CSF has released a new paper under its Natural Capital Forum to contribute to the ongoing debate and deliberations in Sri Lanka on the potential for sovereign finance instruments that are linked to nature, as one tool in achieving debt sustainability alongside sustainable financing for stronger environmental outcomes.
There is increasing global pressure for economies to extend their investments in climate action due to the added and ever-increasing environmental challenges. Various sovereign financing instruments linked to nature, like Debt for nature swaps (DFNS), provides developing economies under severe macroeconomic and public financial strain the opportunity to increase climate action and environmental outcomes, while taking new steps to tackle sovereign debt issues. There has been rising interest in debt for nature swaps in the recent years, especially in the post-pandemic era with increase in instances of sovereign debt crises in developing countries and emerging markets. With the help of various multilateral institutions, there has been an increase in traction and reports of debt for nature swap negotiations in process and of such deals that have already taken place.