Gabon's 'blue bond' deal to restore coast reignites climate finance debate

Gabon will use a controversial financial move to ease its debt burden and restore its oceans at the same time, a leading conservation group has said.

It’s the second-largest deal of its kind to date, and the first on mainland Africa, according to a press release by The Nature Conservancy on Tuesday, the global environmental non-profit that helped broker the deal.

Gabon, an oil-rich Central African nation known for its biodiversity, hosts the world’s largest population of leatherback turtles and myriad other endangered species.

By refinancing $500 million of its foreign debt, TNC estimates, Gabon will free up $163 million to expand its protected coastal areas and combat illegal overfishing.

“It’s a really interesting way of slightly reducing our debt repayments and also generating money for conservation,” said Lee White, Gabon’s minister of water, forests, sea, and environment.

He collaborated with TNC, Bank of America and others to negotiate lower interest rates on Gabon’s outside debt, with the goal of freeing up funds for conservation.

Since 2016, TNC has pulled off similar so-called “blue bond” agreements in the Seychelles, Belize and Barbados.

But while donors and host governments pitch climate refinancing as a win-win solution for indebted nations, local populations and the environment, critics say such deals barely skim the surface of what’s needed to address the climate crisis.

Of the $163 million TNC says will flow into ocean conservation efforts in Gabon, only $4.5 million will be directly available each year through 2038, according to White.

The rest of the half-billion dollar TNC deal will go to paying off Gabon’s newly reorganised debt and paying transactional costs to Bank of America and others involved in the deal.

'Blue Bond' raises concerns over sovereignty

Slav Gatchev, head of TNC’s sustainable debt division, said the fees will be “competitive and reasonable.” Even if the deal were effective, it would raise concerns about Gabon’s ability to make decisions for itself, Hache said.

In the past, critics have viewed “debt-for-nature swaps” as impinging on the national sovereignty of indebted countries by placing financial and environmental decision-making power in the hands of foreign entities.

Gatchev said blue bonds come from the independent will of environmentally conscious countries and pose no threat to self-determination. “We are not telling governments what to do…In Gabon, parliament met and voted on these transactions,” he said.

Proponents and detractors of the Gabon deal agree governments should go beyond blue bonds and other conservation financing solutions to address climate crisis. “We don’t claim, not for a second, that these transactions are a panacea," Gatchev said.