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New release: Recapitalising Sovereign Debt

Wed Sep 09 2020 17:00:00 GMT+0000 (Coordinated Universal Time)

This publication sets out an approach to link the cost of sovereign debt with success in protecting or enhancing a country’s valued, productive natural capital.

COVID-19 and the subsequent economic downturn has put many developing and emerging markets on a pathway to a sovereign debt crisis, which requires an urgent global economic response. 2020 was designated as a critical policy year for the future of biodiversity and climate, an imperative given the collective failure to halt biodiversity loss and inability to achieve most of our global targets.

Finance for Biodiversity (F4B) believes that there is now a compelling opportunity, and an urgent need, to deploy a sovereign debt instrument that links the cost of sovereign debt with success in protecting or enhancing a country’s valued, productive natural capital.

“Nature Performance Bonds” (NPBs) would redefine new issuance and restructuring of existing sovereign debt around measurable economic, nature and climate outcomes by offering the issuer reductions payments in return for the achievement of nature-based outcomes, such as restoring wetlands, protecting forests, and reducing threats to wildlife and plant species.

NPBs would build on the recent evolution of state-contingent debt instruments and green finance products by ensuring that they are not only scalable but standardised, evolving beyond the project-specific nature of much green finance to date, and making NPBs attractive to the private sector.

The ultimate outcome would be reduced debt repayments, improved nature and climate outcomes, lowered country risk and improved access to capital, increasing a country’s attractiveness as a long-term investment destination.

F4B’s analysis is set out in a policy briefing and technical paper and aims to build support for and feedback on its proposition, with active engagement from creditors, debtors and other partners in order to meet these pressing global challenges.

For more information about F4B’s continuing work in this area, contact Ashley Gorst via ashley.gorst@vivideconomics.com

Download the Policy Briefing >

Download the Technical Paper >



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