The Republic of Seychelles aims to keep its economy in the blue by protecting 30 percent of its waters through a historic debt-for-nature deal.
December 2016/January 2017
In an auditorium in Victoria, the small but vibrant capital of Seychelles, a middle-school girl in a pinstriped uniform is making a case for marine protected areas. Conservation is the theme of this national public speaking contest, and students are quick to connect the environment to tourism.
“It is universally known that Seychelles is a desirable vacation destination,” the girl says confidently.
Mention Seychelles and most people think “island paradise”: palm-fringed beaches, turquoise waters and inland tropical forests. Seychelles is actually many island paradises—115 of them, from rocky granitic islands to pristine coral atolls, spread over a large swath of the Indian Ocean north of Madagascar. It’s a biodiversity hot spot as rich as the Galapagos, with black parrots, fox-faced fruit bats, friendly giant tortoises, nesting seabirds unafraid of humans and a stunning palm tree, the coco de mer, whose shapely double-lobed coconut is the largest nut on Earth.
This natural splendor is the birthright of roughly 90,000 Seychellois. In fact, the Seychelles Constitution guarantees every citizen the right “to live in and enjoy a clean, healthy and ecologically balanced environment.” As the students’ speeches demonstrate, the Seychellois take conservation seriously: Mandatory environmental education starts in elementary school. And nearly half the land in Seychelles has been designated as protected areas. However, the nation has lagged behind in creating marine reserves. Fortunately, that’s changing now.
With The Nature Conservancy’s help, the nation has committed to designating nearly one-third of its territorial waters—an area larger than Germany—into marine protected areas by 2020. And it is doing this in a way that addresses the economic challenges of many small-island countries. Using an innovative financial instrument called a debt-for-nature swap, the island nation is reducing its sovereign debt and leveraging payments on a portion of its remaining debt to provide support for protecting its oceans, adapting to climate change, and growing its tourism and fishing economy. The deal is so groundbreaking that it promises to become a model for other island nations that want to conserve their marine environments while growing their economies.
Seychelles, as its citizens like to say, is a small island state but a large ocean nation. It has less than 200 square miles of land, but its exclusive economic zone—the marine area that the nation controls—is about 529,000 square miles. And the vast majority of the country’s gross national product rests on what the government calls the blue economy: tourism and fishing.
That means that, as with many small-island developing nations, Seychelles’ economy is tied to healthy marine ecosystems. Also like other island states, it is especially vulnerable to natural disasters such as cyclones and financial shocks like the past decade’s global financial crisis. In the late 1990s, Seychelles had one of the world’s highest ratios of national debt to gross domestic product. But just as the nation began taking steps to reduce its debt, a new threat loomed: climate change.
As ocean acidification and warming threaten to disrupt ocean ecosystems, the importance of marine resource management is increasing. To protect the health and resilience of oceans, many nations around the world are converting some of their waters to marine reserves. In 2015, more than a million square miles of ocean were given some level of protection. Seychelles officials wanted to join this effort, and they had an innovative idea: Link ocean conservation to debt reduction.
Sitting in his office with a large poster of tropical fish on one wall, Didier Dogley, the minister of environment, energy and climate change for Seychelles, explains the genesis of the program. In 2012, representatives from Seychelles organized a conversation with several other small island states and the Conservancy at a side event at the United Nations Conference on Sustainable Development in Rio.
“We made a pledge at that meeting,” Dogley recalls. “If we can do an innovative financial approach, then Seychelles would be willing to consider putting up to 30 percent of our exclusive economic zone into marine reserve.”
The Conservancy was looking into incentives for island nations to create marine protected areas, says Marc Diaz, managing director of NatureVest, the Conservancy’s impact investment arm that helped structure the deal. Both parties saw a way that the country could honor its debt and still achieve sweeping conservation gains.
The innovative financial approach that resulted was a debt conversion, more commonly known as a debt-for-nature swap: A nation restructures part of its national debt, sometimes with a reduction in the principal owed, in exchange for committing to specific conservation goals. The Conservancy has helped broker such agreements in 11 countries, helping to generate more than a billion dollars worldwide for conservation. But most of these swaps have involved forest protection. Seychelles proposed using this financial instrument to conserve the ocean.
Subsequently, the government of Seychelles passed legislation creating SeyCCAT—the Seychelles Conservation and Climate Adaptation Trust. Funded by a concessionary loan from the Conservancy, as well as $5 million in grants that the Conservancy helped raise, SeyCCAT bought back $21.6 million of Seychelles’ national debt.
Now Seychelles will make payments on this debt to SeyCCAT at a lower interest rate and over a longer period than required under its previous loan agreements. The Conservancy will be repaid in full, but part of the interest payments will be used to fund conservation and climate adaptation work. Additional interest payments will be placed in a long-term investment trust fund to continue paying for conservation work once the loan is paid off.
The trust is expected to generate $400,000 annually, which will be used to fund projects like marine monitoring and coastal restoration work.
“That’s $400,000 that was previously going into the pockets of external creditors,” says Jean-Paul Adam, the minister of finance, trade and the blue economy, “which is now being re-invested in the environment. This is existing money which has been redirected into a project which is essential to the future of Seychelles.”
"Koman ou sava!” Helena Sims calls out in the musical Seychellois Creole, greeting fishermen at the small boat dock in Victoria. The Conservancy’s sole employee in Seychelles, Sims is a project manager helping facilitate the creation of the marine spatial plan. Like a city plan for the ocean, a marine spatial plan organizes marine activities in the most productive and sustainable way by designating zones for them. The plan will guide the work of SeyCCAT. According to Joanna Smith, the Conservancy’s marine spatial plan manager assisting the program, this process requires understanding the needs and concerns of stakeholders, from subsistence fishermen to huge commercial tuna ships, from small dive operations to island resorts, and from local ferry lines to international shipping companies. Among those stakeholders are the artisanal fishermen who unload here. Their compact, colorful boats are an important part of the Seychelles economy.
Standing on the teal-and-yellow Félicité, Captain Jean de Dieu Leonel awaits his buyers. Leonel is known as one of the best red snapper fishermen in Seychelles: When you shake his hand, you can feel the permanent impression of a fishing line on his palm. He and his small crew have been out for about a week, catching 650 kilos of snapper.
“Not bad,” he says. Normally, Félicité would bring in more than twice that, but the seas have been very rough. He has done better than most.
Leonel belongs to the group Seychelles Hook and Line Fishermen, and his boat bears its logo and tagline: “Responsible fishing.” Those in the group commit to doing line fishing, using circular hooks that are easily removed from bycatch, respecting marine reserves, and returning all juveniles and protected species to the water. In exchange, they can sell their fish with the group’s tag, which brings higher prices.
The marine spatial plan, says Sims, is about protecting the most biologically diverse areas while ensuring that members of the fishing community like Leonel can keep doing what they do: providing the Seychellois with a critical source of protein and the tourist industry with a product that makes Seychelles unique and universally attractive to visitors. But doing so, of course, means managing marine activities. So stakeholders from five main economic sectors—tourism, fisheries, infrastructure and public utilities, biodiversity, and nonrenewable resources—have been organized into technical working groups to discuss each industry’s needs. The groups are represented on the steering committee. The government will ultimately create the final plan and divide the marine territory into three types of zones.
The plan calls for 30 percent of the country’s exclusive economic zone to become marine protected areas. The most biodiverse half will be designated Zone 1, where fishing is likely to be restricted. Such zones have been proven elsewhere to increase fish stocks beyond their boundaries. The other 15 percent of the protected area will be Zone 2, highbiodiversity areas where fishing and marine activities will be managed and regulated. And finally, Zone 3 will represent the remaining 70 percent of the country’s waters, which will be open to multiple economic uses.
The first 15 percent of the marine protected area is scheduled to be designated by mid-2016, with the entire 30 percent in place by the end of 2020.
Minister of Finance Adam emphasizes that the plan is not about curtailing economic activity but about making it sustainable in the long term.
“The ocean is not the wild, wild west and should not be,” Adam says. “We are actually recognizing that there has to be economic activity. There has to be fishing, but it has to be done in a sustainable way. There have to be other activities: Tourism will take place, there may even be oil exploration, but all of this must be situated within an overarching plan which contributes to the sustainability of the marine area.” Or as Minister Dogley puts it, “It’s not about just squaring off areas and preserving them. It’s about making sure we look after them so they can look after us.”
To demonstrate the kind of project SeyCCAT will support, two staff members of the local conservation group Nature Seychelles board a small boat and head for a spot not far off the shore of Cousin Island, a special preserve. Wearing T-shirts that read, “Keep calm: we are restoring coral reefs,” researchers Austin Laing-Herbert and Louise Malaise don snorkels, masks and fins.
“This is our nursery site. There are 15,000 coral nubbins down there,” Malaise explains before they both heave themselves backward into the surging sea.
In 1998, Seychelles experienced widespread coral bleaching because of high-water temperatures. That’s when scientists began thinking seriously about “assisted evolution”—selectively breeding coral stocks that are tolerant to stress—to help reefs survive. Nature Seychelles began testing whether reef restoration could be done at a large scale.
The researchers lead the way to a coral nursery. Almost 100 feet down in sapphire water, coral fragments are attached to ropes strung between columns like holiday lights. Fish graze calmly on algae that collect on the nubbins. The young corals will grow for 18 months before being transplanted to the new reef. A short boat ride away is the “designer reef,” an area the size of a football field full of shrubbery-sized corals.
“Seychelles is good-news conservation,” says Nirmal Shah, CEO of Nature Seychelles. He is hoping the effort will be emulated all over the world. To that end, Nature Seychelles researchers share what they’ve learned with a global community of marine scientists.
Other projects SeyCCAT might support include mangrove restoration, wildlife tagging, invasive species removal, water-quality projects, and education and monitoring programs to ensure compliance with environmental regulations. “SeyCCAT is a vehicle which brings additional financing into boosting resilience of the blue economy, and of Seychelles ultimately,” says Adam. “We created it in law because we wanted it to last a very long time.”
“I think it’s a good example of what we’re trying to do in NatureVest,” says Rob Weary, the Conservancy’s senior director of product development, of the Seychelles debt-for-nature swap. “We’ve created [something akin to an in-house bank] in the Conservancy, using all the tools that an investment entity would, but instead of using it [solely] for profit, we’re using it to fund conservation.”
Since this deal began, the Conservancy has started working with six other island nations in the Caribbean and Asia-Pacific regions that want to use this model. Weary notes that development investment groups are now interested in funding future debt conversions. Seychelles has become a working example that will spur the protection of millions of marine acres.
Adam thinks the deal demonstrates the feasibility of factoring sustainability into economic models.
“The traditional models of dealing with oceanic space are very extractive in nature,” he says. “And we’re saying, We’ve actually got this massive space. We can use it much more effectively, but if it’s just going to be extractive, we’ll get what—50 years? What we really need is a longer-term model, which brings economic growth—possibly slower growth, but more sustainable growth.”
That’s not an enormous change, says Adam. “It’s not really radical; it’s just being more realistic.”
When the ferry boats that shuttle between Seychelles islands leave port, flying fish leap up behind them like dragonflies. Often a couple of local boats bounce along in the wake as well, just for fun: The Seychellois are a seafaring people. But as this deal balancing nature with economic growth makes clear, the people of this ocean nation have their feet firmly planted on the ground.