The Hague, 18 October 2024: Oceans Finance Company (OFC), a conservation investment and management firm, has won the IJ Global ESG Award 2024 in the “Bond” category for its pioneering role in Ecuador’s Galapagos Marine Bond, part of a groundbreaking debt-for-nature swap in May 2023.
The IJ Global ESG Awards celebrate the most significant ESG developments in the global infrastructure and energy sectors. The Bond Award, presented to OFC at a ceremony in London yesterday, recognizes the bond-financed transaction with the highest ESG impact, setting an industry standard for future bond financing.
The landmark transaction, orchestrated by OFC, involved the exchange of USD 1.6 billion in Ecuadorian government bonds for a USD 656 million impact loan, financed through the issuance of the Galapagos Marine Bond, a conservation-linked financial instrument. The transaction is expected to generate USD 1.1 billion in lifetime savings for Ecuador through reduced debt service costs. In return, Ecuador will direct USD 550 million to the conservation of the Galapagos Islands, one of the planet’s most important ecosystems, including establishing a permanent endowment to fund long-term conservation activities.
The Galapagos Islands are home to over 3,000 species and have the highest concentration of endemic species on Earth. The conservation funds will protect the 60,000km² Hermandad Marine Reserve, providing vital protection for marine life while promoting sustainable fishing and tourism, enhancing ecosystem richness, and building resilience to climate change.
OFC led the transaction from concept to completion, overseeing financial structuring and securing key partners, including Credit Suisse to arrange and structure the issuance of the Galapagos Marine Bond, the US International Development Finance Corporation(DFC) for political risk insurance and the Inter-American Development Bank(IBD) as guarantor. OFC remains involved as project manager during the 17-yearduration of the bond.
Erik Wandrag, CEO of Oceans Finance Company, said: “Debt-for-nature swaps are a powerful tool for unlocking conservation funding by reducing debt burdens. We are proud to have created a permanent source of finance for the Galapagos, setting a new precedent for ocean protection on a global scale.”
OFC invested USD 2 million in early-stage development capital to fund the debt-for-nature swap via its shareholder Climate Fund Managers (CFM)’s Climate Investor Two (CI2) fund, an innovative blended finance vehicle focused on oceans, water and sanitation. The risk capital was provided by the Dutch Fund for Climate & Development(DFCD) and the European Commission (EC) amongst others.
Days after the Ecuador conversion closed, OFC launched the pilot phase of a new funding model aimed at unlocking long-term, flexible conservation funding. It invested USD 90 million from CI2 in Ecuadorian Eurobonds, with the spread between the bond coupon payments and capital costs allocated to fund conservation activities.
The pilot has proved a success and will generate around USD81 million in funding over a 16-year time frame, allocated to, among others, the Charles Darwin Foundation as well as a program to improve water treatment and supply on the Galapagos Islands, at an average of around USD 5 million a year.
OFC is now scaling up the initiative to tackle in the broader Eastern Pacific region. It aims to raise USD 1 billion in public and private capital, unlocking USD 2 billion in conservation funding to address critical issues including plastic waste removal, mangrove restoration, promotion of threatened species like land-bred sea turtles and the implementation of plastic waste management solutions in countries at the source of the crisis.
