Bahamas Launches Debt Conversion Project to Boost Ocean Conservation and Save $124 Million

Innovative financing aims to reduce debt burden while funding sustainable marine protection and management for the future.

The Government of the Bahamas has launched an innovative debt conversion initiative designed to save the country an estimated $124 million over the next 15 years. This groundbreaking project will help the nation enhance its ocean conservation efforts, particularly the management of the Bahamas Protected Areas System. The debt conversion initiative, supported by the Inter-American Development Bank (IDB), The Nature Conservancy’s (TNC) Nature Bonds Program, and other key partners, has allowed the Bahamian government to repurchase $300 million in external debt. The funds were secured through a new $300 million loan facilitated by Standard Chartered Bank.

The debt conversion project is expected to lead to significant long-term benefits, including the establishment of a conservation endowment fund projected to grow to $20 million by 2039. This fund will support marine conservation beyond the project's 15-year term. The deal is also backed by a robust credit guarantee package: a $200 million guarantee from the IDB, a $70 million co-guarantee from Builders Vision, and $30 million in credit insurance from AXA XL.

The Bahamas Protected Areas Fund (BPAF) will oversee the allocation and management of conservation funds generated by this deal, ensuring that the country’s marine environment receives sustained and targeted protection. The financial advisory firm Rothschild & Co. provided counsel to the Bahamas government on the deal.

A Step Forward in Ocean Conservation

“Since 1958, The Bahamas has led the way in ocean conservation with the establishment of the Exuma Land and Sea Park,” said Rochelle Newbold, Director of The Bahamas Climate Change and Environmental Advisory Unit. “Now, our nation takes another ambitious step forward with an economic program that not only promotes ocean conservation but also benefits local communities. By enhancing the protection and management of our Marine Protected Areas, we will safeguard livelihoods, boost the economy, and contribute to global ocean protection goals.”

The Bahamas’ debt conversion project is designed to provide critical funding for managing its vast ocean area, capacity building for marine conservation, and technical support for key projects. These include climate-smart management plans for Marine Protected Areas (MPAs) and the completion of a national Mangrove Management Plan, aimed at safeguarding vital ecosystems such as coral reefs, seagrass meadows, and mangrove forests.

Institutional Strengthening and Sustainable Management

The IDB, in addition to providing a $200 million guarantee, will also support institutional strengthening within the Bahamas. This includes bolstering the country's environmental and public debt management systems. The project is expected to improve macroeconomic stability, enhance environmental governance for biodiversity protection, and support better debt management practices in the future.

TNC’s Nature Bonds Program is at the forefront of this financial and environmental innovation. This program combines debt refinancing with science-based planning and policy to ensure long-term, effective conservation and climate action. It aims to generate new funding for conservation, climate mitigation, and adaptation efforts, while helping governments develop sustainable policies that benefit both nature and local communities.

Building on its successful track record in Latin America and the Caribbean, the IDB played a crucial role in facilitating dialogue between the various partners. It helped structure the credit enhancement mechanism, drawing in donors and insurance companies to scale up the transaction and ultimately increase the savings available for conservation initiatives.

Advancing the Blue Economy and Climate Resilience

“The IDB is proud to deploy innovative approaches to support our countries in achieving their sustainable development goals, particularly in biodiversity conservation,” said IDB President Ilan Goldfajn. “We are excited to join The Bahamas in this initiative, which will strengthen the conservation of marine and coastal ecosystems, advance the country’s Blue Economy agenda, and enhance climate change resilience.”

Jennifer Morris, CEO of The Nature Conservancy, emphasized the significance of this debt conversion model as a tool to address the critical funding gap for nature-based solutions to climate and biodiversity challenges. “The Bahamas has one of the largest systems of marine protected areas in the Caribbean, and this Nature Bonds project will help the country reach its conservation goals, support sustainable livelihoods, and further prove that debt conversions, when paired with the right conservation commitments and technical assistance, offer an effective market-based solution.”

A Model for Future Conservation Efforts

The Bahamas’ debt conversion project is not only a significant step for marine conservation in the country but also serves as a model for other nations seeking innovative financial solutions to protect their natural resources. By aligning financial management with environmental sustainability, this initiative offers a blueprint for leveraging financial tools to safeguard ecosystems while reducing national debt burdens. The country’s commitment to ocean conservation and climate resilience will continue to drive its long-term environmental and economic goals.