Impact Investing | September 25, 2022

Barbados debt-for-nature swap unlocks $50 million for marine conservation and ‘blue economy’

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, Sept. 25 – Barbados is the latest nation to restructure its high-priced debt to free up funds for conservation.

The Caribbean island will buy back a portion of its higher-priced sovereign debt with $150 million in lower-interest loans arranged by Credit Suisse and CIBC FirstCaribbean. Loan guarantees came from The Nature Conservancy and the Inter-American Development Bank.

The $50 million savings will go into a Conservation Trust Fund that will make grants to protect coral reefs, manage stormwater runoff and pursue other conservation efforts over 15 years.

Island nations, among the most vulnerable to climate-drive driven extreme weather and rising sea levels, also have some of the highest debt-to-GDP loads, in part due to storm-related damages. When the Covid pandemic tanked tourism revenues, many countries had little left to spend on conservation and climate adaptation.

Sustainable development

Conservation and adaptation are converging with economic development goals. Barbados’ economy depends on the health of its waters for fishing and tourism.

The debt-for-nature swap will “allow Barbados to secure and protect our marine environment and also help us expand our Blue Economy, both of which are of critical importance to our people and our very way of life,” Barbados prime minister Mia Mottley said.

The deal is the third under TNC’s ‘Blue Bonds for Conservation’ model, which requires that countries protect at least 30% of their waters and use marine spatial planning. It follows a similar restructuring for Belize last year and the pioneering Seychelles blue bond in 2016.

There are “creative solutions” to getting much-needed funding for conservation efforts that can boost economic growth, TNC’s Sherry Constantine told ImpactAlpha.

The Barbados trust fund is designed to attract additional private capital.  

“Ultimately, what we all want to see here is a large flow of capital coming from a developed country or developed market investors into these types of transactions” that can lower financing costs for countries and deliver generational impact, Credit Suisse’s Ramzi Issa told ImpactAlpha.

Pandemic clause

The new bond contains a natural disaster clause and, in a first for such bonds, a pandemic clause that will defer principal repayments for two years after a triggering event.

Mottley, featured recently in ProPublica, used her United Nations address last week to call for such clauses and for reform of the International Monetary Fund and World Bank to facilitate more funds to fight poverty.