Investing in Climate Resilience for Just Sustainable Development
Summary
In 2023, the government of The Bahamas committed to the Bahamas Sustainable Investment Program (BSIP) , a catalytic initiative to accelerate investment in climate resilience and equitable sustainable development. The BSIP anchors national sustainable development efforts, through three integrated components: strategy, blended capital financing facility and institutional upgrading – aims to raise USD 500 MM through innovative capital market strategies and deploy in line with priorities set in a consultative and participatory process. This approach centers on partnership, learning, capability building, local ownership, increasing awareness and technical skills, generating new knowledge, and integrating traditional knowledge bearers. The Bahamas, a small Caribbean country with population spread over archipelago of 700 islands, plagued by environmental vulnerability and blessed with a rich endowment of natural capital assets – unique topography and biodiversity sought after by marine science, conservation, and carbon sequestration researchers – offers an invaluable site for reimagining sustainable development financing.
Approach
The government of The Bahamas commits to the Bahamas Sustainable Investment Program (BSIP) , an investment and economic program that will be implemented, through the Office of the Prime Minister and under the technical project direction of Resilience Capital Ventures (RCV) . In a participatory and consultative approach with stakeholders, the program will design and implement a national level sustainable investment strategy; an innovative financing facility with a target of 500MM and an upgraded investment institutional infrastructure across the country.
This program of change will be executed by a team composed of government officials working closely with an RCV-led consortium of academic institutions, specialist consultants, financial institutions, and a variety of funding partners. The skills and expertise of the consortium include technical fields such as financial expertise in structuring, underwriting and placement of securities; sustainable development; systems change; ecology; marine science and community development.
The program serves as a demonstration project for accelerating sustainable finance and applying it to bankable projects that benefit the wider society on an equitable basis. By applying a capital markets approach, reimagining blended finance, and adopting good practices in large scale development programming, this effort will move beyond identification of priority projects to actually financing them. The indicative sectors of interest include clean energy, coastal zone management, biodiversity loss projects, carbon sequestration and regenerative agriculture. There is also a need for hardening social infrastructure and improving resilience of the built environment.
BSIP will incorporate principles of strategic ownership by the government and people of The Bahamas, stakeholder engagement, strengthening the financial ecosystem and building capability for the long term. engage with global financial markets and institutions. The BSIP will provide a showcase accelerating climate finance through use of blended finance architecture and capital market approaches.
Action Plan
The Bahamas Sustainable Program (BSIP) will be implemented in three overlapping phases.
Phase 1: Strategy Development BSIS (Sept 2023 – August 2024) Based on a careful and thorough review of existing national climate change, ESG strategy documents and national sustainable development objectives including those identified in the NDC and national biodiversity strategy, this multi-year program will undertake a national strategy development process to identify sectors and projects of priority for investment. Strategy formulation will include intense stakeholder engagement with private sector actors, civil society and academia to deepen a sense of ownership of the priorities identified. Capability development and awareness activity during the strategy design and rollout will be geared to increasing familiarization with the global sustainability and ESG conversation and its implications for The Bahamas.
Phase 2: Financial Facility Design and Capital Raising BSIF (September 2023 – March 2025) Designs and takes to market an investment facility (target size USD 250- 500 MM) for the funding and financing of high priority sustainable development projects identified in the BSIS. The capital raise and marketing will be executed on a syndicated basis with the government, domestic and regional financial actors working with global partners to issue, underwrite and place securities in the market.
Phase 3: Institutional Upgrading BSII (September 2024-August 2026) Upgrading investment institutional framework to improve effectiveness of investment attraction, screening and selection. A comprehensive mapping of investment agencies, as well as a review of existing legal, policy and regulatory instruments. The expected deliverables include: a framework for transforming the institutional landscape and identified changes across all relevant agencies, processes, screening rules and frameworks as required. A major focus of this institutional upgrading would be to design and undertake change management in light of global changes, so as to confer the ability to anticipate and respond to those changes.
Background
The scale of the climate financing challenge is overwhelming. Since COP 26 with GFANZ and COP 27 with its various High-Level commissions there is more than enough empirical data scoping and estimating the size of the financing gap. What is still missing is investment of catalytic finance being applied to actions that will close the gap.
Closing the gap requires political will, technical competencies, greater awareness on the part of citizens and decision makers and targeted specific programming actions. The development community, private sector, academic institutions and commercial finance are currently siloed and operate with different vocabularies and definitions of success.
Relatively modest investments can catalyze transformative change including by bridging various silos. Based on this understanding the government of The Bahamas commits to address these critical challenges: insufficient financial capital deployment; an allocation problem; and an ecosystem weakness challenge.
The Caribbean in general, and The Bahamas in particular, like many small island developing states, faces considerable problems in attracting financial capital from global markets – this is a result of small project size, perception of riskiness, unfamiliarity and fiscal constraints. One estimate is that the Caribbean requires USD 1.25 billion per annum to close the climate finance gap and in 2022, only USD fifty million was secured. In addition, even when finance is available it is often as debt and very little is deployed for adaptation, resilience and disaster preparedness, despite urgent needs in these areas. The financial and business ecosystems in the region are only now becoming familiar with green, sustainable finance and therefore more needs to be done to activate domestic financial institutions.
These challenges are inextricably linked to just outcomes because without ecosystem strengthening, other things equal, any financial capital deployed is likely to support the status quo and result in elites realizing disproportionate benefits.
Progress Update
Under the technical direction of Resilience Capital Ventures, the Government of The Bahamas has continued to engage with capital providers and to present the opportunity of investing in sustainable development and resilience. To this end, the government has secured an important contribution from the Open Society Foundations and those grant funds have allowed them to engage with capital providers and undertake product development on the Investment Readiness Platform (IRP) a five phase process that strengthens the ability of counterparties interested in investing in resilience, adaptation and sustainable development. The project has also continued to raise awareness and further understanding of the requirements for resilience finance including through knowledge generation and sharing, for example, the invited article for the GRI annual publication produced in collaboration with Deloitte.
Partnership Opportunities
Inviting sources of all forms of capital, both financial and non-financial, to collaborate with the government of The Bahamas in implementing this program by contributing grants, knowledge, collaboration and engaging actively in all stakeholder’s consultation processes.,Providing knowledge products and best practice information on national strategies; improving investment readiness of adaptation and mitigation projects; designing structures and underwriting sustainability enhancing projects and reviews of laws, regulations, and codes for investment attraction.