LONDON, July 25 (Reuters) - The launch of a new

"debt-for-climate" swap in Barbados appeared imminent on

Thursday after the European Investment Bank (EIB) and

Inter-American Development Bank (IDB) finalised a vital $300

million guarantee for the plan.

The deal will enable the Caribbean island nation to issue

the equivalent of $295 million of sustainability-linked debt,

with the EIB and IDB each providing $150 million guarantees.

It was not immediately clear which debt Barbados will swap

in the upcoming deal. Savings will go towards sewage treatment

plant upgrades that should boost water supplies and reduce the

amount of pollution going into the Caribbean.

Barbados Prime Minister Mia Mottley said in a statement it

marked a "historic moment" for the island and provided "a

powerful, scalable model" for other countries vulnerable to

climate change.

Debt-for-climate swaps are an offshoot of debt-for-nature

swaps which generate savings via cheaper debt for specific

conservation or climate-related purposes.

They have grown in popularity in recent years, with

Ecuador's record $1.6 billion swap last May sparking widespread

interest in such arrangements.

It is not the first time Barbados has done something like

this. In September 2022 it swapped $150 million of international

bonds generating $50 million for marine conservation, on an

island where pristine waters and beaches are vital for tourism.

Reuters first reported the latest swap last year, and that

this deal would be the first globally that the European Union's

powerful EIB lending arm would be involved in.

The EIB guarantee is part of the EU's Global Gateway

project, a bid to woo Global South countries that have long

looked to China's Belt & Road Initiative to fund their

infrastructure needs.

EIB President Nadia Calvino said she was "really proud" of

the bank's involvement in the Barbados plan, while IDB head Ilan

Goldfajn said it also showed how Mottley's Barbados has been

pushing the boundaries of these kinds of deals in recent years.