Behind the Scenes of Debt-for-Nature Swaps

Financial Innovation for Good: Part 3

Editor’s Note: Many non-profit organizations are pursuing financial innovation. Their goals include raising additional, low-cost capital (beyond donations) and engaging new partners so that they can do more good work. We enthusiastically support these efforts and are actively discussing such opportunities with various organizations. This series summarizes key lessons. Catch up with Part 1: First Things First and Part 2: Follow the Money

There’s a lot of buzz around debt-for-nature swaps these days, which is great. We are strongly in favor of all new tools that can scale and accelerate environmental progress. And we think it’s smart for NGOs to diversify their funding sources beyond traditional philanthropy.

But, some Finance Ministers mentioned to me recently that there is some overzealousness underway. They say NGOs are sometimes pitching these projects when they don’t really make sense for the target country. I can see why this might happen. NGOs want to accomplish more, so they pursue all promising avenues. But they should be careful — we don’t want to see NGO credibility or this innovative deal structure undermined. 

I was fortunate to engage directly in these matters back when I was leading The Nature Conservancy (“TNC”). I thought now would be a good time to step back and think about the best ways to do more with debt swaps.

Origin Story 

This current round of innovation started with a deal for the Seychelles in 2018. Our team at TNC came up with the great idea of using a debt-for-nature swap (or “debt conversion”) to fund marine conservation.