Heroes & Zeros: Seychelles vs. Facebook

Illustration by Ben Tardiff

Hero:  Seychelles’ blue bonds

First, in 2007, came the “green bond,” the debt instrument that has raised hundreds of billions of dollars for projects to combat or adapt to climate change. Now, a decade later, the Indian Ocean island nation of Seychelles has made a splash with the world’s first “blue bond,” aimed at easing environmental pressures on our oceans and marine life.

The proceeds of the 10-year, US$15-million issue will go towards overhauling the Seychelles’ fishing industry, the biggest contributor to the economy after tourism. Eligible projects include the development of aquaculture, training programs, new equipment and promotion of environmentally friendly fishing practices.

Arunma Oteh, World Bank vice-president and treasurer, described blue bonds as “yet another example of the powerful role of capital markets in connecting investors to projects that support better stewardship of the planet.” The World Bank helped pioneer green bonds in 2007, and has played a key role in the Seychelles’ issue by rounding up investors and advising the government on how best to spend the funds.

If green bonds are any guide, there will be no shortage of appetite for blue bonds among both issuers and investors. The Climate Bonds Initiative, a U.K.-based non-profit, estimates that governments, international organizations and businesses around the world were on track to raise US$210 billion from green bonds in 2018, up from US$162 billion in 2017.

EY, a global consultancy, says the main challenge for green bond issuers has been to absorb the extra costs compared to a normal bond without having to offer higher interest rates to investors.

According to a recent EY report, “These costs may include additional expenditure for defining the green criteria, monitoring and maintaining the proceeds as green, and transparently communicating performance to investors over the lifetime of the bonds.” Another challenge is to nail down the definition of a “green” project so that it meets investors’ needs and can withstand scrutiny from environmental activists.

The “blue” market will face similar hurdles. The three U.S. institutions that subscribed to the Seychelles bond – Calvert Impact Capital, Nuveen and Prudential Financial – will earn a handsome interest rate of 6.5 per cent a year. By contrast, Canada’s smallest province, Prince Edward Island, paid interest of just 3.65 per cent for a much longer 25-year bond issued in 2017.
Good news for the Seychelles is that it will end up paying just 2.8 per cent for its funds, thanks to a World Bank guarantee and support from the Global Environment Facility, a partnership of governments, non-profits and private businesses. Alas, not all future blue bond borrowers can bank on such a sweet deal.

Zero: Facebook

Amanda Vermeulen Bowey, a freelance writer living in Sydney, Australia, told her Facebook friends in mid-November that “after thinking about it for some time, I’ve decided to close my Facebook account.”

The final straw, Bowey said, was a blockbuster New York Times story, published a few days earlier, which exposed how the social media giant’s top executives chased growth even at the expense of undermining democratic processes around the world. The story revealed how

Facebook bankrolled a smear campaign against competitors and critics, planting fake stories on right-wing blogs and suggesting that George Soros, the liberal philanthropist, had funded anti-Facebook protestors.

The NYT scoop was the latest in a series of revelations which suggest that the company that once took pride in its ability to “move fast and break things” has ended up moving far too fast and breaking too many things. Regulators, politicians and users like Bowey are increasingly questioning Facebook’s corporate governance, from its privacy policies to its tardiness in responding to malevolent users such as Russian “troll farms” and U.S. white supremacists.

At the heart of Facebook’s problems is its evolution from a distribution platform to a publisher. From its origins as a fun way for users to share stories and pictures with far-flung family and friends, Facebook has played an increasingly active role in deciding who sees what, and when.

Attracting advertising dollars has become a top priority. Yet, as the recent revelations show, Facebook’s top executives have shied away from the transparency and accountability that typically come with such market power.

These missteps are starting to take a toll on the company’s business. Facebook reported 2.27 billion active users in the third quarter of 2018, 10 per cent more than a year earlier but down from the 16 per cent growth rate in the previous 12 months. Its shares lost more than a third of their value between August and December 2018, costing investors close to a quarter of a trillion dollars.

Margaret Sullivan, the Washington Post’s media columnist, wrote in November that Mark Zuckerberg, Facebook’s 34-year-old founder and chairman, “should declare mission accomplished — and find something else to do for the next few decades. Because he’s shown that he’s incapable of leading the broken behemoth that is Facebook.”

Meanwhile, Bowey in Sydney has expressed mixed feelings about her decision. “Giving up Facebook is going to be like giving up chocolate, coffee, wine and cigarettes all on the same day – tough,” she said in a private message. “But it also means I’ll spend more time reading and maybe painting, instead of hours hooked to scrolling through my social media feeds.”

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