• Bahamas secured $124 million for ocean conservation through a debt swap financed by Standard Chartered and private sector backing.
• First new-generation debt swap involving private sector guarantees and insurance, expanding capital pools for such deals.
• Funds allocated to restore mangroves, manage 6.8 million hectares of marine protected areas, and protect the entire Bahamian ocean area.

The Bahamas has unlocked more than $120 million to fund the conservation and management of its oceans and mangroves through a debt swap financed by Standard Chartered and backed by the private sector.

Why it matters: Debt-for-nature swaps are emerging as crucial tools to help countries achieve conservation and climate goals, addressing the $942 billion global nature finance gap estimated by BloombergNEF.

The details: By spending $215.7 million to buy back Eurobonds and repurchasing an $81 million commercial bank loan using a lower-cost $300 million loan from Standard Chartered, the Bahamas can redeploy interest and principal payment savings into extensive ocean conservation projects.

What they’re saying:

“The nature bonds programme is one of the few mechanisms that can drive financing at scale towards climate and nature in the global south,” said Slav Gatchev, head of sustainable debt at The Nature Conservancy, which designed the deal and provides conservation support to the Bahamas.

Context: The Bahamas’ unique archipelago of low-lying islands makes it highly vulnerable to climate impacts. The country is still recovering from the widespread devastation caused by Hurricane Dorian in 2019.

Innovative financing: This deal is the first new-generation debt swap involving private sector guarantees and insurance, with Builders Vision providing a $70 million credit guarantee and Axa XL offering $30 million in insurance. A $200 million partial credit guarantee from the Inter-American Development Bank (IDB) enabled Standard Chartered to price its 15-year loan at 4.7%.

Strategic insights:

“The asset class is not only scaling but developing,” said Dennis Eisele, head of global credit market financing for Latin America at Standard Chartered. “Builders Vision and AXA demonstrate there is an expanded pool of capital for these deals.”

What’s next: Funding from the swap is reported to go towards restoring mangroves damaged by hurricanes, managing the archipelago’s 6.8 million hectares of marine protected areas, and supporting a new project to protect the entire Bahamian ocean area.

The bottom line: The Bahamas’ debt swap sets a precedent for leveraging private sector involvement in conservation financing, addressing significant environmental challenges while promoting sustainable economic development.

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