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The Seychelles is known for its isolated beauty, with pristine beaches, turquoise waters, and lush tropical rainforests.
Over the past decade, the Indian Ocean archipelago spanning 115 granite and coral islands has also emerged as a pioneer of using innovative finance for ocean health.
With long-term support from the Global Environment Facility, the Seychelles has turned its vast ocean territory into leverage that has allowed it to protect its natural assets, reduce its economic pressures, and open up a whole new category of financing for others to follow.
About 10 years ago, when the Seychelles was faced with increasing pressures on its marine environment due to unsustainable levels of fisheries and tourism, it embarked on an ambitious blue economy strategy.
It made the bold decision to expand its marine protected area network and lay the groundwork for what would become two landmark deals – the world’s first debt swap for ocean conservation, and the first-ever sovereign blue bond.
The Global Environment Facility committed nearly $15 million to support this transformation, beginning with the government’s decision to set a target to bring 30 percent of its marine territory under protection by 2020.
The GEF invested in a first wave of expansion of the Seychelles’ marine protected area network and joined with other partners to support the sustainable financing of the entire area.
It later supported the country’s innovative Debt-for-Nature Swap with The Nature Conservancy. This deal raised funding to buy $21.6 million of the Seychelles’ sovereign debt, which the country then refinanced under more favorable terms. A portion of the repayments were directed to the Seychelles Conservation and Climate Adaptation Trust – a public-private trust fund endowment to finance climate change adaptation, sustainable fisheries and marine conservation prospects.
As a result of this transaction, the Indian Ocean’s second-largest marine protected area was created.
The deal included a commitment by the Seychelles to undertake a comprehensive marine spatial plan and to protect 30 percent of its ocean area in marine protected areas. This ensured that more than 400,000 square kilometers – a section of the ocean larger than the size of Germany -- was made into a marine protected area.
Building on those successes, in 2018 the Seychelles launched the world’s first sovereign blue bond – a pioneering financial instrument designed to support sustainable marine and fisheries projects. The bond was backed by a $5 million guarantee from the World Bank and a $5 million concessional loan from the GEF, which partially covered its interest payments. It raised a total of $15 million from international investors including Calvert Impact Capital, Nuveen, and US-headquartered Prudential Financial.
Proceeds from the issuance were used to support the further expansion of marine protected areas, improvement to the governance of priority fisheries, and the development of the Seychelles’ blue economy, as well as regional efforts to support more sustainable management fisheries across the Indian Ocean.
Announcing the bond’s launch, Vincent Meriton, Vice-President of the Republic of Seychelles, described it as a way to combine public and private investment in a way that empowered local communities and businesses. “The blue bond will greatly assist the Seychelles in achieving a transition to sustainable fisheries and safeguarding our oceans while we sustainably develop our blue economy,” he said.
The issuance was also welcomed by the market, whose interest in solutions that benefit both investors and the environment has continued to grow since.
“The blue bond demonstrates the potential for capital markets to scale sustainable oceans solutions that expertly align marine conservation and economic opportunity,” said Jenn Pryce of Calvert Impact Capital. “The need for capital to address threats to the health of our ocean is increasingly urgent. The blue bond sets a great example of the type of bold leadership from governments and financing from public and private sectors that we need more of.”
It committed to protect 30 percent of its exclusive economic zone and is undertaking a marine spatial planning exercise to serve as the basis of its sustainable blue economy strategy.