Business Barbados - 2023 Edition

a combination of factors. These include the COVID-19 pandemic, energy and food insecurity linked to the war in Ukraine which are driving an increase in the cost- of-living, and the climate change crisis. These are some of the drivers behind the recent Bridgetown Agenda. The Bridgetown Agenda Presented by Prime Minister of Barbados, The Honourable Mia Amor Mottley, the title of the Bridgetown Agenda is, “Urgent and Decisive Action Required for an Unprecedented Combination of Crises, the 2022 Bridgetown Agenda for the Reform of the Global Financial Architecture”. It outlines three steps for collective action in developing a path towards a new financial system that channels financial resources towards climate action focused on the UN Sustainable Development Goals (“SDGs”). These include: 1. emergency liquidity 2. expansion of multilateral lending to governments by US$1 trillion 3. activation of private sector savings for climate mitigation and fund reconstruction after a climate disaster through new multilateral mechanisms. These steps aim to support the scaling up of investment in the low-carbon transition in the energy, transport, and agricultural sectors; provide substantial investment in building climate-resilience and sustainability; and deliver investments in public health and education. Creating a sustainable financing model via Climate Financing As we assess the current position of Barbados and other small island economies, the importance of a sustainable financing model is key to increasing resilience. Three principles are highlighted: 1. Fiscal prudence: over the last few years, many small island economies have developed a high level of debt and a number of economic metrics that have warranted higher risk being placed on their debt issuances. This has been reflected in external ratings from agencies. The increased risk was also reflected in higher interest rates attached to the bonds. As observed with both the Barbados and Belize blue bonds, fiscal prudence was exercised by refinancing the more expensive debt with more favourable terms that lowered interest rates and extended the repayment term. The fiscal space this created provides several benefits: i. lower debt servicing requirements, ii. more head room since debt to GDP was lowered in some instances, iii. more cash flow to channel into the sustainability or conservation funds associated with the bonds iv. a mechanism to maintain contributions in the “Resilience Funds” over the long term. 2. Wider pool and strong rating for investors: The structures noted above were both guaranteed by the TNC and multilaterals. In all cases, the guarantors have very strong financial ratings. E.g., the Barbados blue bond has a Triple-A rating. This structure created scenarios where the bonds were oversubscribed given the strength of the guarantors. However, equally important would have been the fact that this also created an appetite for a wider pool of investors into the region. 3. Establishment of a Conservation Endowment Fund: The goal of the foregoing structure is to set up a long- term mechanism, such that there will be funds available for conservation policy and project implementation. This will ensure that resilience funding is maintained. A growing interest in blue bonds highlights a movement toward a sustainable model of collaboration between economic development and environmental protection, and Barbados is helping to lead the way. BUSINESS BARBADOS 2023 44