By Claire Obae
- Bank of America has put together a Blue Bond for Gabon that will generate nearly $125M in financing for new marine conservation efforts
- In the last five years there have $5 billion worth of ‘Blue Bonds’ from 26 transactions
Seychelles, the tiny African island nation became the first country in the world to issue a Blue Bond, a debt instrument that raises funds for climate change mitigation and adaptation. Now, Bank of America has put together a Blue Bond for the country of Gabon that will generate nearly $125 million in financing for new marine conservation efforts over the next 15 years, “advancing critical conservation goals, protecting endangered species, and supporting the country’s sustainable ‘blue economy.’”
Why This Matters: Blue bonds aren’t an entirely new concept. They’ve been around but are only starting to gain traction as climate change becomes a more pressing issue.
The early success of Blue Bonds spurred its adoption across other island nations like Belize and Ecuador and set a benchmark that will hopefully propel such countries to greater heights in the near future.
This can be seen in Gabon’s Blue Bond Master Trust, where the country received $500 million. Gabon’s ‘Debt-for-Nature’ transaction in Continental Africa is the first ever involving private creditors to refinance $500 million of the country’s sovereign debt. The country has been looking for ways to monetise nature conservation but still relies on its oil industry for more than one-third of government revenue, according to the Financial Times.
It also marks the first time a sovereign African nation has used such an approach to raise capital while protecting its natural resources. Gabon plans to use 25% to pay off its debts early and develop a strategy to preserve its natural resources and other measures to protect biodiversity.
Blue Bonds are a great way to support climate change mitigation efforts and can diversify your investment portfolio. From 2018 to 2022, there were only 26 blue bond transactions, totalling $5 billion. However, a growing number of investors are looking for income in the bond market, even while bond yields hover at historic lows.
Situational Awareness: Climate change is a crisis, and it’s only getting worse. As global temperatures rise, so do disaster relief costs, property damage, and public health concerns. Big, bold solutions that can be implemented quickly and there’s no better example than the Blue Bonds.
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