Is debt-for-nature swap the way out for conservation? | Conservation

AAfter decades of surviving in the wilderness, only those in the know know that “debt-for-nature swaps” are becoming one of the hottest topics in conservation financing. Last month, Ecuador reached The largest transaction of its kind: Refinancing $1.6bn (£1.3bn) of commercial debt at a discount in exchange for a steady stream of revenue for conservation around the Galapagos Islands.

Other countries rich in natural resources are struggling to pay their debts and have taken notice, with rumors swirling that Gabon and Sri Lanka. Debt-for-nature markets Expected to exceed $800 billionAccording to Bloomberg, as demand for green investment increases, competition among banks is becoming more intense.

Debt-for-nature swaps mean reducing the debt burden of developing countries in exchange for financial guarantees for protecting nature. Its roots lie in the debt crisis of the 1980s and the idea of ​​the late Thomas Lovejoy, the “father of biodiversity” – that it would be a win-win for financiers, countries and environmentalists.

This week, the topic will be included in New Global Financing Pact Summit In Paris, it was led by French President Emmanuel Macron and Barbadian Prime Minister Mia Mottley. Barbados Signed $150 million debt-for-nature swap In 2021.

“The world is facing a biodiversity, climate and debt crisis, and this crisis is particularly acute in developing countries,” said Slav Gatchev, managing director of sustainable debt at The Nature Conservancy (TNC), which often brokers deals.

“There’s an overlap between biodiversity hotspots and high levels of debt in the tropics,” he said, “and often countries contact us because they see these deals can be done at scale.

“You can take strong action in terms of financial distress points to address liquidity constraints before they become solvency issues, and because we are a conservation organization, we can be an honest broker in implementing these programs on the ground.”

But critics warn of “greenwashing” in the deals and criticize the agreements in which banks often collect large fees while spending relatively little on protection.

Barclays questioned the green credentials of debt-for-nature swaps — often sold as ESG (environmental, social and governance) investments — in a January note to investors because Just a small part The banks involved strongly objected to this statement.

In addition, Daniel Ortega Pacheco, Ecuador’s former environment minister, is concerned about the potential impact of the agreements on sovereignty. Last month’s Galapagos agreement requires Ecuador to provide about $18 million a year to protect the waters around the islands, mainly for the construction of new Marine Reserve Brotherhood There are whale sharks, blue whales and leatherback turtles.

“If you look at the nature-for-debt deal, Moody’s actually considers it a default. (The deal) could cause long-term damage to developing countries, and there are restrictions on how the money can be used. Even after World War II, Germany was free to decide where to invest,” he said.

Katie Cadward, a researcher at University College London, echoed these concerns, saying the agreements do not go far enough. “The pandemic has put debt restructuring back on the table. In terms of sovereign debt burdens, these restrictions are preventing countries from investing in protection and adapting to the growing risks of climate change.”

“I think we need to look further into debt relief. I have serious doubts about how well debt-for-nature swaps are being implemented in practice,” she said.

Gatchev said those concerns were unfounded, pointing to the TNC deal as an example. Belize and Barbadoshe said, showing that all countries benefit. The agreements address each country’s specific requirements and try to anticipate potential problems. The Belize deal includes natural disaster insurance, designed to avoid a situation where the country is forced to pay for protection rather than reconstruction after a hurricane.

The rationale for signing the agreement bears striking similarities to the following arguments: Lovejoy in 1984when the idea was first proposed.

“As debtor nations cut government spending, programs to protect natural resources will be the first to be affected,” said Lovejoy. Written in the New York Times “Costa Rica’s first-rate national park system could not be staffed or expanded without private donations from abroad.

“Brazil’s environmental protection agency is doing little more than paying its employees’ salaries; when fires broke out recently in the national park system, there were barely any guards to put them out,” he said.

In Paris, Mia Motley’s Bridgetown Agenda will attempt to reform global finance to address the modern environmental crisis. For some, debt-for-nature swaps are part of the answer.

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