The Government of Barbados Forms a Coalition of Multilateral Banks to Develop Resilient Infrastructure and to Drive New Social and Nature Capital Investments, Building on Its Resilience and Sustainability Facility at the IMF
IMF News, June 23, 2023
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- The Government of Barbados Forms a Coalition of Multilateral Banks to Develop Resilient Infrastructure and to Drive New Social and Nature Capital Investments, Building on Its Resilience and Sustainability Facility at the IMF
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- Published: June 23, 2023
Overview
- Announcement date: June 23, 2023.
- Context: Announced at the Summit for a New Global Financing Pact in Paris.
- Purpose: Accelerate Barbados' transition to net zero, boost resilience, enfranchise workers, and draw in private sector investment while prudently managing public debt levels.
- Foundation: Builds on ongoing climate policy reforms supported by the Resilience and Sustainability Facility (RSF) at the International Monetary Fund (IMF), expected to play a catalytic role in mobilizing private and public sector financing for climate projects.
- Coalition partners: Inter-American Development Bank (IDB), World Bank Group (WBG), Development Bank of Latin America and the Caribbean (CAF), European Investment Bank (EIB), and Green Climate Fund (GCF), together with Barbados’ RSF at the IMF.
Key initiatives and instruments
- Four complementary approaches identified by the Government of Barbados with financing partners.
- A New Blue Green Bank
- Initial capital: US$10 million from fiscal space created by the RSF.
- Leverage: This capital will support five times that lending amount.
- Partner engagement: GCF proposes to its Board in July to become a co-founding partner; other partners (GCF, CAF, IDB) to support via technical support or capitalization.
- Target financing: Will help finance over US$250 million of green investments in affordable homes, hurricane-resilient roofs, the electrification of public and private transport, and other Paris-aligned investments.
- More Resilient Infrastructure: Low-Cost, Long-Term Loan Instruments from Development Finance Institutions
- Instruments: Low-cost and long-term financing from EIB, CAF, IDB, GCF and RSF to support resilient water and waste treatment infrastructure, flood and coastal protection, transformation of state owned enterprises, and worker enfranchisement.
- EIB contribution: US$18 million of grants from the European Union (EU) to support climate-resilient water, sanitation, and clean ocean projects across the Caribbean to back a US$165 million loan facility.
- GCF contribution: Will offer up to US$1.5 million in grants per project for end-to-end project preparations, innovation, transformational impact, and to prepare investment proposals for further GCF funding.
- Better and More Affordable Public-Private Partnerships (PPPs)
- Project preparation: Multilateral partners will strengthen project preparation support to attract private investment in PPPs.
- IDB role: Support and help develop the Government's capacity and expertise in PPPs.
- Risk mitigation: World Bank Group's Multilateral Investment Guarantee Agency has made available investment guarantees to help reduce the cost of private sector financing.
- IFC role: International Finance Corporation will support development of the first large-scale onshore wind project in Barbados and enhance grid resilience.
- Developing New Non-Debt Investments in Nature and Social Capital
- Building on 2022 Blue Bond: The 2022 Blue Bond with IDB and The Nature Conservancy released approximately US$50 million of new financial resources for marine conservation.
- Focus: New generation of instruments to support investments in nature and social capital.
Expected impacts and objectives
- Mobilize private and public sector financing for climate projects.
- Help Barbados meet resilience objectives and protect citizens from hurricanes, flooding, and droughts.
- Protect and preserve natural capital and pristine natural environment.
- Transform the economy while maintaining sustainable public debt levels and limited public borrowing capacity.
- Support investments in affordable homes, hurricane-resilient infrastructure, electrification of transport, resilient water and sanitation, flood and coastal protection, and onshore wind deployment.
Leadership statements (verbatim)
- Prime Minister Mia Mottley: “Alongside new capital, innovative instruments, partnerships and new ways of working together are critical if we are to overcome the challenges posed by climate, pandemics and debt. These new, integrated, initiatives announced today are embodiment of what can come out of new cooperative ways of working together.”
- Kristalina Georgieva, Managing Director of the International Monetary Fund: “We welcome Barbados’ initiatives to catalyze private climate finance, and the related push to bring together multiple partners in pursuit of a common goal. The Fund is fully committed to supporting our members’ efforts to meet their climate goals—including through the Resilience and Sustainability Facility – and we look forward to our continued partnership with Barbados as the government takes steps to green the economy.”
- Ilan Goldfajn, President, Inter-American Development Bank Group: “The IDB has long been one of Barbados’ closest and most committed development partners. We are delighted to take advantage of this opportunity to collaborate with the IMF and other partners to build on our successful recent blue bond issuance, and promising experiences across the region with project preparation and structuring to help catalyze new and larger volumes of private financing for resilient climate smart investment. These and other innovative financing and support mechanisms will be crucial to help Barbados meet the challenges of a rapidly changing climate."
- Sergio Díaz-Granados, Executive President of CAF: statement asserted that as a home-grown development bank owned by the countries Latin America and the Caribbean, CAF understands the myriad challenges faced by small islands, like Barbados, as a result of the effects of climate change. “CAF is committed to doing its part in channelling increased resources and is very pleased to join forces with other development partners to mobilize dedicated financing that will help to strengthen the resilience of our member countries.”
- Werner Hoyer, President of the European Investment Bank (verbatim, source text): "As the EU Climate Bank, alongside our Team Europe partners, the EIB is constantly workingWe have no time to increase the impact of its climate lending and lose to support for vulnerable countries like Barbados. that are already facing the devastating consequences of climate change. Following the call to action of Prime Minister Mia MottleyAmor Mottley's call to action, we are delivering swift and targeted support. We will start offering extended loan tenors to lower and middle-income countries, and are seeking to provide natural disaster risk clauses in our loans to ensure the most vulnerable communities can recover and rebuild following a crisis.". As the EU Climate Bank, alongside our Team Europe partners, the EIB is constantly working to increase the impact of its climate lending and support for vulnerable countries like Barbados."
- Henry Gonzalez, Executive Director ad interim of the Green Climate Fund: “The Blue Green Bank will transform the financing landscape in Barbados and catalyse new finance for sustainable climate investments. GCF has provided technical and financial support in developing the concept, and our Board will consider making a substantial investment in the new Bank at its meeting next month.”
- Makhtar Diop, IFC Managing Director: “Barbados is redoubling efforts to bolster its climate resilience and become a low-carbon leader. IFC will continue to work closely with the country and collaborate with other multilateral institutions to accelerate the flow of private capital in support of Barbados' ambitions."
Media and contact information (from release)
- Press Release No. 23/231
- IMF Communications Department, MEDIA RELATIONS
- PRESS OFFICER: Maria Candia
- Phone: +1 202 623-7100
- Email: MEDIA@IMF.org
- @IMFSpokesperson
Press Release No. 23/231, June 23, 2023 — International Monetary Fund