Debt-for-Climate Swaps
Debt for climate (or nature) swaps are operations that involve the cancellation, exchange, or buyback of a portion of a country’s debt in return for policy commitments to invest the resultant savings in environmental conservation or climate change mitigation and adaptation projects. These swaps can include both official bilateral and commercial debt.
2030 Goals
- While these swaps are unlikely to scale easily, an agreed-upon set of principles/legal framework should be created as the basis of debt-for-climate swaps, speeding up implementation and lowering barriers to entry for countries and debt situations where its implementation makes sense.
- Test instruments that have previously been used for conservation to support coal phaseout, potentially in conjunction with offsets to support both the swap and the domestic offset market.
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- DFIs are very keen to implement these, but the contracts involved can be complicated, time-consuming, and often require philanthropic involvement, making them more difficult to implement.
- Stakeholders will need to be identified on a case-by-case basis; public creditors may be able to offer partial or full forgiveness in exchange for climate commitments, whereas private creditors will likely need to be bought out using proceeds from new, lower-cost debt that benefits from guarantees or other concessional de-risking instruments.
- Conversations on effective swaps are increasingly including economic and social development as priorities, alongside environmental / conservation KPIs.
Relevant Actors & Audiences
Private FIs
Credit Suisse
Public FIs
US Development Finance Corporation, Agence Française de Développement
Multilateral Development Banks
Inter-American Development Bank, Asian Development Bank, African Development Bank, European Investment Bank, Global Environment Facility, Green Climate Fund
Leading Countries and Alliances
Colombia, China, Ecuador, Seychelles, Belize, Barbados, Gabon
Supportive Stakeholders
The Nature Conservancy, Ocean Finance Corporation, Finance in Common Summit
Milestones
The below events contain milestones related to Debt-for-Climate Swaps.
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Resources
The below resources all pertain to the topic of Debt-for-Climate Swaps.
Debt for Climate Swaps Blueprint
Fiscal Space, Debt-for-Climate Swaps
Climate Policy Initiative
Perspectives: The Debt-for-Nature Lifeline
Fiscal Space, Debt-for-Climate Swaps
The Nature Conservancy