally distinct buyer pools simultaneously. The institutional credit-market buyer pool absorbs the senior tranche; the corporate balance-sheet pool absorbs CFA contract-asset tokens; the retail pool absorbs CFA tokens at $1 entry through brand-affiliated programmes. The bookrunner does not need to own the retail distribution to capture the volume; the corporate placement programme is the differentiator.

Buyer class 1 — Institutional credit market

See distribution book mapping in Section 3. The senior CBS tranche is HQLA L1 / 0% RW eligible where qualifying; institutional buyers use it for matched-tenor liability work, FX reserve diversification, and TNFD / nature-positive mandate fulfilment.

Buyer class 2 — Corporate balance sheets

The CFA layer is the differentiator. Conservation has historically been a P&L cost line under voluntary carbon-credit retirement. CFA reverses the accounting: conservation becomes a balance-sheet asset under IFRS 9 / IAS 41 — appreciating, recognised through OCI or FVTPL, not retired.

Buyer class 3 — Retail (the volume layer)

CFA at $1 entry point makes the asset accessible to retail investors, NGOs, and consumers via brand-affiliated programmes. Conservation Wrapping — large corporates aggregate CFA tokens distributed as consumer loyalty rewards into branded conservation footprints. The retail layer is a pure secondary-market depth contributor; the bookrunner does not need to own retail distribution to capture the volume. Listing on the NATDAQ exchange provides the secondary-market venue for retail-and-corporate trading flow.

How the country with the resources captures the value

The structural innovation of CBS is that the country with the conservation resources receives long-term institutional capital flows from corporate balance sheets and credit markets in exchange for the cashflow rights to its natural capital — without ceding ownership, without expanding sovereign debt, and with the sovereign retaining full title and operational control. This section consolidates the sovereign-side economics for the bookrunner’s sovereign-coverage team.

What flows in to the country

1. CFA proceeds at issuanceCorporate balance-sheet allocations + retail subscriptions purchase the CFA layer; proceeds flow back to the sovereign programme operator. Conservation budget cost replaced with revenue.
2. CBS senior-tranche subscriptionInstitutional credit-market subscription at $1–2bn benchmark per tranche; proceeds enter the bankruptcy-remote SPV capital pool corpus.
3. Capital-pool corpus returnCorpus invested in HQLA-eligible instruments per published Mandate; annual return funds programme operations indefinitely. Permanent funding without budget appropriation.
4. Carbon and ecosystem-service offtakeOnce conservation is funded, the sovereign retains carbon credit issuance rights, biodiversity unit revenues, water credits, and ecosystem-service flows — bookable as additional sovereign income.
5. Sovereign wealth fund formationThe corpus is itself a managed asset book under custodian oversight at $1–2bn per benchmark, multiplied across the issuance pipeline. By year five of the programme, a sovereign issuing $5–10bn of CBS has a corresponding corpus pool that compounds professionally without further fiscal intervention.

Per-sovereign engagement playbook by region

Six revenue lines decomposed

The economics rest on six revenue lines drawn from JPMorgan’s normal product set, applied to a long-duration originated programme. Per-line bottom-up build, with stress scenarios and regulatory caveats inline. Indicative figures are derived from published JPMorgan ABS economics and stress-disclosed in the financial model annexed under separate cover.

1. Bookrunner / structuring fees

• Base fee: 50–75 bps on $1.0–2.0bn benchmark senior tranches.
• Per-tranche envelope: $5–15m.
• Frequency: 1–3 benchmarks per Tier-1 sovereign per year at full ramp; 5–10 benchmarks per sovereign over the first five years.
• Steady-state per Tier-1: $15–45m / yr at full ramp.
• Stress: downside fee compression to 35–50 bps under competitive process; upside to 75–100 bps on novel structure / first-issuance positions.

2. Risk-retention residual yield (alignment, not income)

• Retention: 5% sponsor retention under 17 CFR Part 246, structured as horizontal residual interest.
• Cash yield band: 8–14% gross cash yield on retained notional, illustrative; depends on programme stacked-revenue performance.
• Capital treatment: SEC-SA / SSFA risk-weight up to 1,250% per CRR III Art 261.
• Treatment in proposal: alignment cost, not standalone income source. The cash yield offsets capital cost; net yield depends on JPMorgan’s internal capital-pricing.
• Holding period: 5 years per Regulation RR sunset; transferable thereafter subject to residual mandate.

3. CFA secondary-market and clearing economics

• CFA volume base: retail-and-corporate scale; per-programme listing on NATDAQ at $1 entry.
• Clearing on issuance: per-token clearing fee on primary issuance; envelope $1–3m / yr per Tier-1 programme at steady state.
• Secondary trading bid-ask: JPMorgan as primary market-maker on NATDAQ-listed CFA; envelope $1–3m / yr per Tier-1 programme.
• Repo and ancillary derivatives: $0.5–2m / yr per Tier-1 programme.
• Per-programme envelope (steady state): $3–8m / yr.

4. Corporate-balance-sheet placement programme

• Margin band: 25–75 bps on placed notional. Corporate-bond-placement comparable economics.
• Volume base: per-corporate allocations $50m–$5bn (see Section 9 buyer-mapping table).
• Frequency: recurring; corporate buyers refresh CFA holdings annually as part of ESG / sustainability programme cycle.
• Steady-state envelope: $5–20m / yr per Tier-1 sovereign relationship across the corporate book.

5. Carbon and ecosystem-service offtake intermediation

• Compliance carbon: EU ETS, RGGI, California cap-and-trade where the sovereign elects to participate; standard JPMorgan Commodities & Markets desk economics.
• Voluntary carbon: Verra, Gold Standard, ART TREES intermediation where the sovereign elects to participate alongside CBS funding; standard offtake-intermediation margin.
• Biodiversity, water, ecosystem services: emerging compliance-and-voluntary markets; first-mover position for the bank that anchors the asset class.
• Tax-credit monetisation: 45Q-equivalent intermediation where applicable; standard JPMorgan tax-equity desk economics.
• Steady-state envelope: $3–12m / yr per Tier-1 programme depending on scale of sovereign offtake participation.

6. M&A and capital-markets advisory

• Sovereign-treasury advisory: standing relationship with the sovereign on the broader Quantitative Growth programme.
• Cross-sovereign issuance pipeline advisory: $2–5m per major sovereign relationship per cycle.
• Sister-pillar advisory: parallel FBS mandate coverage; eventual MSWBS Carbotura cross-coverage.
• IPO economics: on EPC Holdings or related natural-capital platform consolidations; one-off but multi-tens-of-millions.
• Per-sovereign envelope: $5–20m per major sovereign relationship.

Aggregate per-Tier-1 sovereign relationship economics

Binding constraint. The retention position is governed by the leverage ratio at the 1,250% RW level, not the CET1 ratio. Net economic contribution depends on JPMorgan’s internal capital-pricing of the leverage-binding position. The fee-income subtotal above is therefore the appropriate aggregate for fee-revenue planning; the retention position is treated as alignment cost / variable upside on programme-cashflow performance.

The Amazon Basin model — per-country breakdown

EPC’s flagship analytical model. Nine nations, 530 million hectares of conservation, $100/ha/yr stacked stream, $2,000/ha CFN par at 5% perpetuity. Per-country quanta are EPC analytical estimates from designated national conservation estates; per-country CBS programme size scales with designated estate. Country-specific scaffolds available at engagement-letter stage for all nine.

Sovereign credit ratings as published by S&P and Moody’s on a long-term-foreign-currency basis as of 2026 H1; HQLA tier inference is EPC’s probable-classification under §13 conditions, not a regulatory determination. Country-specific quanta are EPC analytical estimates from public-source national conservation estates and are subject to per-sovereign DD validation.

Programme phasing and milestones

1. Mandate confirmation (Day 0)JPMorgan returns signed engagement letter; commercial terms agreed; six-head scope confirmed; lead-bookrunner-with-first-look-exclusivity designation effective.
2. Phase 0: pilot sovereign engagement (Days 1–30)EPC and the bookrunner’s sovereign-coverage team engage Tier-2 anchor sovereigns (Guyana, Suriname, Ecuador, Peru, Colombia). Country-specific scoping; National Conservation Plan template adaptation; AiGLe pre-grading scoping.
3. Phase 1: pilot benchmark structuring (Days 30–70)SPV jurisdictional setup; rating-agency engagement on the pilot benchmark; AiGLe Four-Pillar grading; bookrunner-team segmentation (securitisation, credit, ESG, commodities, private wealth, corporate banking) for parallel review.
4. Phase 1: first benchmark issuance (Day ~70)First $1–2bn benchmark CBS senior tranche issued; institutional-buyer placement complete; corporate-balance-sheet placement programme launched on the CFA layer; NATDAQ listing live.
5. Phase 2: cadence ramp-up (Days 70–365)3–5 additional benchmark issuances across pilot sovereigns; corporate-treasury placement programme expands; secondary-market depth builds on NATDAQ.
6. Phase 3: Tier-1 sovereign onboarding (Year 2–3)Brazil, French Guiana onboarded as Tier-1 issuers; pipeline expands to Congo Basin, ASEAN and Pacific anchors.
7. Phase 4: full programme cadence (Year 3+)5–10 benchmarks per Tier-1 / yr at full ramp; multi-decade build-out across OECD-qualifying and tropical sovereigns; corpus-pool reaches sovereign-wealth-fund scale across the issuance pipeline.

What sits in mandate, what sits in DD

This document is the full mandate proposal. It sets out the structural opportunity, the bank’s economics, the architecture and the heads of terms in detail sufficient for a 10-day decision window. It is not a due-diligence pack and does not attempt to substitute for one. The DD pack is segmented for parallel review across JPMorgan’s securitisation, credit, ESG, commodities, private wealth and corporate-banking lines so confirmation-of-capability work runs concurrently with the post-mandate engagement-letter execution.

In-scope (mandate)

• The six heads of terms, indicative engagement-letter envelope, lead bookrunner mandate with first-look exclusivity on follow-on issuance.
• The unit economics, programme phasing, six bank-revenue lines with regulatory caveats.
• The canonical Amazon Basin worked example with per-country breakdown.
• The Quantitative Growth platform proposition and the parallel FBS mandate.
• The architectural derivation of the three-tier construction and the capital-pool form.
• The AiGLe Four-Pillar Framework calibration scaffold.
• The waterfall and tranche architecture template.
• The comparator analysis vs REDD / REDD+ / GCS / DFN swaps / blue bonds.

In-DD (post-mandate)

• Sovereign engagement letters and signed conservation programme agreements per anchor sovereign.
• Carbon Code chain-of-custody (Verra / Gold Standard / ART TREES per programme); biodiversity-credit chain-of-custody (Verra Biodiversity, Plan Vivo).
• Regulatory opinions on Basel III HQLA / LCR / NSFR / CRR III treatment by jurisdiction.
• Counsel-issued opinions on FCA / SEC / AIFMD jurisdictional positioning of the CBS issuance programme; sovereign-immunity carve-outs.
• Technical due-diligence on the AiGLe-graded methodology and Four-Pillar Framework calibration; independent verification panel.
• Independent benchmark validation for hectare value and ecosystem-service price assumptions (Costanza et al. 2023 update; UNEP State of Finance for Nature 2023; bespoke ecosystem-service revenue modelling per anchor sovereign).
• Custodial, audit and SPV jurisdictional opinions; bankruptcy-remoteness validation.
• Rating-agency methodology engagement on each benchmark issuance.
• Per-sovereign credit memo (sovereign credit, designated estate, programme overlays, HQLA-classification analysis, comparator transaction precedent).

Decision and process

Confirmation of terms is required within 10 days of receipt. The accelerated tail targets first benchmark issuance within 10 weeks of mandate confirmation. The 10-day window enables the bookrunner to confirm capability across the six product lines internally; the 10-week tail allows for SPV setup, rating-agency engagement on the pilot benchmark, and pilot-sovereign engagement-letter execution.

1. Day 0 onwards: mandate confirmationJPMorgan internal review across securitisation, credit, ESG, commodities, private wealth, corporate banking; commercial terms agreed; engagement letter signed.
2. Day 10–30: pilot sovereign engagementTier-2 anchor sovereign(s) selected; National Conservation Plan template adapted; sovereign-counsel engagement.
3. Day 30–70: pilot benchmark structuringSPV setup; rating-agency engagement; AiGLe Four-Pillar grading; corporate-balance-sheet placement programme launch preparation.
4. Day ~70: first benchmark issuance$1–2bn senior CBS tranche issued; institutional placement complete; CFA layer launched on NATDAQ.

Engagement letter scaffold

The engagement letter codifies the mandate. The scaffold below is provided for counsel review during the 10-day decision window and is subject to negotiation. The intended governing law is English law with exclusive jurisdiction of the English courts; arbitration available at JPMorgan’s election under LCIA rules in London.

Regulatory citations — orientation

Citations to Basel III, the LCR Delegated Regulation, CRR III, US Basel III endgame proposal and analogous instruments are summary references for orientation; the operative legal text governs each issuance, and counsel-issued opinions in the DD pack establish the regulatory position per jurisdiction.

Comparator transactions — precedent

Sovereign comparator table

Per-anchor-sovereign credit profile, designated conservation estate, existing programme overlays, and indicative HQLA-tier classification. Subject to per-sovereign DD validation in the post-mandate phase.

Sources and data references

• EPC Amazon Basin Financial Model — primary EPC analytical model; full version available behind the NATDAQ research-archive gate.
• Costanza et al., The Value of Ecosystem Services (2023 update) — per-hectare ecosystem-service valuation benchmarks.
• UNEP, State of Finance for Nature 2023 — biodiversity-finance gap analysis and capital-formation benchmarks.
• Refinitiv ABS league tables 2022–2024 — bookrunner / structuring fee bands for senior US ABS issuance ≥ $1bn notional.
• S&P Global Ratings and Moody’s Investors Service sovereign credit ratings, 2026 H1 publication cycle.
• UNFCCC REDD Web Platform — methodology references and project-level deployment data.
• Verra Registry — voluntary carbon credit issuance data 2008–present.
• World Bank IBRD green bond programme; Inter-American Development Bank DFN swap programme history.
• TNFD Recommendations (2023, v1), TCFD Final Recommendations (2017, with 2021 supplemental).
• EU SFDR (Regulation 2019/2088), EU CSRD (Directive 2022/2464).
• Basel Committee on Banking Supervision — Basel III LCR Final Rule (2013) and subsequent revisions; Basel IV (CRR III) endgame proposals.
• EPC Quantitative Growth Thesis — principal architectural reference; full text available behind separate gate.
• AiGLe Criteria Papers Nos. 1 & 3 — Four-Pillar Framework methodology and the Mandate text governing capital-pool corpus formation.