The small island nation of Seychelles has become the first country to raise money in the bond markets to protect dolphins and other marine life, in a deal that also involves the World Bank and the Prince of Wales.
Seychelles is the first country to sell debt specifically earmarked for ocean projects, raising $15 million in a 10-year ‘blue bond’ that is modeled after the green-labeled debt that emerged a decade ago and is since become a debt of 150 dollars. market of one billion euros per year.
The country received help designing the bond from the World Bank, which pioneered the use of green bonds, and an environmental foundation set up by the Prince of Wales to work on the challenges of sustainability.
Arunma Oteh, Vice President and Treasurer of the World Bank, said the blue bond was “an example of the powerful role of capital markets in connecting investors to projects that support better stewardship of the planet.”
Although the amount raised was small, it acted as a proof of concept for the blue bond structure, she said: “We hope this bond will pave the way for others – just like the first green bond of the World Bank catalyzed the green bond market 10 years ago.”
A record $155 billion of green debt was sold in 2017, according to ratings agency Moody’s, which predicts between $175 billion and $200 billion will be sold this year.
The bond “will greatly help Seychelles achieve a transition to sustainable fisheries and safeguard our oceans as we sustainably develop our blue economy,” said Vincent Meriton, Vice President of the Republic of Seychelles.
The Seychelles are an archipelago of 115 islands and 1.4 million square kilometers of ocean. Fish products represent 95% of its exports and the fishing industry employs 17% of its population. Proceeds from the bond will be used to expand its marine protected areas, invest in fisheries, and provide grants and loans to ocean-related industries.
Justin Mundy, former director of the Prince of Wales’ International Sustainability Unit, said the concept for the bond was conceived in 2014 with help from the unit.
“The bond demonstrates that institutional investors can get involved to help build a truly sustainable blue economy that supports critical marine ecosystems,” he said.
Jennifer Pryce, managing director of Calvert Impact Capital, one of three investors who bought the bond, said there was an “urgent” need for capital “to address threats to the health of our ocean”. The bond structure is a way “to align marine conservation and economic opportunity”, she said.
Other investors who bought the bond were Nuveen – a subsidiary of asset management giant TIAA – and Prudential Financial.
Stephen Liberatore, head of ESG bond strategies at Nuveen, said climate change had “created both challenges and opportunities for investors”.
“Investing with a responsible approach is both prudent and financially rewarding in the long run,” he said. “We hope this transaction will serve as a model for creative impact investing solutions in the future.”
The financing structure combines commercial and non-commercial sources of finance – the bond is backed by a $5 million guarantee from the World Bank and a concessional loan of $5 million from the Global Environment Facility, a international funding partnership supported by governments and other organizations. partially cover interest payments.
The bond pays an annual coupon of 6.5% to investors, but the WEF loan will reduce the cost to Seychelles to 2.8%.
This is Seychelles’ second foray into environmental finance: earlier this year, the country created two new marine protected areas as part of a 2016 deal to set aside $20 million from its debt.