PUTTING UP GREEN TO SAVE THE OCEAN BLUE
CONSERVATION MAKES FINANCIAL AND MORAL SENSE, SAY BOND SUPPORTERS BEHIND CLEANUP EFFORTS AROUND WORLD
THEY’RE USING MORE AND MORE OF THESE TYPE OF BOND ARRANGEMENTS TO RAISE FINANCE, WHICH ARE VERY UNSUSTAINABLE AND LACKING TRANSPARENCY AND ACC OUNTABILITY. — ANDRE STANDING
Rob Weary led a seemingly glamorous life for almost a decade, travelling to remote island paradises.
But Weary was no tourist. He was trying to convince small countries to protect their seas — in partnership with big banks and international financial institutions.
Four years ago, he struck a pioneering deal with the Seychelles, islands off the East African coast. At the time, the country was deep in debt and facing a gloomy future. Its economy depended on tourism and fishing, two industries in danger from climate change.
As part of a team at the Nature Conservancy, an environmental group, Weary threw the Seychelles a lifeline: a chance to refinance more than $ 21 million of its debt on two conditions. The government had to spend the savings on ocean conservation and had to designate 30 per cent of its waters as zones where activities such as fishing and drilling are highly regulated or off limits.
The nation’s leaders delivered. The Seychelles hasn’t missed a payment and has protected an area larger than Germany.
Now some of the giants of the financial world are realizing there could be profits in ocean conservation.
Historically, ocean protection has been funded by governments, charities and a few ethically minded investors. Today, financial heavyweights such as the World Bank, Credit Suisse, Morgan Stanley and the Asian Development Bank are actively pursuing “blue bonds,” a tool to raise vast private capital for the oceans.
Last year, the Nordic Investment Bank issued a $ 220 million bond to address pollution in the Baltic. Morgan Stanley helped the World Bank sell a $ 10 million bond for cleaning up plastic waste in oceans.
“We saw ( the sale) had very robust demand,” said Audrey Choi, Morgan Stanley’s chief sustainability officer.
Investors get a steady flow of interest payments and an opportunity to shine up their environmental records. Borrowing countries should end up with stronger economies that boost budgets and make it easy to repay the bonds.
But skeptics warn against too quick an expansion. They are wary given previous misadventures in “green” finance to aid conservation on land.
“There is a growing financial crisis in many developing countries,” said Andre Standing, an independent researcher in Kenya. “They’re using more and more of these type of bond arrangements to raise finance, which are very unsustainable and lacking transparency and accountability.”
Others question how effectively deals can be replicated. “If this works in Seychelles, it can be done again in other locations. But it can’t be a mass- production thing,” said Mark Spalding, president of the non- profit Ocean Foundation.
Yet supporters say blue bonds provide critical cash infusions for developing countries. And conservation makes financial as much as moral sense, they contend.
Healthy corals and mangroves shelter islands against heavy storms, reducing recovery costs. Regulated fisheries help fishers stay in business.
Weary is among the bonds’ biggest boosters. He first worked at the Nature Conservancy on “debt for nature” swaps, negotiating with countries that owed the U. S. government a lot of money, usually at high interest rates. Under the deals he worked out, the Nature Conservancy and the United States would refinance a chunk of that.
The catch: The country had to protect a swath of biodiverse tropical forest. Any wavering on that protection and the debt would revert to its prior terms.
Weary came to call debt “the secret sauce” for conservation. Eleven such deals, struck from 2001 to 2011, resulted in almost $250 million for forest protection.
In 2012, the Seychelles called him: Could he do this for oceans?
The Seychelles, an archipelago of 115 islands in the Indian Ocean, was desperate given the future it faced.
Half a century earlier, its famed coral banks had teemed with life so abundant that Jacques Cousteau featured them in his documentary The Silent World. But a major bleaching event in 1998 proved devastating, and the reefs were dying faster than scientists could rehab them. Fishermen’s catches had become smaller and smaller.
And the Seychelles had scads of debt.
The Nature Conservancy, with cash from its own pocket as well as from philanthropists like Leonardo Dicaprio, bought a chunk of the Seychelles’ debt and then slashed its interest rate. That carved out about $200,000 a year for spending on projects to benefit the ocean.
The money is allocated by the independent Seychelles Conservation and Climate Adaptation Trust. Angelique Pouponneau, a 30- year- old lawyer and rising star on the international environmental circuit, is its chief executive. She sees part of her job as getting buy- in from local fishermen, which sometimes means hanging out as they hawk their day’s catch.
Researcher Jazzy Taberer led a $30,000 study tracking the habits of sicklefin lemon sharks, a vulnerable species in the Indo- Pacific that lives near coral reefs and within mangrove forests. The latter is crucial since mangroves have more resilience against a changing climate than corals do.
Identifying the sharks’ preferred habitat during their life cycle boosts the odds of saving the species.
On the small, rockstrewn island of Curieuse, the grant helped her team catch 20 shark pups, affix acoustic trackers and collect mountains of data on this little-studied species.
In 2018, the World Bank helped the Seychelles issue the world’s first “sovereign blue bond” — a slightly different instrument that serves as a new loan — for $15 million. Prudential Financial, Nuveen and Calvert Impact Capital, which each manage billions of dollars globally, provided $5 million apiece.
The Nature Conservancy’s effort is only expanding, ambitiously so. This winter, the organization hopes to ink the first deals toward its target of generating $1.6 billion for ocean protection around the world.
It aspires to negotiate debt- restructuring arrangements, funded by blue bonds, in 20 coastal and island nations within the next five years.