TNC Announces Third Global Barbados Debt Swap

Today, The Nature Conservancy (TNC), the world’s leading conservation organization, announced an innovative financial agreement that will allow the Government of Barbados to redirect part of its sovereign debt service to funding marine conservation at supporting the nation’s commitment to conserve approximately 30% of its ocean and sustainably develop its blue economy.

This project is the latest in TNC’s “Blue Bonds for Ocean Conservation” strategy, an ambitious plan to dramatically increase ocean conservation around the world. Barbados is the third country to partner with TNC on a Blue Bonds project, following Seychelles and Belize. The Blue Bonds for Ocean Conservation strategy is an innovative approach to working with governments on the refinancing of a portion of their sovereign debt, securing long-term sustainable financing for the large-scale protection and management of the precious natural resources upon which life and livelihood. The Blue Bonds Strategy combines conservation funding with TNC’s science and marine planning expertise to help governments unlock funds at a scale that meets their conservation goals while supporting the well-being of their communities and of their savings. % of the world’s oceans, land and fresh water by 2030.

Although the ocean contributes around $3 trillion annually to global GDP, marine conservation continues to be the least funded of the United Nations Sustainable Development Goals – a missed economic, climate and biodiversity opportunity. .

“This climate crisis is one that requires urgent action by all. As we continue to press and expect the wider international community to address this situation as a matter of priority, we in Barbados have taken our own steps to combat its adverse effects,” said Barbadian Prime Minister Mia Mottley. . “With the help of The Nature Conservancy and the Inter-American Development Bank, this Blue Bonds project will enable Barbados to secure and protect our marine environment and will also help us grow our blue economy, both of which are invaluable. importance to our people and our very way of life.Through this innovative debt swap project, our government will commit to protect and effectively manage up to 30% of Barbados’ waters.In short, this is changing gives it.”

Financing marine conservation and climate change adaptation activities is a challenge for most countries, and particularly for small island developing states (SIDS) – or “large ocean states” – such as Barbados, which depends heavily on marine resources. Barbados’ heavy debt burden has stifled the country’s efforts to invest in critical conservation and climate change adaptation activities that would allow its nature-based economy to thrive. The effects of COVID-19 on Barbados’ tourism economy have been devastating. The continued degradation of the country’s precious marine and coastal environments due to severe storms – such as Hurricane Elsa and another catastrophic “abnormal storm” in 2021 – is likely to hamper the economy and coastal resilience of the small island nation. Barbados was determined to find new funding and capacity to enforce environmental laws and commitments and to expand protected areas.

“We believe that innovative debt transactions combined with science and marine planning, such as our Blue Bonds for Ocean Conservation strategy, can ensure the protection and better management of more than 4 million square kilometers of the ocean of the planet – a 15% increase in the current amount of global marine protection,” said Jennifer Morris, CEO of The Nature Conservancy. “The Nature Conservancy has pioneered this kind of approach in the marine space, and it s proves to be a powerful way to help governments achieve their conservation goals while supporting their economies and building resilience to the climate crisis.”

Through a new co-guarantee structure with a $50 million guarantee from TNC and a $100 million guarantee from the Inter-American Development Bank (IDB), Barbados completed a $150 million debt conversion which will facilitate the expansion of the country’s marine protected areas from virtually zero to around 30% and improve the management of all marine waters under its jurisdiction. This project is expected to free up approximately $50 million to support environmental and sustainable development actions in Barbados over the next 15 years, making both the country and the livelihoods of its people more resilient to climate change.

IDB President Mauricio Claver-Carone said, “The IDB has been a long-standing partner of Barbados on its ambitious climate and biodiversity agenda. Our catalytic role in this transaction demonstrates our commitment to the IDB to offer innovative financial instruments and technical advice that increase the region’s resilience. With our expertise in international green finance, the IDB stands ready to mobilize additional funds to scale up countries’ resources to boost their ambition, and we stand by them to support their efforts.

Blue Bonds for Ocean Conservation: Turning Debt into Marine Protection

At the heart of a Blue Bonds project is an agreement: a coastal or island nation pledges to protect approximately 30% or more of its ocean territory, including coral reefs, mangroves, fish spawning sites and other important ocean habitats and species, as determined from the completion of a holistic and participatory marine spatial planning process that uses the best available science for decision-making. In support of this commitment, TNC works with the government and its partners to enable governments to buy back debt (often at a discount) and refinance it with more favorable interest rates and repayment terms. The resulting savings are then used to support new, planned and ongoing conservation work.

In the case of Barbados, the country worked with Credit Suisse, which acted as global lead arranger, and CIBC FirstCaribbean, as national lead arranger, to raise approximately $150 million through a dual currency term loan. This blue loan, partially financed by the issuance of blue bonds on the capital markets, financed the buyback of part of Barbados’ existing debt. With TNC and IDB each providing repayment guarantees on behalf of Barbados, the new financing has a lower interest rate than the old debt, and 100% of the resulting cost savings will be channeled into conservation Marine.

Using our scientific expertise, TNC is committed to supporting the realization of a Participatory Marine Spatial Plan (PSM) that will be government-led and contribute to the ongoing monitoring and effective management of the resulting protected areas.

Experience has proven that these debt swaps work: TNC’s 2016 project with the Republic of Seychelles enabled the country to spend $430,000 a year on marine conservation, helping to protect 410,000 km2 of ocean – an area twice the size of Great Britain – from 2020. In late 2021, TNC worked with Belize on a similar transaction in support of the country’s commitment to protect 30% of its ocean.

What this means for Barbados

Healthy marine environments are crucial for Barbados, whose national economy relies heavily on tourism. Barbados’ ocean is 430 times the size of its land area and the sustainable development of the country’s blue economy is a top priority for the government. The tourism industry, which has been heavily affected by the COVID-19 crisis, contributes over 40% of the country’s GDP and is responsible for around 40% of the country’s total employment.

Barbados’ coastal and marine resources are under intense pressure from factors such as overfishing, coastal overdevelopment, siltation, and pollution from sewage and runoff. Climate change is aggravating localized problems and has led to land loss, beach erosion and damage to reefs. Barbados is home to vast coral reef ecosystems and is an important nesting site for critically endangered hawksbill and leatherback turtles.

Although Blue Bonds projects generally share some common elements – a commitment to protect around 30% of a country’s waters, the use of marine spatial planning, sustainable funding – each project is designed to meet specific needs and circumstances. specific to the countries TNC works with. For example, the new TNC and IDB co-guarantee structure in the project transaction includes an innovative natural disaster debt deferment clause that Barbados has pioneered and a new pandemic clause, both of which can help the country manage crises.

“The completion of this debt swap is an innovative and progressive initiative for Barbados, as the country strives to secure its future financially and environmentally and develop a sustainable blue economy,” said Dr Sherry Constantine. , TNC’s Eastern Caribbean Program Director. “This project has been specifically designed to help the government meet its national development aspirations while demonstrating global leadership in the fight to reduce biodiversity loss and address climate change. One of the key outcomes of the project will be a comprehensive marine spatial plan that will improve the management and governance of Barbados’ vast ocean space, which is a win for nature and for all Barbadians.

Many supporters have made this project possible through years of effort, including the Becht FoundationIsdell Family Foundation, Lyda Hill Philanthropies, Oceans 5MacKenzie Scott, TED Bold ProjectJeff and Laurie Ubben, and the Wyss Foundation.

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