The Bahamas has just flipped the script on its $300 million commercial debt to secure itself a $120 million deal to inject ‘new and significant’ funding into the conservation of its 13 million acres of protected marine space.

Now, if you’re not ‘the numbers guy’ within your social circles, then the following could well induce a case of ‘going cross-eyed’. Rest assured, you’re not alone and we will do what we can to mitigate the mental acrobatics with pictures of pretty oceans, marine life, and of course The Bahamas… so stick with us, because it’s all going to be worth it.

Engaging what can best be described as ‘financial engineering’ by those within the NatureTech sector, or “complete sorcery” by the rest of us, The Bahamas has launched a new debt-conversion project hailed by those within the sector as a ‘groundbreaking advancement’ of the debt-for-nature approach; a fast-moving area tipped to be critical in generating the kind of finances required by biodiversity-rich nations to conserve crucial habitats.

Of course, working a deal like this brings a lot of factors into play. So, here are the basics:

The Bahamas’ Marine Protected Areas (MPAs) currently cover an area of 13 million acres – an area comparable to the size of Croatia. These MPAs are rich in abundance of biodiversity. In fact, the Bahamas hosts as much as 5% of the world’s coral reefs and is home to numerous endangered species, from sea turtles to tiger sharks.

However, this small island nation is faced with some rather sizeable challenges. Chief among them are the ongoing recovery operations following the devastating impact of 2019’s Hurricane Dorian – a category five hurricane that tore through The Bahamas leaving behind its legacy as the worst storm the nation has faced since records began. As a result, paying off loans used for disaster-relief on such as scale has severely limited the nation’s ability to raise finances to protect its marine ecosystems; particularly when that debt carries with it high interest rates.

Working, therefore, in partnership with The Nature Conservancy, the Inter-American Development Bank, and several other financial partners (marking a number of groundbreaking firsts for nature financing along the way), the Government of The Bahamas has launched a Nature Bonds project to refinance this $300 million commercial debt to help the country improve ocean conservation and management of its Marine Protected Areas.

The details of the deal? Buckle up… by working with Standard Chartered – which has provided the Bahamas with a $300 million loan at a lower interest rate of 4.7% – the Bahamas has been able to buy back $296 million of old debt at a discount. This clever swap has saved the nation $124 million (in debt-repayments plus interest) which, over the next 15 years, will be funnelled into the conservation of its marine spaces – all without adding to the country’s debt.

Beyond that – because, yes there is still more to this equation – the estimated $8 million in endowment investment returns (funding anticipated to be generated by the conservation project) is anticipated to grow to $20 million by 2039. It’s expected that this will be used for continued financing of marine conservation in the Bahamas beyond the project’s 15-year term.

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

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

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

“Since 1958, The Bahamas has led in ocean conservation with the establishment of the Exuma Island and Sea Park. Now, our nation takes another ambitious step with an economic programme that promotes ocean conservation and benefits local communities,” said Rochelle Newbold, director, climate change and environmental advisory unit of the Government of The Bahamas.

“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.”

To give this clever form of debt-for-nature jiggery-pokery a more formal name, project leaders have opted for The Bahamas Debt Conversion Project for Marine Conservation. It’s actually just one of the more recent Nature Bonds projects to be guided by The Nature Conservancy.

The conservation funding generated by this project will be managed by The Bahamas Protected Areas Fund, a conservation trust fund. The Bahamas National Trust meanwhile, a conservation organisation, will work in cooperation with the Bahamian government and people to strengthen stewardship of the country’s recently expanded MPAs, complete a National Mangrove Management Plan, and build on that work by completing and implementing a Marine Spatial Plan to improve management of the entire Bahamian ocean area.

This is the fifth Nature Bonds project for The Nature Conservancy which has previously secured refinancing deals for the Seychelles (2016), Belize (2021), Barbados (2022), and Gabon (2023). Combined, the five projects will support governments reach new protections of nearly 238 million hectares of ocean with a total of $1.5 billion of debt refinanced.

“When it comes to addressing the dual crises of the climate emergency and biodiversity loss, there is a funding gap that stifles many countries’ ambitions to invest in nature for the benefit of their people,” said Jennifer Morris, CEO of The Nature Conservancy. 

“The Bahamas has a strong record in conservation and one of the largest systems of designated marine protected areas in the Caribbean. I am especially excited about this Nature Bonds project, as it will help The Bahamas reach its conservation goals and support sustainable livelihoods. This is further proof that debt conversions, with the right conservation commitments and technical assistance, are an effective market-based solution.”

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