Climate-Resilient Debt Clauses, and Pre-Emptive Reprofiling

Climate-Resilient Debt Clauses (CRDCs) are ex-ante agreements to postpone debt repayments in the instance of climate disasters, creating fiscal space for emergency response and resilient reconstruction.

2030 Goals

Standardize and encourage the use of debt clauses that create a repayment pause in the wake of climate disasters.
All MDBs and bilateral creditors include no-cost natural disaster and pandemic clauses in all future debt instruments, as well as any future restructured debt.

Status
Moderate progress

The International Capital Market Association (ICMA) and the MDBs have made commitments to include climate resilient debt clauses in future lending.
Several regional MDBs have also begun looking into how CRDCs would impact their portfolio, given the lack of regional diversification. Credit rating agencies, including Fitch, suggested that the credit ratings for MDBs would likely not be impacted by the inclusion of CRDCs in their loans.
While CRDCs have widespread support, certain challenges to implementation persist, including identifying appropriate triggers, especially for events other than hurricanes, where data is limited, and efforts to establish standards are still underway.
The World Bank CRDCs—a key component of its broader crisis response toolkit—now extend to cover natural disasters such as floods and droughts, as well as health emergencies like pandemics. Additionally, CRDCs will be included in all World Bank Group (WBG) loans to Small Island Developing States (SIDS).
In November 2024, Japan launched a CRDC pilot program for its sovereign lending to Pacific Island Countries. Most recently at FfD4, a group of creditor nations and multilateral lenders launched the Debt Suspension Clause Alliance to push for more widespread inclusion of CRDCs in sovereign lending, from both public and private creditors.

Leading Actors

Private FIs

Lazard, Clifford Chance, Deutsche Bank

Public FIs

UK Export Finance, FiCS, Caribbean Development Bank

Multilateral Development Banks

World Bank, African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB), Asian Development Bank (ADB), European Investment Bank (EIB)

Regional MDB work has been led by the Caribbean Development Bank, with support from Lazard, although this work is not yet public.

International Organizations

International Monetary Fund

Leading Countries

Bangladesh, Barbados, Belize, Canada, France, Grenada, Japan, Kenya, Spain, United Kingdom

Alliances

V20, G20 Ministries of Finance, IFA WG, G7

Supportive Stakeholders

ICMA, UK-convened Private Sector Working Group (PSWG), CRDC Technical Working Group, Debt Suspension Clause Alliance

Resources

The below resources all pertain to the topic of Climate-Resilient Debt Clauses, and Pre-Emptive Reprofiling.