* To boost impact funds to $2 billion - Ocean Finance Company
* To help stop plastic pollution across the region
* Will use blended finance pool to buy Eurobonds
LONDON, May 21 (Reuters) - Oceans Finance Company, a climate finance group helping protect Ecuador's Galapagos Islands, plans to raise $1 billion through a new type of debt deal to help fund environmental projects, its chief executive told Reuters.
Its plan is to steadily buy up Ecuadorian Eurobonds with money raised from multilateral lenders, philanthropies and institutional investors and pay each an agreed share of the annual coupon payout.
The rest would be used to help finance projects such as removing plastics from the ocean and restoring mangroves. OFC started fundraising this month and expects to generate an extra $2 billion for impact activities once it is fully developed.
To attract more risk averse investors, OFC said it was speaking to Lloyd's of London insurers to buy cover that would effectively lock in a return. The bonds would be held in a special purpose vehicle dedicated to the initiative.
"It allows us to mobilise all the difference between the cost of capital and the funding that we have for impact," Erik Wandrag said.
"It also allows us to fast-track not only transactions, but also fast-track the impact that we want to achieve," he added, describing the plan as part of a regional programme for Latin America's Pacific coast that could also be replicated in Africa.
The need is acute. An OECD study in 2022 estimated there were 30 million tonnes of plastic waste in the world's seas and oceans and a further 109 million tonnes accumulated in its rivers.
OFC's main shareholder is the Netherlands-headquartered Climate Fund Managers (CFM), which has formed funds in partnership with the likes of the Dutch Fund for Climate and Development (DFCD) and European Commission.
CLIMATE AND BIODIVERSITY
Countries are increasingly looking for ways to finance preservation of biodiversity-rich ecosystems after agreeing a landmark deal in 2022 to accelerate action, yet many of the efforts achieved to-date have struggled to gain scale.
The issue is particularly acute in developing countries, which have some of the world's largest and most precious areas to protect but which are often too stretched financially to fund all the preservation work needed.
One increasingly popular solution has seen countries such as Ecuador, Belize and Barbados expand conservation programmes in exchange for having their debt payments reduced, through what are known as debt-for-nature swaps.
The only downside is that most have been relatively modest in scale and can take years to agree. A record $1.6 billion Galapagos-focused swap last year, for example, raised around $500 million for environmental projects. Others have raised much less.
A global taskforce was launched at the COP28 climate talks in Dubai last year to look at ways to scale up the market, yet OFC, which took part in the Galapagos swap, said it believes its new model could have an even bigger impact.
For instance, whilst OFC is liaising with Ecuador's government, Wandrag said its formal blessing was not needed to go ahead. And as there is no debt restructuring involved and the bonds can be bought from the open market over time, the approach could be replicated almost anywhere.
Nearly 180 governments are due to meet in Korea in November, for the fifth and final round of negotiations for a global treaty to end plastic pollution. The plan is for that agreement to then be formally signed early next year in the Galapagos.
Just before that, countries will meet in Azerbaijan for the next round of climate talks, COP29, at which the connections between climate and biodiversity are likely to take a more prominent role. (Reporting by Simon Jessop and Marc Jones; Editing by Alex Richardson)
