The European Investment Bank is backing a new debt-for-climate swap for Barbados as the transactions gain in popularity among developing economies.
The Caribbean island nation is set to raise €276 million ($295 million) of debt, structured as a sustainability-linked bond or loan, according to a Friday statement. The issuance will be backed by a €280 million ($300 million) guarantee — half of which will come from the EIB and the other half from the Inter-American Development Bank, subject to approvals by those banks’ governing bodies.
The “freed-up proceeds” from the debt-swap will go toward upgrading Barbados’s South Coast Sewage Treatment Plant, with the aim of mitigating climate change impacts, reducing chronic water shortages and improving wastewater systems, the statement reads. The upgrade is estimated to cost €100 million and will require upfront financing.
“Tools like debt-for-climate swaps can create the necessary fiscal space for essential investments, especially in the most climate-vulnerable countries,” Werner Hoyer, president of the EIB, said in the statement.
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Support for the debt-swap was announced by Jutta Urpilainen, the EU’s Commissioner for International Partnerships. The Commissioner met with Barbados’s prime minister, Mia Mottley, on Thursday.
