Nations and corporations alike are protecting biodiversity. Often, those leading the pack are those facing the most pressing environmental challenges. Take, for example, the island nation of Barbados. Its marine space is 430 times larger than its land area and supports diverse life, including 13 species of flying fish. However, the country protects less than 1 percent of its oceans, which are plagued by overfishing and pollution. To protect species and to sustain the tourism industry that provides 40 percent of the country’s GDP and employment, “the land of the flying fish” has teamed up with The Nature Conservancy (TNC) and the Inter-American Development Bank (IDB) to convert $150 million of its sovereign debt into lower-cost debt.
Barbados will buy back $77.6 million of its 6.5% U.S. dollar-denominated bonds due in 2029 and $72.9 million of its 8% Barbados dollar-denominated bonds due in 2043. IDB provided a $100 million repayment guarantee, while TNC provided one for $50 million. This enables it to reduce its cost of borrowing with a lower interest rate than the previously issued debt and to use all of those savings for conservation purposes. The savings will be put into a trust fund, out of which grants will be provided to environmental projects for at least 15 years. Over that time, about $50 million will be freed up that the country will use to protect 30% of its coastal habitat, in line with TNC’s “Blue Bonds for Ocean Conservation” program.
After the transaction closes, TNC will help the government complete a marine spatial plan . Through this years-long process, Barbados will assess its marine assets and, using the best available science, decide how best to optimize its marine assets while also meeting the needs of communities and businesses relying on them. According to Dr. Sherry Constantine, TNC’s Eastern Caribbean Program director, “it’s a long process. It’s going to take a lot of stewardship, a lot of trust-building, and good-faith negotiating. But once it’s done, Barbados will have an effectively managed ocean that will benefit generations to come.”
This is only the third time that TNC has done this with a country, but 2016’s collaboration with the Republic of Seychelles funneled $430,000 annually into protecting 86 million acres of marine territory by 2020 and was followed up by a similar deal with Belize in 2021. Each of those experiments generated massive success.
Although this is the first time TNC (or any non-governmental organization) has teamed up with a multilateral development bank as a co-guarantor of a financial instrument, it is just the beginning.
As Mauricio Claver-Carone, President of IDB, explained, “with our expertise in international green financing, the IDB is ready to mobilize additional funds to increase resources for countries to enhance their ambition, and we remain at their side to support their efforts.”
Equally innovative moves are coming from corporate entities. In September, North Queensland Airports Group (NQA) refinanced about $508 million of its debt with the help of the Commonwealth Bank of Australia. This sustainability-linked loan came with terms tied to several targets, the meeting of which would result in a lower interest rate for the owner of Australia’s Cairns Airport and Mackay Airport. Some of these targets are purely environmental, including net zero emissions across Scopes 1 and 2 by 2025 and the measurement and mitigation of Scope 3 emissions.
Others are more nuanced, including a biodiversity target to improve the habitats of at least three endangered species, like the double-eyed fig parrot, in collaboration with the Dawul Wuru Aboriginal Corporation’s Yirrganydji Land and Sea Ranger Program. This community organization working to promote local indigenous interests will be heavily involved in reporting on the targets. This “honors the skills and knowledge of Aboriginal and Torres Strait Islander peoples and recognizes that they are best placed to lead this important work as the traditional custodians of Australia,” says Sally Reid, Executive General Manager of Global Client Solutions at Commonwealth Bank.
This is Australia’s first corporate loan to target biodiversity, which is especially important for the country with the highest mammal extinction rate. Richard Barker, CEO of NQA, reflects that “by actually linking our environmental targets into our refinancing, it really commits us as an organization to deliver on what we say, not only around reducing our emissions, but to actively encourage the regeneration of biodiversity in this area.”
Projects aimed at protecting biodiversity around Cairns Airport were already in place before this unique financing deal. The airport has been working to restore 350 hectares of mangroves on its property that help sequester carbon, protect the shore from tides, and support various forms of wildlife. Renovating the Jack Barnes Bicentennial Mangrove Boardwalk through the mangroves, for example, will prove useful for research into the rejuvenation of the habitat. Brian Singleton, a senior Yirrganydji ranger, remarked that “the ability to bring our Elders into places like this has been really important for them to start sharing knowledge about how we used to look after the country.”