SUNDAY, NOVEMBER 22 , 2020. THE WASHINGTON POST EZ EE G5
BY SAQIB RAHIMR
ob Weary led a seemingly
glamorous life for almost
a decade, traveling to re-
mote island paradises
known for picture-perfect beach-
es and technicolor corals.
But Weary was no tourist. He
was a dealmaker trying to per-
suade small countries to protect
their seas in a novel way — p artner-
ing with big banks and internation-
al financial institutions.
Four years ago he struck a pio-
neering deal with the Seychelles, a
splash of islands off the East Afri-
can coast. At the time, the country
was deep in debt and facing a
gloomy future. Its economy de-
pended on tourism and fishing,
two industries facing decimation
from climate change.
As part of an investment team
at the Nature Conservancy, the
U.S.-based environmental group,
Weary threw the Seychelles a life-
line: a chance to refinance more
than $21 million of its debt. There
were just two conditions. The gov-
ernment had to spend the savings
on ocean conservation work such
as coral restoration and trash
cleanup, and it had to designate
30 percent of its waters as special
zones where activities such as fish-
ing and drilling are highly regulat-
ed or off-limits.
The nation’s leaders delivered.
The Seychelles hasn’t missed a
payment, and this spring its presi-
dent announced it had met that
target, protecting an area larger
than Germany. Now some of the
giants of the financial world are
realizing there could be profits in
ocean conservation.
“Basically what we’re doing is
financial engineering,” Weary said
recently. “That’s typically used by
hedge funds and private equity
funds, with their goal of course to
make returns for their investors.”
It’s just that the investment objec-
tive here is different. “We’re doing
all these to help Mother Nature.”
Historically, ocean protection
has been funded by governments,
charities and a few ethically mind-
ed investors. Today, financial
heavyweights like the World Bank,
Credit Suisse, Morgan Stanley and
the Asian Development Bank are
actively pursuing “blue bonds,” a
tool that could raise vast pools of
private capital for the oceans.
Last year, the Nordic Investment
Bank issued a $220 million bond to
address pollution in the Baltic Sea.
Morgan Stanley helped the World
Bank sell a $10 million bond for
cleaning up plastic waste — an
admittedly small offering that the
company saw as a trial balloon.
“We saw that [the sale] had very
robust demand,” said Audrey
Choi, Morgan Stanley’s chief sus-
tainability officer. “We were very
excited to see how we could do
more of these at larger scale.”
The approach offers investors a
steady flow of interest payments
— albeit slightly less than that of
traditional bonds — and an oppor-
tunity to shine up their environ-
mental records. Borrowing coun-
tries, in theory, should end up with
stronger economies that boost
budgets and make it easy to repay
the bonds. (A country that de-
faults would fall into the same
financial limbo as one that stiffs its
traditional lenders.)
But amid this burst of money
for oceans, skeptics are wary, giv-
en previous misadventures in
“green” finance to aid conserva-
tion on land.
“There is a growing financial
crisis in many developing coun-
tries,” said André Standing, an in-
dependent researcher in Kenya
who has studied the impact of
debt deals on small nations.
“They’re using more and more of
these type of bond arrangements
to raise finance, which are very
unsustainable and lacking trans-
parency and accountability.”
Others question how effectively
the deals can be replicated. “If this
works in Seychelles, it can be done
again, and it can be done in other
locations. But it can’t be a mass-
production thing,” said Mark J.
Spalding, president of the non-
profit Ocean Foundation.
“The argument is we have to do
a lot of this and quickly,” Spalding
continued. “That’s why there’s a
push for scale. But if that huge
scale doesn’t actually get us the
results we need, we’re just smok-
ing funny stuff.”
Yet supporters say blue bonds
can provide critical cash infusions
for countries determined to reha-
bilitate ailing oceans given the ev-
er-increasing risks from rising sea
levels, higher water temperatures
and greater acidification. And con-
servation makes financial as much
as moral sense, they contend.
Healthy corals and mangroves
can shelter islands against heavy
storms, reducing recovery costs.
Regulated fisheries can help fishers
stay in business for the long haul.
One study concluded that a live
shark swimming offshore generates
exponentially more money from
tourism and taxes than if it were
sold as meat in the marketplace.
Weary is among the bonds’ big-
gest boosters. In another life, he
might have a career as a hedge-
fund guru. “This is all I’ve done for
eight years,” he said from his home
office in Keswick, Va. “This is all
I’ve thought about and done.”
He cut his teeth at the NatureConservancy on “debt for nature”
swaps, negotiating with Latin
American and Caribbean coun-
tries that owed the U.S. govern-
ment a lot of money, usually at high
interest rates. Under the deals he
worked out, the Nature Conser-
vancy and the United States would
refinance a chunk of that.
The catch: The country had to
protect a swath of biodiverse tropi-
cal forest. Any wavering on that
protection, and the debt would re-
vert to its prior terms.
Weary came to call debt “the
secret sauce” for conservation.
Eleven such deals, struck from
2001 to 2011, resulted in almost
$250 million for forest protection,
according to the organization.
In 2012, the Seychelles called
him with a challenge: Could he do
this for oceans?
Weary was interested; oceans
were no less threatened than for-
ests, yet just 3 percent of their
water was protected globally. And
the Seychelles, an archipelago of
115 islands in the Indian Ocean,
was desperate, given the future it
faced.
Half a century earlier, its famed
coral banks had teemed with life
so abundant that Jacques Coust-
eau featured them in his ac-
claimed documentary “The Silent
World.” But a major bleaching
event in 1998 proved devastating,
and the reefs were dying faster
than scientists could rehab them.
Fishermen’s catches had become
smaller and smaller.
Fortunately, the Seychelles had
scads of debt.
The deal took four years. The
Nature Conservancy, with cash
from its own pocket as well as from
philanthropists like Leonardo Di-
Caprio, bought a chunk of the Sey-
chelles’ debt and slashed its inter-
est rate. That carved out about
$200,000 a year for p rojects to ben-
efit the ocean.
The money is allocated by the
independent Seychelles Conser-
vation and Climate Adaptation
Trust. Angelique Pouponneau, a
30-year-old lawyer and its chief
executive, sees part of her job as
getting buy-in from local fisher-
men — which sometimes means
hanging out as they hawk their
day’s catch. “I grew up in the fish-
ing district of Mahé. Fishers are
my friends,” she said. “They’re sto-
rytellers, and they’re keen to un-
derstand what you know.”
It will take time to see lasting
ecological benefits. In one project, a
fishing guild experimented with
sustainable management for rab-
bitfish, a local delicacy. Another
supported cleanup of an island of
giant tortoises, where crews collect-
ed tons of washed-up trash — in-
cluding 50,000 flip-flops. Still un-
derway is an effort to trace the re-
productive routes of coral.
Researcher Jazzy Taberer led a
$30,000 study tracking the habits
of sicklefin lemon sharks, a vul-
nerable species in the Indo-Pacific
that lives near coral reefs and
within mangrove forests. The lat-
ter is crucial since mangroves have
more resilience against a chang-
ing climate than corals do.
Identifying the sharks’ pre-
ferred habitat boosts the odds of
saving the species. “They have a
chance,” said Taberer, a science co-
ordinator with conservation group
GVI. “They have a fighting chance.”
On the small, rock-strewn is-
land of Curieuse, the grant helped
her team catch 20 shark pups, affix
acoustic trackers and collect
mountains of data on this little-
studied species. Securing such
funding from other sources “would
be exceptionally hard,” she noted.
Other investors have gotten in-
volved. In 2018, the World Bank
helped the Seychelles issue the
world’s first “sovereign blue bond”
— a slightly different instrument
that serves as a new loan — for
$15 million. Prudential Financial,
Nuveen and Calvert Impact Capi-
tal, which each manage billions of
dollars globally, provided $5 mil-
lion apiece.
“The belief is that having a
healthier ocean is going to make
the government of Seychelles a
healthier economy,” said Jenn
Pryce, Calvert’s chief executive. “If
it succeeds, the impact is huge.
The Seychelles has a sustainable
economy forever, in theory.”
T hough Weary departed in Octo-
ber — after 22 years, he says he
wanted to explore new opportuni-
ties — he left behind blueprints for
a massive scale-up.
This winter, the Conservancy
hopes to ink the first deals toward
its target of generating $1.6 billion
for ocean protection around the
world. It aspires to negotiate debt-
restructurings, funded by blue
bonds, in 20 coastal and island
nations within the next five years.
And to try to reassure those who
haven’t previously viewed reefs or
sharks as investable assets, the
Conservancy plans to combine
each bond with an insurance pol-
icy provided by the U.S. Interna-
tional Development Finance
Corp., a new federal agency creat-
ed to help U.S. investors compete
with Chinese banks abroad.
The combination will trans-
form the bonds into a “super safe”
opportunity with real impact,
Weary said. “There shouldn’t be
any difficulty finding investors.”
[email protected]How investors are providing
the green to save the ocean blue
Initiatives help nations refi nanc e debt, with the condition that savings be spent on conservation
FOTO NATURA/COURTESY OF THE SEYCHELLES ISLANDS FOUNDATIONGVIJULIA RENDLEMAN FOR THE WASHINGTON POST
FROM TOP: Four years ago, Rob Weary and the Nature Conservancy gave the Seychelles the chance to refinance over $21 million of
its debt if it dedicated the savings to conservation and designated 30 percent of its waters as special zones where certain activities
are highly regulated. The Seychelles has never missed a payment. Such “blue bonds” have allowed researchers to study the habitats
of species like the lemon shark. Weary, at his Virginia home, previously struck deals with nations wanting to conserve their forests.