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Innovative Ocean financing: Seychelles Blue Bonds

The Seychelles are islands off the coast of eastern Africa surrounded by the Indian Ocean.

On Friday, during the 40th session of the FAO Conference, there will be Conference side event entitled Blue Ocean, Blue Growth: People, Resources, Innovation.

That event takes place on Friday, 7 July 15:00-16:30 CET, and will review FAO’s participation in the recent UN Ocean Conference, before exploring innovative approaches to Blue Growth aimed at harnessing ocean resources to promote economic growth for coastal communities.

The side event will focus on some of the innovative approaches already taken by countries, regions, international organizations and the private sector.

One of the examples scheduled for discussion is the issuing of Blue Bonds by the Government of Seychelles, an innovative approach to promote the African islands’ Blue Economy investment strategy.

According to Dominique Benzaken, Senior Ocean Governance Advisor, Commonwealth Fund for Technical Cooperation, Seychelles.  “In 2015, Seychelles graduated as a high income country.

Fisheries are extremely important to the Seychelles economy. Here fishermen offload yellow fin tuna at the Victoria harbor.
Seychelles graduated as a high income country. As a result, the Government has been proactive in rethinking its Blue Economy investment strategy, including Blue Bonds.

As a result, the Government has been proactive in rethinking its Blue Economy investment strategy, as it will no longer be eligible to some of concessional funding sources previously available.  Seychelles has turned to innovative finance instruments, such as the debt Swap for Conservation and Climate Change Adaptation and the Seychelles Blue Bond, to attract new investors in support of its sustainable development agenda.  The Blue Bond issuance was possible thanks to the support of The Government of Seychelles international partners, namely a World Bank guarantee and a GEF guarantee".

The Government of Seychelles Blue Bond issuance is scheduled for 2017 will raise up to US$15 million, which will be used to finance the transition to the sustainable management of its small scale artisanal fishery (the Mahe Plateau Demersal Fisheries Management Plan), including measures aimed at rebuilding fish stocks, harvest control measures, restructuring of fishing capacity, post-harvest and value adding activities and scientific and sector support services.

The proceeds from the Blue Bond Issuance, like the Seychelles Debt swap for Conservation and Climate Adaptation, is to be administered through the Seychelles Conservation and Climate Adaptation Trust (SeyCCAT), a local independent trust established under Seychelles legislation, bringing financial efficiency, transparency and accountability and at the same time building synergies between fisheries management, marine conservation and climate resilience.  Part of the proceeds will also be used as loans through the Development Bank of Seychelles for prescribed activities aimed at encouraging value adding and diversification of the sector consistent with conservation and fisheries management plans milestones.

The Blue Bond proceeds will complement other sustainable fisheries initiatives in Seychelles, such as the World Bank SWIOFISH 3 project and the development of Seychelles’ EEZ marine spatial plan, and the designation of 30% of marine protected areas as part of the Debt Swap for Conservation and Climate Adaptation.

According to Ms. Benzaken, “The long term impacts of the Blue Bond project will be stock recovery, and the restructuring of the sector as a result of policy reform and management measures.

Over time, it will generate increased revenue for government, demonstrating that investing in sustainability makes business sense.  As the fisheries recover and the returns on investment flow to government and the sector, the benefits of a culture of sustainability will emerge which can be translate into a better understanding of impacts of other unsustainable practices on the marine environment, for example marine pollution, and in particular the use of plastics which are detrimental to marine ecosystems and food chains.”  Additionally, according to Ms. Benzaken, “The use of proceeds from Seychelles blue Bonds will contribute to an innovative, blended financing mechanism, by combining with the implementation of the World Bank/GEF Third South West Indian Ocean Fisheries Governance and Shared Growth Project (SWIOFish3),  which includes US$10.5 in grants and loans aimed at conservation and fisheries management planning capacity building and institutional strengthening for the development of the blue economy.”

The Seychelles Blue Bond is the first of its kind, and it aims to create a replicable and scalable model for other countries/regions interested in innovative finance.

The most obvious “clients” for this type of transaction are Small Island Development States, however it could be attractive to a number of small states and nations transitioning to a high income country.

This will be a topic of discussion at the FAO Conference side event. If you are not in Rome tomorrow to follow the event, please follow us at the following link: http://www.fao.org/webcast/en/ and follow our live tweeting @FAOfish and through the hashtags #BlueGrowth and #Fishinnovation.

Unloading tuna fish in Seychelle’s capital of Victoria.
Like many small island developing states, Seychelles’ economy relies heavily on tourism and fisheries.
The Seychelles Blue Bond is the first of its kind, and it aims to create a replicable and scalable model for other countries/regions interested in innovative finance.
Innovative ideas such as the Seychelles Blue Bond will be discussed at the FAO Conference side event on Blue Growth.

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