Convergence Design Funding award aims to mobilize new sources of financing to achieve the Sustainable Development Goals and catalyze the next generation of blended finance instruments
TORONTO, ON, CA – Convergence, the first and only platform exclusively focused on blended finance, announced it will award a grant to NatureVest, the conservation investing unit of The Nature Conservancy (TNC), for the design of a Blue Bond that will finance debt conversions for Small Island Developing States. The debt conversions provide funding to these governments in exchange for their commitment to improve policies and invest in marine conservation and climate adaptation activities. The design grant is part of Convergence’s efforts to surface the next generation of blended finance models and foster market-wide learning to drive the field forward. Convergence will award a minimum of CAD 10M in design grants over the next five years, and this initial funding is provided by the Government of Canada.
TNC’s conservation investing unit, NatureVest, will use the proof of concept funding from Convergence to design and structure the Blue Bond, which will raise debt capital from investors to fund multiple debt conversions for conservation. In a single-country debt conversion model, NatureVest raises a mixture of debt and grants for a newly created in-country non-profit Trust. The Trust purchases a portion of the country’s debt from creditors at a discount, and then allows that country to repay the debt on more manageable terms. The Trust then repays its own investors and uses the remaining capital to fund in-country conservation programming. TNC has demonstrated the viability of debt conversions through the recently-closed transaction for the Seychelles, a low-lying island nation highly vulnerable to the threats of climate change.
The Blue Bond model will finance multiple debt conversion opportunities, as illustrated in the figure below:
Rob Weary, Senior Director of Product Development at NatureVest commented, “Small Island Developing States are among the least responsible for climate change, but are likely to suffer the most from its adverse effects. TNC has developed expertise in structuring debt conversions, which help Small Island Developing States in regions such as the Caribbean and Pacific fund a range of critical efforts like reef and mangrove restoration for climate resiliency and marine protection areas for more sustainable fisheries management.”
Convergence is an independent institution that helps public, philanthropic, and private investors find and connect with each other to co-invest in blended finance deals in emerging markets. Convergence offers grant funding for practitioners to design innovative blended finance instruments that address a key development need but would otherwise be too risky or complex to pursue. To share what grantees have learned through their design process, Convergence, in partnership with the Bertha Centre for Social Innovation and Entrepreneurship at the University of Cape Town's Graduate School of Business, will create learning briefs that outline key decisions and outcomes from the design processes to ensure practitioners considering similar instruments have access to design best practices.
“The Nature Conservancy is the leading conservation organization globally and has established itself as an expert in structuring debt conversions. The issuance of Blue Bonds is a bold mechanism that will allow the NatureVest team to replicate their Seychelles transaction for a number of Small Island Developing States and introduce institutional investors to the asset class”, said Joan Larrea, CEO of Convergence.
Convergence accepts Design Funding applications on a continuous basis, and reviews applications every quarter. To be considered for the next review cycle, practitioners must submit their applications by February 28, 2017. Visit www.convergence.finance/design-funding to learn more.
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ABOUT CONVERGENCE: Convergence is a platform that connects and supports private, public, and philanthropic investors for blended finance deals in emerging and frontier markets. Visit www.convergence.finance to learn more.
ABOUT NATUREVEST: The Nature Conservancy launched its impact capital strategy in 2010 with support from the Robertson Foundation that continues today, and built a global network with subsequent support from the Jeremy and Hannelore Grantham Environmental Trust. In early 2014, with founding sponsorship from JPMorgan Chase & Co., NatureVest was launched as a concerted effort to change the way we invest in nature. Visit NatureVest on the Web at www.naturevesttnc.org.