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, the global environmental nonprofit 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 climate change.
“This seems like a great deal at first glance, but when you look at the details … the money that is being freed up for conservation is typically a tiny fraction of the deal,” said Frederic Hache, a sustainable finance researcher.
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.
“That’s a joke, frankly, especially for an oil-rich country like Gabon,” said Hache. The average yearly income in Gabon is nearly $9,000, giving it the third-highest GDP per capita in sub-Saharan Africa, according to the World Bank.
The rest of the half-billion dollar TNC deal will go to paying off Gabon’s newly reorganized debt and paying transactional costs to Bank of America and others involved in the deal.
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.
White says a U.S.-based charity will manage Gabon’s new funds. “It is kind of standard practice on these conservation trust funds that you tend to get them offshore … and you limit the number of government representatives on them,” he said.
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 that governments should go beyond blue bonds and other conservation financing solutions to address climate change.
“We don’t claim, not for a second, that these transactions are a panacea,” Gatchev said.
“This is one small way for the Global North … to at least partially fulfill its funding commitments for climate and conservation,” he said. Wealthy nations have failed to deliver on the $100 billion per year they pledged at a 2009 summit to help address climate change in developing nations, according to a 2020 Oxfam report.
But critics say the Gabon deal and other debt-for-nature swaps do more harm than good. The wealthiest and highest-polluting nations, whose governments and companies facilitate the deals in lower-income countries, should not be let off the hook for curbing their own emissions because of it, according to Hache.
“It continues to further divert the conversation away from debt forgiveness,” he said.