The Inter-American Development Bank (IDB) and the European Investment Bank (EIB) have approved guarantees totaling US$300 million to support an innovative debt-for-climate operation that will help Barbados unlock much-needed resources to invest in critical climate adaptation projects, while safeguarding other priorities such as social spending on health and education.
The boards of the IDB and the EIB each approved a US$150 million guarantee, marking the first time the two institutions have provided joint guarantees for a single operation in the Caribbean. This combined effort on innovative climate financing and project preparation will amplify the scale and impact of Barbados’ investment in climate-resilient infrastructure.
The guarantees will be used in a debt-for-climate conversion plan first announced late last year. The plan creates the fiscal space that allows the government to make investments in resilience that would not be otherwise possible given the current fiscal limitations.
The guarantees will also help Barbados advance its resilience plans outlined in the country’s Updated Nationally Determined Contribution (NDC) under the Paris Agreement, and in the Roofs to Reefs Programme, by increasing water availability and food security and enhancing the country’s resilience in a holistic manner. The guarantees support the implementation of the European Union’s Global Gateway investment strategy and enable Barbados to access crucial water and climate financing.
“This groundbreaking collaboration between the IDB and the EIB marks a historic moment for Barbados and sets a powerful, scalable model for other vulnerable nations. With these loan guarantees, we are not only securing our nation’s water and food resources but also fortifying our resilience against the ever-looming threat of the climate crisis. This initiative exemplifies how innovative climate financing can drive meaningful change, ensuring a sustainable future for our people and our planet,” said Barbados Prime Minister, Mia Amor Mottley.
“The EIB has consolidated its role as the Climate Bank, supporting investments that reinforce the resilience of most-affected countries,” said Nadia Calviño, President of the European Investment Bank.
“I am really proud that the EIB Group participates in the first ever debt-for-climate conversion and, through our partnership with the European Commission, the IDB and the government of Barbados, set an important milestone in innovative financing for climate action.”
“This operation exemplifies how the Global Gateway Investment Agenda for Latin America and the Caribbean is delivering innovative solutions to enhance partner countries’ resilience and direct benefits to the citizens. These crucial resources help Barbados address climate vulnerabilities and invest in resilient infrastructures,” said Jutta Urpilainen, European Union Commissioner.
“Our partnership with the EIB, and Barbados, shows how international development organizations are working together as a system with governments to devise innovative financial solutions to mobilize more resources for more impactful climate-resilient investments,’’ said Ilan Goldfajn, IDB President.
“Barbados is on the forefront of financial innovation and partnerships. We reached this important major achievement because of the country’s strategic vision and commitment to a climate-resilient future.”
The operation will provide Barbados with the resources for infrastructure investments, including the South Coast Water Reclamation Project, which will increase the island’s water security in the context of climate change impacts and improve sanitation services.
The project will upgrade the South Coast sewage treatment plant, allowing it to reclaim water used in irrigation. This will allow local aquifers to recharge while preventing untreated wastewater from being discharged into the ocean, helping protect marine ecosystems and nearshore reefs and safeguarding public health.
Under the guarantee program, Barbados has developed a set of policies that will strengthen the government’s capacity to prepare and implement new climate investments, protect and augment scarce groundwater resources, and boost agricultural production.
The government will also commit to adopting measures to improve tax and debt management and develop strategies to enhance the country’s financial resilience to natural disasters such as hurricanes and flooding. Complementary investments by the government in reducing water losses in the supply network ensure a comprehensive water security investment program.
The recent impacts of Hurricane Beryl highlight the vulnerability of the Caribbean region and small island developing states to climate change. The 2024 Atlantic hurricane season is predicted to be unusually active and intense, driven by exceptionally warm ocean temperatures.
In becoming a Category 5 hurricane so early in the season, Beryl set a historical record. This operation is the result of collaborative efforts among Multilateral Development Banks (MDBs) to provide innovative tools to address the challenges and effects of climate change.
