The Nature Conservancy has announced that its NatureVest division will support a debt-swap deal between the government of the Seychelles and its Paris Club creditors in exchange for the government’s commitment to additional marine conservation and climate adaptation efforts. To that end, TNC will invest $23 million in impact capital while raising an additional $8 million to finance the deal.
The people and economy of Seychelles, an archipelago nation of a hundred and fifteen low-lying islands in the western Indian Ocean, are particularly vulnerable to the effects of climate change. To be purchased by the government of the Seychelles from the Paris Club and South Africa at a discount to face value, the debt will be converted into new government-issued debt in the name of the soon-to-be-created Seychelles Conservation and Climate Adaptation Trust (SeyCCAT). Over a twenty-year period, the proceeds of that issuance will be used to finance marine conservation and climate adaptation efforts in and around the Seychelles, capitalize an endowment to finance future work, and repay investors.
The agreement follows three years of negotiations involving TNC, the government of the Seychelles, and the government's financial advisor, White Oak Advisory. According to the conservancy, the debt buyback agreement not only marks the first time the Paris Club has supported a debt operation designed to benefit the environment but also the first time a Southern creditor (i.e., South Africa) has participated in a buyback operation involving the debts of another Southern country. Creditor participation in the agreement is also the highest ever achieved in a buyback deal reached through the Paris Club's market-based window.
The conservancy designed the deal to allow the government of the Seychelles to redirect a portion of its current debt payments to conservation activities, including the creation and management of more than four hundred thousand square kilometers of new marine protected areas. The deal also helps address marine conservation and climate adaption goals announced as part of the "Blue Economy" theme at the Rio +20 meeting in 2012.
"This deal demonstrates the tremendous potential for impact investing to protect nature," said Nature Conservancy president and CEO Mark Tercek. "Through NatureVest, we are excited to bring together the Paris Club creditors and the Seychelles government to unlock a significant source of capital for marine conservation efforts that will help address climate change."