An initiative to use ‘blue’ bonds to support marine conservation and climate change initiatives in small island nations has won a significant design grant, awarded by a finance platform called Convergence. This is a hugely exciting step in securing the future of small island nations and the marine life they are home to.
At their most basic, the blue bonds will be used to convert countries’ sovereign debt into finance. The bonds are modelled on their green counterparts, which channel their proceeds to climate change and ecological projects – Seychelles has already implemented the model used by the bond for the benefit of the country’s fishing industry.
Convergence is a platform focused on facilitating funding models that blend a mixture of grants and private or public sources. It announced in January that it had awarded a design grant to NatureVest, the investing unit of The Nature Conservancy, a charity.
NatureVest will design and structure the blue bond and develop a proof of concept, showing how the bond can be used to raise debt capital from investors to fund multiple debt conversions for conservation. The debt conversions will provide funding to the governments of small island nations in exchange for their commitment to improving policies and investing in marine conservation and climate change projects.
The funding model used by the bond has already been demonstrated by the Nature Conservancy in a recently-closed blue bond transaction for Seychelles, which will now use the money to fund sustainable fisheries.
Rob Weary, a senior director of product development at NatureVest, explained that Seychelles, like small island nations, are “among the least responsible for climate change but are likely to suffer the most from its adverse effects”. He said that debt conversions can be used to fund a variety of climate change initiatives, from fisheries management to mangrove restorations.
According to reports, Convergence hopes the design grant will help identify the next generation of blended finance models and foster market-wide learning to drive the sector forward. It plans to award a minimum of $7.5 million in design grants to such initiatives within the next five years.