Release date: 11 June 2024
Promoter – Financial Intermediary
GOVERNMENT OF BARBADOSLocation
Description
The operation consists of EIB's first credit enhancement under a Debt for Climate Conversion in which the Bank provides a pro-rata credit guarantee for a new sovereign sustainability linked debt issuance by the Government of Barbados, that will replace more expensive legacy debt. The generated savings from the Debt for Climate Conversion will be used for key investments in infrastructure and enabling activities to protect and increase the resilience of natural resources, and critical and fragile ecosystems and the services they provide; thereby contributing to reducing and mitigating the impacts of climate change. The Debt for Climate Conversion structure also includes conditions and requirements for improvements in the institutional framework to strengthen Barbados' adaptive, financial and environmental capacity to address and manage climate change impacts, biodiversity loss.
Additionality and Impact
The operation consists of EIB's first credit enhancement under a Debt for Climate Conversion (DfCC) in which the Bank provides a pro-rata credit guarantee for a new sovereign sustainability linked debt issuance by the Government of Barbados, that will replace more expensive legacy debt. The generated savings from the DfCC will be used for key investments in infrastructure and enabling activities to protect and increase the resilience of natural resources, and critical and fragile ecosystems and the services they provide; thereby contributing to reducing and mitigating the impacts of climate change. The DfCC structure also includes requirements for policy improvements to increase Barbados' climate adaptation, environmental and financial capacity.
The operation will be addressing a market failure in relation to the provision of finance by unlocking funds that would not be available without the DfCC because of the debt restrictions of the country. This will allow Barbados to carry out the investment backlog of projects to preserve groundwater resources, improve wastewater treatment and provide an alternative continuous water source to irrigation.
The Project also addresses several other market failures by protecting the environment, public health, and generate renewable energy. With this Project, the EIB financing will help to reduce negative externalities while strengthening the positive externalities for Barbados. These positive externalities are not fully captured by the financial rate of return (FRR), and therefore the economic rate of return (ERR) is higher than the FRR. The broader social benefit is "Excellent". As such, the Project not only enhances the quality of life of the about 281 000 population of Barbados, but its benefits extend beyond its borders.
The Project will strengthen the climate adaptation, environmental and financial capacity of the country. The objectives match the EU's regional strategic objectives from the 2021-2027 Multi-annual Indicative Programme for the LAC region, specifically for the Caribbean Window. The project contributes to environmental protection and natural resource efficiency as well as climate action. The Project is well in line with the Bank's Water Sector Orientation, will support the Blue Economy, contribute to the circular economy, is aligned with the Clean Oceans Initiative (COI) and contributes to the achievement of the United Nation's Sustainable Development Goals #2, #3, #6, #7, #10, #11, #13, #15 and #17.
EIB's participation in the DfCC provides critical financial and non-financial additionality, given that its 'AAA' rating and costing fees helps to maximize savings, that can be reinvested in infrastructure essential to guarantee environmental protection. Moreover, the EIB provided advise on the technical, economic, environmental and social aspects of the preparatory studies and supported with the procurement. It is anticipated that the Project's environmental, climate and social benefits, would not be achieved to the same extent without the Bank's support. Finally, its procedures and standards ensure that the transaction will be robust, transparent, and closely monitored.
Objectives
The aim is to make the water system more resilient to climate change, generate renewable energy to mitigate its impacts and reduce marine pollution. The investments under the EIB's Guarantee will also improve the management of ground water resources and make reclaimed water available to sustainable agricultural activities, thereby contributing to food security. Additionally, the operation will contribute to increase the resilience and health of marine ecosystems, hence mitigate and protect the island against the impacts of climate change and damages incurred from hurricanes and storm surges.
Sector(s)
- Water, sewerage - Agriculture, forestry and fishing
- Water, sewerage - Water supply; sewerage, waste management and remediation activities
Under Global Europe NDICI guarantee
Under EFSD+ Guarantee
Proposed EIB finance (Approximate amount)
USD 150 million (EUR 137 million)
Total cost (Approximate amount)
USD 150 million (EUR 137 million)
Environmental aspects
The implementation of the investments under the EIB's guarantee will be done in line with the principles of EU environmental legislation and EIB's Environmental and Social Standards.
Procurement
The implementation of the investments under the EIB's guarantee will be done in accordance with the EIB's Guide to Procurement.
Status
Signed - 25/11/2024
Disclaimer
Before financing approval by the Board of Directors, and before loan signature, projects are under appraisal and negotiation. The information and data provided on this page are therefore indicative.
They are provided for transparency purposes only and cannot be considered to represent official EIB policy (see also the Explanatory notes).