DFC Political Risk Insurance to support a blue bond providing $500 Million for ocean conservation in Gabon
24-08-2023 12:54:15 | by: Marlene Mutimawase | hits: 3112 | Tags:

The U.S. International Development Finance Corporation (DFC) announced $500 million in political risk insurance supporting a bond for marine conservation in Gabon (Gabon Blue Bond).

Working with The Nature Conservancy (TNC), the Government of Gabon, and Bank of America, DFC provided political risk insurance that enabled a $500 million debt conversion for Gabon which is expected to generate $163 million in dedicated marine conservation funding over the next 15 years.

The refinancing will unlock $5 million each year over the next 15 years for conservation action and create an endowment expected to grow to approximately $88 million by 2038 to fund conservation in Gabon in the future.

It will improve Gabon’s debt profile, while simultaneously creating a dedicated funding stream in support of the country’s commitment to biodiversity protection and nature-based resilience through management of marine protected areas.

Projects funded as a result of the Gabon Blue Bond will support marine protection and management, advance sustainable fisheries, strengthen climate resilience, and develop a sustainable blue economy for the local community.

“DFC’s political risk insurance provided critical support for this historic transaction, helping to mobilize capital from institutional investors and catalyzing additional investment in Gabon’s marine conservation efforts,” said DFC CEO Scott Nathan.

 “We are proud to contribute to this kind of innovative financing in Central Africa, having supported similar efforts in Central and South America. The Gabon Blue Bond will generate an expected $163 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.’ Like previous transactions DFC has supported in Belize and Ecuador, the Gabon Blue Bond illustrates how DFC can effectively lift the credit-profile of a bond issuance to deepen capital markets. We are proud to have partnered on this transformative transaction.”

DFC’s political risk insurance provided critical support for the issuance by reducing investor risk and, in turn, catalyzing additional investment for Gabon’s marine conservation efforts. Moody’s Aa2 rating of the Gabon Blue Bond shows how DFC’s political risk insurance can catalyze investment from capital markets that would otherwise not be available for such bonds.

As part of the agreement, Gabon has committed to develop and implement a comprehensive marine spatial plan, designate 30 percent of its ocean as biodiversity protection zones, and improve the sustainability of the country’s fishing sector. Realizing these conservation commitments will increase protection for vulnerable ecosystems, preserve Gabon’s marine biodiversity, and improve the nation’s nature-based resilience.

Gabon’s ocean territory is a globally important habitat for endangered species, including the largest population of leatherback turtles—30 percent of the global population. Gabon’s waters are also a critically important seasonal breeding ground for humpback whales, and home to endangered dolphins, sharks, and ray species.

“Our Blue Bonds program combines finance with science and marine planning expertise to help governments reach their conservation and climate goals while also supporting the well-being of their people and economies,” said Jennifer Morris, CEO of The Nature Conservancy. “This project in Gabon unlocks an enormous stream of funding for conservation created by the issuance of new bonds, which was made possible with political risk insurance from the US International Development Finance Corporation. It is among a growing number of innovative financial opportunities advancing both biodiversity and climate goals for people and nature.”

“The launch of Gabon’s Blue Bond is an important moment, giving us hope that green or blue financial mechanisms will grow significantly in coming years and help countries like Gabon, who effectively protect critical ecosystems whilst also growing our economies,” said President Ali Bongo Ondimba of Gabon. 

“All too often talk of these new mechanisms to reward countries like my own remain just that. In this case, thanks to the work of our partner, The Nature Conservancy, and the US International Development Finance Corporation, we have made it a reality. I call on Developed Nations and our Multilateral Banks to multiply these sorts of initiatives, which could make a significant contribution to addressing the critical challenges of Climate Change and Biodiversity Loss.”

The Gabon Blue Bond also supports climate mitigation, adaptation, and resilience efforts. These efforts support fish habitats, promote biodiversity, and support seagrass beds and mangrove forests, which absorb carbon from the atmosphere.

DFC is sharing 50 percent of the risk with a group of eight private insurers.

Reinsurance for the project is provided by AXA XL, Fidelis MGU, Swiss Re Corporate Solutions, Chubb Global Markets, Sovereign Risk Insurance Ltd, Apollo, Mosaic, and Vantage Risk Specialty Insurance Company.

www.dfc.gov