Four years ago, he struck a pioneering deal with the Seychelles, a splash of islands off the East African coast. At the time, the country was deep in debt and facing a gloomy future. Its economy depended on tourism and fishing, two industries facing decimation from climate change.
As part of an investment team at the Nature Conservancy, the U.S.-based environmental group, Weary threw the Seychelles a lifeline: a chance to refinance more than $21 million of its debt. There were just two conditions. The government had to spend the savings on ocean conservation work such as coral restoration and trash cleanup, and it had to designate 30 percent of its waters as special zones where activities such as fishing and drilling are highly regulated or off limits.
The nation’s leaders delivered. The Seychelles hasn’t missed a payment, and this spring its president announced it had met that target, protecting an area larger than Germany. Now some of the giants of the financial world are realizing there could be profits in ocean conservation.
“Basically what we’re doing is financial engineering,” Weary said recently. “That’s typically used by hedge funds and private equity funds, with their goal of course to make returns for their investors.” It’s just that the investment objective here is different. “We’re doing all these to help Mother Nature.”
Historically, ocean protection has been funded by governments, charities and a few ethically minded investors. Today, financial heavyweights like the World Bank, Credit Suisse, Morgan Stanley and the Asian Development Bank are actively pursuing “blue bonds,” a tool that could raise vast pools of private capital for the oceans.
Last year, the Nordic Investment Bank issued a $220 million bond to address pollution in the Baltic Sea. Morgan Stanley helped the World Bank sell a $10 million bond for cleaning up plastic waste in oceans — an admittedly small offering that the company saw as a trial balloon. The burgeoning community of investors interested in pro-environment options responded.
“We saw that [the sale] had very robust demand,” said Audrey Choi, Morgan Stanley’s chief sustainability officer. “We were very excited to see how we could do more of these at larger scale.”
The approach offers investors a steady flow of interest payments — albeit slightly less than that of traditional bonds — and an opportunity to shine up their environmental records. Borrowing countries, in theory, should end up with stronger economies that boost budgets and make it easy to repay the bonds. (A country that defaults would fall into the same financial limbo as one that stiffs its traditional lenders.)
But amid this burst of money for oceans, skeptics warn against too quick an expansion. They are wary, given previous misadventures in “green” finance to aid conservation on land.
“There is a growing financial crisis in many developing countries,” said André Standing, an independent researcher in Kenya who has studied the impact of debt deals on small nations. “They’re using more and more of these type of bond arrangements to raise finance, which are very unsustainable and lacking transparency and accountability.”
Others question how effectively the deals can be replicated. “If this works in Seychelles, it can be done again, and it can be done in other locations. But it can’t be a mass-production thing,” said Mark J. Spalding, president of the nonprofit Ocean Foundation.
“The argument is we have to do a lot of this and quickly,” Spalding continued. “That’s why there’s a push for scale. But if that huge scale doesn’t actually get us the results we need, we’re just smoking funny stuff.”
Yet supporters say blue bonds can provide critical cash infusions for developing countries determined to rehabilitate ailing oceans, particularly given the ever-increasing risks from rising sea levels, warmer water temperatures and greater acidification. And conservation makes financial as much as moral sense, they contend.
Healthy corals and mangroves can shelter islands against heavy storms, reducing recovery costs. Regulated fisheries can help fishers stay in business for the long haul. One study concluded that a live shark swimming offshore generates exponentially more money from tourism and taxes than if it were sold as meat in the marketplace.
Weary is among the bonds’ biggest boosters. In another life, he might have a career as a hedge-fund guru. He speaks a mix of English and financial-ese. “This is all I’ve done for eight years,” he said from his home office in Keswick, Va. “This is all I’ve thought about and done.”
He cut his teeth at the Nature Conservancy on “debt for nature” swaps, negotiating with Latin American and Caribbean countries that owed the U.S. government a lot of money, usually at high interest rates. Under the deals he worked out, the Nature Conservancy and the United States would refinance a chunk of that.
The catch: The country involved had to protect a swath of biodiverse tropical forest. Any wavering on that protection, and the debt would revert to its prior terms.
Weary came to call debt “the secret sauce” for conservation. Eleven such deals, struck from 2001 to 2011, resulted in almost $250 million for forest protection, according to the organization.
In 2012, the Seychelles called him with a challenge: Could he do this for oceans?
Weary was interested; oceans were no less threatened than forests, yet 3 percent of their water was protected globally. And the Seychelles, an archipelago of 115 islands in the Indian Ocean, was desperate, given the future it faced.
Half a century earlier, its famed coral banks had teemed with life so abundant that Jacques Cousteau featured them in his acclaimed documentary “The Silent World.” But a major bleaching event in 1998 proved devastating, and the reefs were dying faster than scientists could rehab them. Fishermen’s catches had become smaller and smaller.
Fortunately, the Seychelles had scads of debt.
The multimillion-dollar deal took four years to conclude. The Nature Conservancy, with cash from its own pocket as well as from philanthropists like Leonardo DiCaprio, bought a chunk of the Seychelles’ debt and then slashed its interest rate. That carved out about $200,000 a year for spending on projects to benefit the ocean.
The money is allocated by the independent Seychelles Conservation and Climate Adaptation Trust. Angelique Pouponneau, a 30-year-old lawyer and rising star on the international environmental circuit, is its chief executive. She sees part of her job as getting buy-in from local fishermen — which sometimes means hanging out as they hawk their day’s catch.
“I grew up in the fishing district of Mahé. Fishers are my friends,” she said. “They’re storytellers, and they’re keen to understand what you know.”
It will take time to see lasting ecological benefits. In one project, a fishing guild experimented with sustainable management for rabbitfish, a local delicacy. Another supported cleanup of an island of giant tortoises, where crews collected tons of washed-up trash — including 50,000 flip-flops. Still underway is an effort to trace the reproductive routes of coral to better inform future rehabilitation efforts.
Researcher Jazzy Taberer led a $30,000 study tracking the habits of sicklefin lemon sharks, a vulnerable species in the Indo-Pacific that lives near coral reefs and within mangrove forests. The latter is crucial since mangroves have more resilience against a changing climate than corals do.
Identifying the sharks’ preferred habitat during their life cycle boosts the odds of saving the species. “They have a chance,” explained Taberer, a science coordinator with conservation group GVI. “They have a fighting chance.”
On the small, rock-strewn island of Curieuse, the grant helped her team catch 20 shark pups, affix acoustic trackers and collect mountains of data on this little-studied species. Securing such funding from other sources “would be exceptionally hard,” she noted.
Other investors have gotten involved since the initial deal. In 2018, the World Bank helped the Seychelles issue the world’s first “sovereign blue bond” — a slightly different instrument that serves as a new loan — for $15 million. Prudential Financial, Nuveen and Calvert Impact Capital, which each manage billions of dollars globally, provided $5 million apiece.
“The belief is that having a healthier ocean is going to make the government of Seychelles a healthier economy,” said Jenn Pryce, Calvert’s chief executive. “If it succeeds, the impact is huge. The Seychelles has a sustainable economy forever, in theory.”
The Nature Conservancy’s effort is only expanding, ambitiously so. Though Weary departed in October — after 22 years, he says he wanted to explore new opportunities for his expertise — he left behind blueprints for a massive scale-up.
This winter, the organization hopes to ink the first deals toward its target of generating $1.6 billion for ocean protection around the world. It aspires to negotiate debt-restructuring arrangements, funded by blue bonds, in 20 coastal and island nations within the next five years.
It has hired Credit Suisse as its conduit to Wall Street. And to try to reassure those who haven’t previously viewed reefs or sharks as investable assets, the Conservancy plans to combine each bond with an insurance policy provided by the U.S. International Development Finance Corp., a new federal agency created to help U.S. investors compete with Chinese banks abroad.
The combination will transform the bonds into a “super safe” opportunity with real impact, Weary said. “There shouldn’t be any difficulty finding investors.”