The Nature Conservancy Announces Innovative Nature Bonds project in The Bahamas

Today, The Government of The Bahamas, The Nature Conservancy (TNC), the Inter-American Development Bank (IDB), and several financial partners launched a Nature Bonds project that will refinance USD 300 million of The Bahamas’ external commercial debt to help the country improve ocean conservation and management of its Marine Protected Areas (MPAs) to benefit biodiversity and people, and lessen the effects of climate change. 

The Bahamas debt conversion project is a project of firsts. It is the first time that a private investor, Builders Vision (an impact platform founded by Lukas Walton), is providing a co-guarantee alongside a multilateral development bank (MDB). Also, it’s the first time a private insurer, AXA XL, is providing credit insurance alongside an MDB in support of a sustainable issuance for nature and climate. In addition, the project marks the first time that climate-smart MPA commitments are included explicitly in the conservation outcomes to support climate mitigation and adaptation goals.

By buying back USD 300 million of its external commercial debt using proceeds from a new competitively-priced USD 300 million loan funded by Standard Chartered, The Bahamas will unlock an expected USD 124 million of new cash funding (plus an additional estimated USD 8 million of endowment investment returns) for marine conservation over the next 15 years without adding to the country’s debt. The conservation fund endowment, expected to grow to USD 20 million by 2039, will continue funding marine conservation in The Bahamas beyond the project’s 15-year term. The new financing benefits from a comprehensive credit-enhancement package: a USD 200 million partial credit guarantee from the IDB, alongside a USD 70 million collateralized guarantee from Builders Vision and USD 30 million in credit insurance from AXA XL. Rothschild & Co served as sole financial advisor to the Ministry of Finance.

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 (16.8 million acres) of the ocean. Like many other small-island, large-ocean states, The Bahamas needs additional resources to effectively manage and enforce its existing MPAs, to balance conservation of its marine resources with increasing demands for use and development of its coastal and ocean space, and also to help with addressing climate change impacts on the country and its people. This Nature Bonds project will enable the country to advance its goal of effectively managing its vast system of MPAs and will provide the single largest amount of funding to support effective management of The Bahamas’ ocean area.

"Since 1958, The Bahamas has led in ocean conservation with the establishment of the Exuma Land and Sea Park. Now, our nation takes another ambitious step with an economic program that promotes ocean conservation and benefits local communities. By strengthening the protection and management programs of the Marine Protected Area system we will safeguard livelihoods, boost the economy, and contribute to global ocean protection goals,” said Rochelle Newbold, Director, Climate Change and Environmental Advisory Unit of The Government of The Bahamas.

The Bahamas project, officially called The Bahamas Debt Conversion Project for Marine Conservation, is the most recent of TNC’s Nature Bonds projects. Nature Bonds projects are powerful tools that combine debt refinancing, ecological and social science, conservation planning, and policy to support countries to achieve their conservation and climate goals, close the nature finance gap, and support local communities. The Nature Bonds Program is an evolution of TNC’s successful Blue Bonds for Ocean Conservation strategy. The conservation funding generated by this project will be managed by The Bahamas Protected Areas Fund, a conservation trust fund. The Bahamas National Trust, a conservation organization, 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 will be the fifth Nature Bonds project for TNC, alongside those in Seychelles (2016), Belize (2021), Barbados (2022), and Gabon (2023). Combined, the five projects will support governments to reach new protections or improved management of nearly 238 million hectares of ocean and a total of USD 1.5 billion of debt refinanced. Importantly, these projects are expected to generate more than USD 535 million of new funding for conservation, and they demonstrate how quickly this approach is scaling around the world.  

“The IDB is proud to deploy innovative approaches to support our countries to effectively achieve their sustainable development goals, including their biodiversity conservation efforts. We’re happy to join The Bahamas in this initiative to strengthen the mechanisms for the conservation of marine and coastal ecosystems and their sustainable management. This will also help advance the country’s Blue Economy agenda and enhance its climate change resilience,” said IDB President Ilan Goldfajn.

Nature Bonds projects require a risk mitigation package, usually anchored by a public-sector guarantor and/or political risk insurer, that results in an investment-grade issuance for sub-investment grade issuers. What is different about this project in The Bahamas that has never been done before is that Builders Vision, an impact investor, provided the required collateralized guarantee after IDB’s contribution. IDB will be guaranteeing USD 200 million with Builders Vision guaranteeing USD 70 million and AXA XL insuring the balance of USD 30 million. This feature is important as TNC is interested in partnering with private investors and insurers to support future projects. 

The ocean covers more than 70% of the planet, generates 70% of the oxygen we need to breathe, and regulates our climate, weather and carbon cycles. It also contributes an estimated USD 3 trillion per year to the global economy. Despite these facts, ocean conservation continues to be the least funded of the United Nations' sustainable development goals—a missed opportunity. 

“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, 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.”