Up-scaling Debt for Climate and Nature

22nd May 2023, 5:38 pm

Up-scaling Debt for Climate and Nature

One resounding message from COP27 in Sharm el-Sheikh is that our global community must urgently move from “talking the talk” to “walking the walk” regarding climate finance.

Globally, we are facing a triple crise of rising debt, climate change and rapid biodiversity loss. Debt for climate or nature swaps are a response to this in which a portion of a country’s external debt is relieved in exchange for domestic investments for the mitigation, adaptation, or resilience to climate change or conservation of biodiversity. They are an exchange of an existing debt contract for a new debt contract, a transaction that involves ‘writing down’ or ‘discounting on’ the value of the original debt contract.

Upscaling debt for nature and climate swaps will decrease transaction costs and increase fiscal space but will require building local ownership and addressing poverty, comprehensive involvement from various types of creditors, financing channelled through government budgets, and key performance indicators that centre on the priorities of national stakeholders.

The climate and nature funds can be tracked through a process known as climate and biodiversity expenditure tracking. This will ensure that the funds are integrated into the budget whilst also ensuring transparency for creditors and investors. Many countries have started to put in place climate budget tracking systems, and the World Bank and UNDP have both issued guidance to countries on past experiences and best practices.

An important characteristic of debt for nature and climate swaps is that the entirety of the value gained from the swap does not need to be used on conservation and climate action, so long as the KPIs of the deal are met. This means that debt swaps can mobilise finance, not only for environmental issues but, also to address poverty.

 

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Up-scaling Debt for Climate and Nature

One resounding message from COP27 in Sharm el-Sheikh is that our global community must urgently move from “talking the talk” to “walking the walk” regarding climate finance. Globally, we are facing a triple crise of rising debt, climate change and rapid biodiversity loss. Debt for climate or nature swaps are a response to this in which a portion of a country’s external debt is relieved in exchange for domestic investments for the mitigation, adaptation, or resilience to climate cha

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Climate Finance: Innovative Financial Structure in Africa

In Africa, the amount of climate finance is dramatically falling short compared to the needs of the continent to implement Nationally Determined Contribution (NDCs). The estimation reflects that USD 250 billion is required to be mobilized annually from 2020-2030, and this shall be provided by international public and private investors. While the exact annual climate finance mobilized reported in 2020 didn’t exceed USD 29.5 billion. Accordingly, a significantly higher level of investment

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Designing Sustainable Finance Taxonomies

Sustainable finance taxonomies can only be interoperable if their common design features are comparable. Alignment is a process that can be broken down to common features – and start on a small scale. The features of all taxonomies do not have to be identical. The agreement on overarching principles – e.g., taxonomies should be science based, dynamic and technology neutral – are the basis for all other elements to be interoperable. Interoperability is then achieved by agreeing on the sp

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Closing the Climate Action Gaps

Closing the gap on climate action starts with robust actions that policymakers and business leaders should take to help achieving a climate-resilient economy. However, Market volatility and geopolitical uncertainty threaten business leaders to prioritize climate commitments. Three main gaps shall be always on the table to be closed: Closing the ‘ambition gap’ which requires more ambitious targets on the national level. This can be achieved by strengthening the Nationally Determin