DEBT-FOR-CLIMATE SWAPS
LEAVIT is considering the adoption of debt-for-climate swap mechanisms to incentivize the relinquishment of futur oil development and encourage local investments in low-carbon alternatives
DEBT-FOR-CLIMATE SWAPS
Nations most susceptible to climate change are frequently those with limited capacity to invest in enhancing resilience and climate mitigation due to the burden of debt on their budgets.
Within debt-for-climate swaps, a contractual agreement unfolds wherein creditors, in exchange for debt relief, anticipate a government commitment to initiatives such as decarbonizing the economy, investing in climate-resilient infrastructure, or preserving forests and reefs.
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BELIZE BLUE BOND CASE STUDY
The Belize 2021 debt-restructuring involved the government of Belize, TNC, the US Development Finance Corporation (USDFC) and commercial creditors holding a sovereign bond with face value of $553 million (about 30 percent of GDP). A subsidiary of TNC arranged a “blue loan” to the Belize government to finance a bond-for-cash exchange at 55 cents per dollar of face value.
On its part, Belize agreed to use part of the debt relief to pre-fund a $23.4 million endowment supporting marine conservation. It also committed to spending $4.2 million per year on marine conservation and to expand its protected ocean area from about 16 percent to 30 percent by 2026.
