Earth Today | The Bahamas to benefit from innovative nature bonds project

THE GOVERNMENT of The Bahamas together with The Nature Conservancy (TNC) and the Inter-American Development Bank (IDB), among other partners, recently launched a Nature Bonds project to refinance US$300 million of the country’s external commercial debt to help improve ocean conservation and the management of its Marine Protected Areas.

The goal is to benefit biodiversity and people, while also lessening the effects of climate change.

“The Bahamas debt conversion project is a project of firsts. It is the first time that a private investor, Builders Vision (an impact platform founded by Lukas Walton), is providing a co-guarantee alongside a multilateral development bank (MDB)” noted a November 22 release from the TNC.

“Also, it’s the first time a private insurer, AXA XL, is providing credit insurance alongside an MDB in support of a sustainable issuance for nature and climate. In addition, the project marks the first time that climate-smart MPA commitments are included explicitly in the conservation outcomes to support climate mitigation and adaptation goals,” the release added.

By buying back US$300 million of its external commercial debt using proceeds from a new competitively-priced US$300 million loan funded by Standard Chartered, the release explained,“the Bahamas will unlock an expected US$124 million of new cash funding (plus an additional estimated US$8 million of endowment investment returns) for marine conservation over the next 15 years without adding to the country’s debt”.

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“The conservation fund endowment, expected to grow to US$20 million by 2039, will continue funding marine conservation in The Bahamas beyond the project’s 15-year term. The new financing benefits from a comprehensive credit-enhancement package: a US$200 million partial credit guarantee from the IDB, alongside a US$70 million collateralised guarantee from Builders Vision and US$30 million in credit insurance from AXA XL. Rothschild & Co served as sole financial advisor to the Ministry of Finance,” the release explained.

The Bahamas has a strong record in marine conservation, with reportedly more than 17 per cent of its nearshore environment designated as part of its National Protected Areas System. MPAs within this system comprise nearly 6.8 million hectares (16.8 million acres) of the ocean

Like many other small-island, large-ocean states, it needs additional resources to effectively manage and enforce its existing MPAs, to balance conservation of its marine resources with increasing demands for use and development of its coastal and ocean space, and also to help with addressing climate change impacts on the country and its people.

The Nature Bonds project will enable the country to advance its goal of effectively managing its vast system of MPAs and will provide the single largest amount of funding to support effective management of The Bahamas’ ocean area.

“Since 1958, The Bahamas has led in ocean conservation with the establishment of the Exuma Land and Sea Park. Now, our nation takes another ambitious step with an economic program that promotes ocean conservation and benefits local communities. By strengthening the protection and management programmes of the Marine Protected Area system we will safeguard livelihoods, boost the economy, and contribute to global ocean protection goals,” said Rochelle Newbold, Director, Climate Change and Environmental Advisory Unit of The Government of The Bahamas.

The Bahamas project, officially called The Bahamas Debt Conversion Project for Marine Conservation, is the most recent of TNC’s Nature Bonds projects.

Nature Bonds projects are powerful tools that combine debt refinancing, ecological and social science, conservation planning, and policy to support countries to achieve their conservation and climate goals, close the nature finance gap, and support local communities.

The Nature Bonds Programme is an evolution of TNC’s successful Blue Bonds for Ocean Conservation strategy. This will be the fifth Nature Bonds project for TNC, alongside those in the Seychelles (2016), Belize (2021), Barbados (2022) and Gabon (2023).

Combined, the five projects will support governments to reach new protections or improved management of nearly 238 million hectares of ocean and a total of US$1.5 billion of debt refinanced. The projects are expected to generate more than US$535 million of new funding for conservation.