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OUR

WORK

GREENING SOVEREIGN DEBT 

PUBLIC FINANCE

Sovereign bond markets need to quickly and radically innovate in order to successfully integrate nature-related risks, and finance the transition to a net zero, nature positive world.

With this call to action, Finance for Biodiversity Initiative (F4B) has rapidly scaled its efforts to embed natural capital into the global sovereign debt markets.

 

A new class of nature and climate KPI-linked sovereign debt instruments aims to generate short-term liquidity through increased fiscal space and at the same time provide long-term structural changes to embed natural capital in sovereign debt markets.

 

These instruments - Nature Performance Bonds (NPBs), while tied to measurable targets for restoring wetlands, protecting forests, and reducing threats to wildlife and plant species, still allow for general use of proceeds. The NPBs can incentivise nature performance by offering a reduction in coupons payments and/or a principal adjustment on delivery of the targeted nature and climate outcomes. 

 

F4B’s call to action is being answered by a growing number of market actors aligned with the view that radical innovation in the sovereign debt market is critical to unlocking a greener future and wellbeing for all. 

 

With partners, F4B will launch a Sustainable Sovereign Debt Facility to support the growth of nature and climate linked sovereign bonds issuance. The Facility aims to catalyse a virtuous circle that increases countries’ resilience and productivity. For more information contact the F4B Sovereign Debt  Project Manager Gregor Pipan at gregor.pipan@f4b-initiative.net.

 

Recent publications in this workstream:

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10/07/22, 23:00

Integrating Nature into Debt Sustainability Analysis

This report highlights the importance of integrating nature-related risks into Debt Sustainability Analysis and proposes a four-step process for how it can be done. It provides compelling quantitative evidence that the inclusion of nature collapse scenarios is necessary to provide a full picture of debt sustainability risks to sovereigns.

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22/05/22, 23:00

Nature Loss and Sovereign Credit Ratings

This report provides the world’s first biodiversity-adjusted sovereign credit ratings. The results show how biodiversity loss translates into market risk for developed and emerging countries – with likely impacts without interventions including downgrades, soaring borrowing cost, and a worsening systemic debt crises. The report highlights actions recommended for credit rating agencies, investors, and governments to help avert such consequences.

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03/03/22, 00:00

Greening Sovereign Debt Performance

This report outlines how performance-linked debt instruments would allow sovereign debt markets to integrate climate and nature-related risks and therefore help finance the transition to a net-zero, nature-positive world.

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28/07/21, 23:00

Nature Performance Bonds: Frequently Asked Questions

F4B has compiled answers to some of the most frequently asked questions about Nature Performance Bonds to help issuers and investors navigate these developments.

Partners
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Working group on 
Debt for Nature
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MAVA
Foundation
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Bankers without
Boundaries