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Debt-for-Nature Swaps: A $100 Billion Opportunity in the Climate Fight

A new report has calculated that debt-for-nature swaps, wherein poorer countries have debt written off in exchange for safeguarding ecosystems like barrier reefs or rainforests, could yield $100 billion for combating climate change.

The estimate, by the UK-based non-profit International Institute for Environment and Development (IIED), is based on the potential for debt swaps in many of the 49 less developed countries deemed most susceptible to debt crises.

Several countries including Belize, Ecuador, Barbados, Gabon, and Cabo Verde have already executed such swaps in recent years. Laura Kelly, director of IIED’s sustainable markets research group, noted that many countries facing debt distress and the threat of global warming are considering these swaps.

According to the IMF and World Bank, the countries in focus collectively owe $431 billion, primarily to wealthier governments, the IMF, and pension and hedge funds.

However, these countries received less than $14 billion in climate finance in 2021, significantly below what’s needed to mitigate climate change or adapt to it.

The IIED report aims to catalyze more debt swaps at the upcoming IMF and World Bank Spring meetings starting later this week.

Kelly highlighted countries such as Pakistan, Sri Lanka, and The Gambia in West Africa as potential beneficiaries, emphasizing The Gambia’s vulnerability to sea-level rise and the urgent need for flood prevention and wetland preservation.

Ghana, currently restructuring its debt like Sri Lanka, is another promising candidate. Protecting its vital rainforests could bolster its cocoa bean exports, crucial for chocolate production.

“Debt swaps create fiscal space for governments and help achieve climate and nature outcomes with global impact,” Kelly said, noting significant interest from many countries.

Source: Reuters

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