{"id":36713,"date":"2023-01-28T22:11:50","date_gmt":"2023-01-29T03:11:50","guid":{"rendered":"https:\/\/test.greenmoney.com\/2025\/?p=36713"},"modified":"2023-01-30T23:12:35","modified_gmt":"2023-01-31T04:12:35","slug":"wall-streets-new-esg-money-maker-promises-nature-conservation-with-a-catch","status":"publish","type":"post","link":"https:\/\/test.greenmoney.com\/2025\/wall-streets-new-esg-money-maker-promises-nature-conservation-with-a-catch\/","title":{"rendered":"Wall Street’s New ESG Money-Maker Promises Nature Conservation\u2014With a Catch"},"content":{"rendered":"
>> Back to February 2023 Issue<\/a><\/div>\n

Big global banks are eyeing some of the world\u2019s most fragile countries for a new experiment in financial engineering: debt relief in exchange for environmental protections.<\/h3>\n

Called \u201cdebt-for-nature swaps,\u201d<\/strong> they present a tempting solution for the rising number of nations in distress, particularly those with ecosystems to protect. A country gets to avoid default and lower its debt burden, as long as it\u2019s willing to earmark some of the savings to salvage a coral reef, preserve a forest or build a wind farm, for example. Global investors get better returns and enhanced green credentials. Wall Street takes a cut.<\/p>\n

As much as $2 trillion of developing country debt may be eligible for this kind of restructuring, according to a rough estimate by the Nature Conservancy, a US nonprofit that\u2019s taking a lead role in these deals. Belize inked a $364 million nature swap in 2021; Gabon signaled plans for a $700 million restructuring in October; Ecuador is said to be working on a $800 million transaction, and Sri Lanka is considering a $1 billion deal.<\/p>\n

Buoyed by the finance industry\u2019s newfound enthusiasm for biodiversity, backers of this latest flavor of swap are finding eager partners in investment banks and institutional investors. These are \u201cturbocharged swaps,\u201d said Daniel Munevar, economic affairs officer at the United Nations Conference on Trade and Development and former adviser to finance ministries in Greece and Colombia. \u201cThe limit in these operations isn\u2019t the money to fund the swaps, it\u2019s how much debt can be swapped.\u201d<\/em><\/p>\n

Behind the feel-good headlines, it\u2019s unclear whether these kinds of swaps will deliver the promised benefits. The terms can be murky. Transaction costs are high. Experts question whether the complex and costly deals will achieve long-term financial stability. In December, as negotiators gathered at the United Nations\u2019 COP15 biodiversity conference in Montreal, Greenpeace and dozens of other non-profits called for debt-nature swaps to be rejected.<\/p>\n

\u201cDebt-for-nature swaps have been popular for the wrong reasons. And the main wrong reason is that they generate the impression that you can kill two birds with one stone, that you can address a debt problem and you can improve nature conservation,\u201d said Jeromin Zettelmeyer, director of Belgian think tank Bruegel and a former sovereign debt expert at the International Monetary Fund.<\/h3>\n
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The first debt-for-nature swaps debuted in the 1980s, small deals limited by what governments and nonprofits could bring to the table. But with emerging market debt rising and the costs of climate change bearing down disproportionately on some of the most-indebted countries, there\u2019s new interest in a supersized version. \u201cThere\u2019s tons of demand,\u201d <\/em>said Ramzi Issa, managing director for credit structuring at Credit Suisse Group AG, who helped arrange Belize\u2019s $364 million deal. \u201cInvestors haven\u2019t really seen this before.\u201d<\/em><\/p>\n

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