More Than $100 Billion in Debt-for-Nature Swaps Could Help Fight Climate Crisis, Report Says

A nationwide reserve in The Gambia. The nation is extraordinarily weak to sea stage rise and may spend money on wetland preservation and flood prevention, a brand new report says. mariusz_prusaczyk / iStock / Getty Photographs Plus

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In keeping with a brand new evaluation by the Worldwide Institute for Surroundings and Growth (IIED), greater than $100 billion of creating international locations’ debt may very well be made out there to spend on nature restoration, defending ecosystems like rainforests and coral reefs and local weather change adaptation.

The analysis is a part of IIED’s “hidden handbrakes” marketing campaign, designed to disclose and clarify unseen obstacles to local weather motion.

“Lots of the international locations most threatened by rising temperatures have enormous debt burdens, and are endlessly paying curiosity to wealthier nations which have contributed way more to the local weather disaster,” mentioned Laura Kelly, IIED’s director of analysis group Shaping Sustainable Markets, in a press launch from IIED.

Kelly defined that big quantities of cash are going to fund huge polluters in a approach that’s basically unfair.

“Cash that might assist restore broken ecosystems and defend weak communities from floods or drought is as an alternative flowing to banks and polluters within the wealthy world,” Kelly mentioned. “The IMF and World Financial institution ought to recognise that the present approach of lending simply doesn’t work for folks or the planet. Our damaged monetary system should transfer on from colonialist, Twentieth-century considering if it’s going to serve everybody pretty.”

IIED, a nonprofit primarily based in the UK, seemed on the probability of debt-for-nature exchanges in among the 49 creating international locations most weak to defaulting on exterior money owed, in response to out there knowledge.

Estimates from the World Financial institution and Worldwide Financial Fund (IMF) have been used as the premise for the evaluation, reported Reuters. The figures confirmed that the international locations owed a complete of $431 billion to the IMF, wealthier nations and hedge and pension funds.

Nations that might profit from the debt-for-nature exchanges included Sri Lanka, Pakistan and The Gambia, which Kelly mentioned was at “enormous threat” of rising sea ranges and wanted to spend money on wetland preservation and flood prevention.

When an settlement is reached between a nation and its collectors, a part of the debt owed might be forgiven in alternate for reaching “particular, measurable and traceable” ends in nature or local weather tasks, IIED mentioned.

IIED calculated that roughly $103.4 billion may very well be made out there for debt-for-nature swaps. All these exchanges have already been utilized in Gabon, Ecuador, Belize and Cabo Verde.

“The debt, biodiversity and local weather crises are carefully linked on the planet’s poorest international locations, which additionally are typically probably the most weak to local weather disasters and to have emitted comparatively little greenhouse gasoline,” IIED mentioned. “Most so-called local weather finance is supplied as loans, slightly than grants, which suggests low-income nations are pushed additional into debt whilst they attempt to battle local weather change – a hidden brake on progress. Analysis has discovered poorer international locations spend way more servicing their money owed than they obtain in funds to combat local weather change.”

IIED believes extra of the exchanges must be used to alleviate debt burdens of creating international locations, together with different instruments. It added that, for some international locations, outright debt cancellation could also be the only option.

“They need to be thought-about as a part of layered options on a per-country foundation, alongside agreements that pause debt repayments when disasters strike, or ‘parametric’ insurance coverage that may cowl funds whereas restoration takes place,” the press launch mentioned.

Of the nations checked out within the report, 29 are members of the Least Developed Nations Group, that are represented in United Nations local weather negotiations as a bloc. The report concluded that the debt-for-nature swaps might make as a lot as $33.7 billion out there for these nations — way more than the $6.1 billion given to them in 2021 for local weather finance.

In keeping with figures from the Organisation for Financial Co-operation and Growth, the 49 international locations within the IIED evaluation acquired a complete of $13.8 billion in 2021 for local weather finance, which IIED identified was “considerably much less” than what was wanted.

“The amount of cash that may very well be freed up via swaps additionally vastly outweighs the roughly $700 million pledged to the COP28 ‘loss and injury’ fund thus far,” IIED mentioned.

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