The Bahamas Gets Real About Climate Finance

* By Aliya Allen, a Partner at the law firm of Graham Thompson

The Bahamas is a low-lying archipelagic nation situated in Hurricane Alley, the area of warm water in the Atlantic Ocean that stretches from the west coast of north Africa to the Caribbean and the eastern seaboard of the United States.

urricanes in this zone are increasing in force as the years pass and Bahamians of all ages are becoming climate refugees and leaving the country. Last November, the Bahamian Prime Minister spoke at the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) and made a simple request of world leaders: “Let’s Get Real”. In this article, we explore how the Bahamas is promoting a green agenda through green initiatives, blue-carbon initiatives and carbon trading.

Climate Finance

The term ‘climate finance’ refers to the financing needed to tackle climate change and to support a country’s transition to a low-carbon and climate-resilient economy. Climate change is now a pressing problem that affects economies, societies and ecosystems worldwide. Banks, capital markets, fintech firms, insurance carriers and investment firms will have to provide green and sustainable financial services on a greater scale in future.

HThe National Investment Funds Act 2023, which provides the legal architecture for the creation of one or more National Investment Funds (NIFs) owned by the Government of The Bahamas, provides that a NIF may be established for a project related to the blue, green or orange economy.

The Bahamas has also been participating in blue-carbon initiatives. The term ‘blue carbon’ refers to the carbon stored in coastal and marine ecosystems such as mangroves, seagrasses and salt marshes. These ecosystems sequester carbon dioxide from the atmosphere and store it in their biomass and sediments. The protection and restoration of these ecosystems can therefore help to mitigate climate change. An article published in the National Geographic notes that The Bahamas is home to 25,000 square miles of lush seagrass meadows that lie on the floor of the ocean and host an abundance of sea life. According to the World Wildlife Federation, seagrass captures carbon up to 35 times faster than tropical rainforests and absorbs 10% of the ocean’s carbon annually.

The United Nations has recognized the importance of blue carbon as a way of addressing climate change, stating that “Protecting and restoring coastal and marine ecosystems can provide significant climate benefits, including through the sequestration and storage of carbon.”

Financial centres, where the demand for and supply of finance come together, must play an active role in green and sustainable finance. The Bahamas, with its strong financial centre, has recognized the importance of green and sustainable finance and has been participating actively in climate-finance initiatives.

Green And Blue Economies

Green initiatives are activities that reduce greenhouse gas emissions and pave the way for a low-carbon economy. The Bahamas has been working to promote these initiatives in various sectors such as renewable energy, energy efficiency and sustainable transportation.

The Bahamas is also participating in climate finance by developing a framework for both sovereign carbon credits and the registration of carbon exchanges and other carbon businesses. The term ‘carbon trading’ refers to the buying and selling of carbon credits, which represent reductions in greenhouse-gas emissions. Carbon trading can provide a financial incentive for countries and companies to reduce their greenhouse-gas emissions and to invest in low-carbon technologies. The United Nations has recognized the importance of carbon trading in the fight against climate change, stating that “Carbon-pricing mechanisms, such as carbon taxes and emissions-trading schemes, can provide a powerful incentive for emissions reductions and can help to mobilize climate finance.”

Laws To Help Climate Finance

The Climate Change and Carbon Market Initiatives Act 2022 (CMIA) facilitates the Bahamas’ national carbon-credit programme. The Bahamas’ unique topography consists of thousands of miles of mangroves which are more efficient at capturing carbon than just