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.
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- The International Capital Market Association (ICMA) and the MDBs have made commitments to include climate resilient debt clauses in future lending. What a clause means for a regional, national, or sub-national bank is less known, given that climate events will impact the majority of their portfolio.
- Several regional MDBs have also begun looking into how CRDCs would impact their portfolio, given the lack of regional diversification.
Relevant Actors & Audiences
Private FIs
Lazard, Clifford Chance
Public FIs
UK Export Finance, FiCS
Multilateral Development Banks
World Bank , African Development Bank, EBRD
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
Governments
Ministries of Finance
Leading Countries and Alliances
Barbados, Grenada, UK, Bangladesh, Kenya, France, US, Spain, V20, G20, IFA WG
Supportive Stakeholders
ICMA
Milestones
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Resources
The below resources all pertain to the topic of Climate-Resilient Debt Clauses, and Pre-Emptive Reprofiling.
ICMA Guidance Note and Term Sheet on Climate Resilient Debt Clauses
Fiscal Space, Climate-Resilient Debt Clauses, and Pre-Emptive Reprofiling
International Capital Market Association
Restructuring Sovereign Domestic Debt and the International Financial Architecture
Fiscal Space, Climate-Resilient Debt Clauses, and Pre-Emptive Reprofiling
Clifford Chance
A bridge to climate action
Fiscal Space, Climate-Resilient Debt Clauses, and Pre-Emptive Reprofiling
Finance for Development Lab