Debt-for-Nature Swaps: The Belize 2021 Deal and the Future of Green Sovereign Finance

Capital Markets Law Journal (forthcoming, January 2024)

24 Pages Posted: 16 May 2023 Last revised: 1 Nov 2023

See all articles by Sebastian Grund

Sebastian Grund

International Monetary Fund (IMF) - Legal Department

Stephanie Fontana

Cleary Gottlieb Steen & Hamilton

Date Written: May 4, 2023

Abstract

• Belize conducted a debt-for-nature swap operation in 2021 that was heralded as a model for facilitating both debt relief and action on climate change. The country was able to commit an estimated US$107 million for conservation projects at the same time it restructured its unsustainable debt.

• The transaction relied on two essential, yet intertwined features: first, the backing of the United States’ Development Finance Corporation (DFC) and, second, Belize’s environmental conservation undertakings with real financial and legal consequences.

• The legal commitments made in the debt-for-nature swap outstripped the typical commitments made by sovereigns in green, social and sustainable bonds and sustainability-linked bonds.

Keywords: Debt-for-Nature Swap; Sovereign Debt Restructuring; Belize; Sovereign Green Finance; Green Bonds; Sustainability-Linked Bonds

JEL Classification: F34

Suggested Citation

Grund, Sebastian and Fontana, Stephanie, Debt-for-Nature Swaps: The Belize 2021 Deal and the Future of Green Sovereign Finance (May 4, 2023). Capital Markets Law Journal (forthcoming, January 2024), Available at SSRN: https://ssrn.com/abstract=4437615 or http://dx.doi.org/10.2139/ssrn.4437615

Sebastian Grund (Contact Author)

International Monetary Fund (IMF) - Legal Department ( email )

700 19th St NW
Washington, DC 20431
United States

Stephanie Fontana

Cleary Gottlieb Steen & Hamilton ( email )

One Liberty Plaza
New York, NY 10006
United States

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