Wall Street's New ESG Money-Maker Promises Nature Conservation — With a Catch
Belize is home to a threatened coral reef and a mountain of sovereign debt. It’s become a test case for a new kind of finance that mixes debt relief and environmental protection.
Called “debt-for-nature swaps,” 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’s 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.
“Debt-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,” said Jeromin Zettelmeyer, director of Belgian think tank Bruegel and a former sovereign debt expert at the International Monetary Fund.