Barbados has successfully executed the world’s first debt-for-climate-resilience operation, securing financing to modernize its water and sewage infrastructure in the face of climate change. This groundbreaking initiative, supported by international funding partners, replaces expensive debt with affordable financing, generating $125 million in fiscal savings to enhance water management and food security.
CIBC Caribbean led the Sustainability-Linked Loan (SLL) transaction, backed by $300 million in guarantees from the Inter-American Development Bank (IDB) and the European Investment Bank (EIB), under the EU’s Global Gateway Initiative. With these guarantees, Barbados obtained favorable, long-term, local currency financing from regional banks, enabling key investments in water security.
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Transformative Infrastructure Projects
The operation paves the way for converting the South Coast sewage treatment plant into a state-of-the-art water reclamation facility—one of the first in the Caribbean. This facility will produce high-quality reclaimed water for agricultural irrigation and groundwater recharge. Additional investments will reduce water losses, enhance the sewer system, and mitigate marine and groundwater pollution, safeguarding ecosystems and public health.
With upfront funding of $110 million from the IDB and Green Climate Fund (GCF), including a $40 million GCF grant, Barbados aims to address critical water scarcity issues. Per capita water availability in Barbados is four times lower than the global average—a challenge exacerbated by climate change. The improvements are also expected to reduce the country’s reliance on costly food imports by supporting local agriculture.
A Sustainability-Linked Model for Progress
The debt conversion is structured as a Sovereign Sustainability-Linked Loan (SSLL), a first for a sovereign water security project. Loan conditions are tied to sustainability targets, such as the volume and quality of reclaimed water. If these targets are not met, penalties will be paid into the Barbados Environmental Sustainability Fund for further environmental projects.
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This innovative financing model aligns with Barbados’ Updated Nationally Determined Contribution (NDC), the Paris Agreement, and its “Roofs to Reefs” Program. It demonstrates a practical path toward climate resilience by increasing water availability, boosting food security, and reducing pollution.
Leaders Applaud the Initiative
Prime Minister Mia Mottley hailed the initiative as a model for vulnerable nations:
“In the face of the climate crisis, this groundbreaking transaction delivers rapid adaptation benefits for Barbados, showcasing how innovation and cooperation drive environmental and fiscal gains.”
IDB President Ilan Goldfajn described the operation as a milestone for climate resilience and financial innovation, while EIB President Nadia Calviño emphasized its potential as a model for other nations. CIBC Caribbean CEO Mark St. Hill highlighted the partnership’s role in fostering sustainable development across the region.
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A Blueprint for the Future
This debt-for-climate-resilience model represents a significant step forward in addressing intertwined challenges of climate vulnerability and fiscal constraints. As GCF Executive Director Mafalda Duarte remarked:
“This innovative financial instrument supports Barbados in achieving its development and climate goals, offering a roadmap for other nations to follow.”
Barbados’ success with this initiative underscores the power of collaboration and innovation in tackling global climate challenges, setting a new standard for sustainable adaptation strategies.
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