Sovereign Advisory Viewpoints – Debt for Climate Swaps
CrossBoundary's latest Sovereign Advisory Viewpoints report is a brief explainer on the topic of Debt for Climate Swaps and should be useful to both experienced market participants and the casually curious.
Climate change, industrialization, and rapid human population growth have all had negative effects on the planet – effects that reach beyond borders and pose an existential threat to our species.
At the same time, Governments – particularly in emerging markets – have had to cope with worsening economic outlooks and increased fiscal stress.
The Debt for Climate Swap – while still considered in its infancy, is a tool that can provide partial relief to fiscally constrained debtor nations in exchange for commitments towards climate and nature-based initiatives.
“The current inflation and interest rate picture has once more brought to the fore the question of debt sustainability. Debt swaps are a valuable tool in the arsenal of options that some governments have to both reduce their fiscal burden and work towards their NDCs,” says Stephen Akpakwu, CrossBoundary’s Head of Sovereign Advisory.
The Debt for Climate Swaps structure is still considered in its infancy but provides partial relief to a fiscally constrained debtor in exchange for a commitment to climate and nature-based initiatives.