We have blogged before about Sustainable and Responsible Investment. We’ve discussed the Dow Jones Sustainability Index and its ilk. Since then (about 6 years ago), it’s getting increased attention now – look at the increase in SRI, especially in the most recent years:
So what is SRI?
According to The Forum for Sustainable and Responsible Investment, SRI is:
Sustainable, responsible and impact investing (SRI) is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact. Examples of ESG criteria can be found here.
Wall Street investors (at least some of them) and NGOs are working together to consider sustainability, conservation, and social responsibility into great-performing financial products bankers sell every day. Examples of these are “Green bonds”, sustainable commodities, ecosystem services, carbon credits attempting to attract mainstream capital to invest in and shore-up (excuse the pun) large-scale efforts related to sustainability.
What drew my attention to this, as we watch Harvey, Irma, Jose, Katia, Lee, and Maria form and storm in the Atlantic, is the apparent increase in threat to island nations.
Case in point – the devastation in the Caribbean from Hurricane Irma, and at the time of this writing, what looks to be the ominous arrival of Maria in the same area.
Turns out, there is a very interesting story at the intersection of SRI and the threat of sea-level rise and a greater number and intensity of severe weather.
And it’s centered on Seychelles, an archipelago nation in the Indian Ocean (and part of the African Union) which is made up of not 10, not 30, not 100, but 115 islands.
99 percent of its territory is ocean, and more than half of its GDP depends on fishing – in particular, tuna, and on ocean-based tourism. Seychelles is an example of what some people are calling a Large Ocean Developing State (LODS). By some estimates, there are 58 LODS on Earth, and 65 million people call them home – and the populations of these nations are increasing, even as they find themselves facing the first impacts of rising sea levels and bigger, badder storms.
As climate concerns and other environmental anxieties mount, Wall Street and NGOs are working together to hammer the complexities of conservation into the kind of mature, repeatable financial products bankers sell every day. Green bonds, sustainable commodities, ecosystem services, carbon credits — some sectors of the conservation market are nearly ready to attract mainstream capital to bankroll large-scale restoration and conservation.
The story at this intersection was called Debt for Nature Swaps Let Impact Investors Finance Climate Resilience. It’s a short and to-the-point article, and I suggest you have a look for more detail.
Mostly, though, it’s the story of a deal. It’s a deal that will launch lots of meaningful projects, in the Seychelles, and that’s why you’re reading this story on projectmanagement.com.
Here’s a very short (and probably clumsy, but close enough) version of the deal courtesy of another excellent article which came up in my research on this topic - this one from The Economist, called Debt Relief For Dolphins.
It’s a debt restructuring in which The Nature Conservancy (TNC), an American NGO, ‘consumes’ $21.6m of debt owed by the Seychelles to the Paris Club of international creditors, and in exchange, the island nation promised to protect 30% of its waters by 2020—half of this area will be off-limits to fishing and will create a giant (400,000 square kilometer) reserve, one of the largest of its kind in the world.
The idea: Seychelles has a longer time to pay back their debt at a lower interest rate over a longer period, and TNC triggers funding for conservation projects that the island would otherwise be hesitant to take on. Examples of the projects:
- training fishermen to use more sea-friendly techniques
- conducting research on fish populations
- gearing up to monitor the new reserve
Here’s what TNC has to say about the deal:
“I think it’s a good example of what we’re trying to do in NatureVest,” says Rob Weary, the Conservancy’s senior director of product development, of the Seychelles debt-for-nature swap. “We’ve created [something akin to an in-house bank] in the Conservancy, using all the tools that an investment entity would, but instead of using it [solely] for profit, we’re using it to fund conservation.”
Although it involves "only" $22M, this could be considered a pretty small deal. But it’s a template for application by other NGOs and other nations which stand to gain from such an exchange.
“Although we are small, we can make a real difference,” President James Michael of Seychelles said about the debt restructuring. “A difference that brings the best outcomes for Seychelles. And a difference that offers examples in terms of sustainable development, in terms of innovation, and in terms of options for all small island states.”