An Inclusive G20 Strategy To Scale ‘debt-for-nature/climate Swaps’ For Effective Climate And Biodiversity Action In Developing

The number of highly indebted countries has increased from 22 in 2011 to 59 in 2022. Trapped in a vicious cycle of unsustainable debt, high interest rates, frequent natural disasters, poverty and inadequate capacity to meet climate and nature commitments, these economies struggle to secure affordable borrowing. Without a well-conceived global debt management plan, these vulnerable countries are likely to continue lagging in sustainable development and climate and nature action. Shrinking fiscal space limits their ability to invest injust, resilient and sustainable low-carbon development, undermining the stability and health of the global economy. Innovative financing instruments like debt-for- nature/climate swaps that align debt sustainability, mobilizing private capital and freeing fiscal space, can expedite national priority-linked climate and nature action as well as sustainable development. These instruments can be a key part of the solution to address debt instability and support effective implementation of Nationally Determined Contributions (NDCs) and National Biodiversity Strategies and Action Plans (NBSAPs). Taking forward G20 India’s High-Level Principles on Lifestyles for Sustainable Development, G20 Brazil’s Taskforce for the Global Mobilization against Climate Change, and the Bioeconomy Initiative, G20 should mainstream debt-for-nature/climate swaps. Inclusion of debt-for-nature/climate swaps into a comprehensive, transparent, and inclusive G20-rescue strategy can increase the amount of credit enhancement available, reduce transaction costs, bring down perceived risk and ensure the scaling of the novel financing mechanism.