An analysis of debt-for-nature swaps and their potential

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We live in the midst of a 6th Mass Extinction, also known as the Anthropocene Extinction, which is disrupting our natural environment, society, and global economy. From 1997–2011, the world lost an estimated $4 trillion to $20 trillion per year in ecosystem services due to land-cover change and an estimated $6 trillion to $11 trillion per year from land degradation.[1]

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The Anthropocene Extinction

The Anthropocene Extinction threatens businesses ranging from tourism companies that depend on ecosystems such as coral reefs to pharmaceuticals companies that will lose potentially untapped new sources of medicine.

It is imperative now to protect the world’s remaining biodiversity hotspots, such as tropical rainforests and coral reefs.

Many of these biodiversity hotspots are in developing countries, where rapid industrialization, population growth, agricultural frontier expansion, and resource-based economies have led to the loss and degradation of forests, marine ecosystems, and more. Conventional thinking leads us to believe that economic interests supersede and conflict with environmental protection. For example, a developing country might prioritize paying off its foreign debt or fund its national budgets, by clear-cutting its forests, selling off the lumber, and growing cash crops for export in their place. The problem described here has led to the creation of an innovative, market-based solution: the debt-for-nature swap (DNS), also known as debt-for-nature conversions.

The Introduction Of Debt-For-Nature Swaps

The DNS was first conceived in the mid-1980s by Thomas Lovejoy, the former Executive Vice President of the World Wildlife Fund (WWF). With a DNS, a portion of a developing country’s debt to a creditor country is forgiven. In exchange, the government of the indebted country must set aside a trust fund for conservation activities within the country.[2]

In 1987, the environmental NGO Conservation International executed the first debt-for-nature swap with Bolivia. Conservation International bought $650,000 of Bolivian sovereign debt for $100,000.[3] Conservation International required the government of Bolivia to bestow maximum legal protection to the Beni Biosphere Reserve and its adjacent areas, in addition to providing $250,000 for management activities within the reserve.[4]

Since then, DNS have been replicated in various forms by national governments and NGOs alike.

In April 2019, The Nature Conservancy announced the creation of a new program called Blue Bonds for Conservation. The program is a DNS mechanism designed to protect marine ecosystems.[5]

In 2018, The Nature Conservancy assisted the Republic of the Seychelles, an island nation located in the Indian Ocean, in issuing a $15 million blue bond that protected 30% of the country's national waters and support its blue economy (e.g. fisheries, tourism).[6] The bond was partially guaranteed by a World Bank guarantee of $5 million and is further supported by a $5 million commitment from the Global Environment Facility.[7] Now, The Nature Conservancy aims to expand the blue bonds program to twenty other coastal and island countries.[8]

Debt-for-nature swaps have had success.

Tropical Forest Conservation Initiatives

A 2010 U.S. Congressional Research Service report found that since 1987, debt-for-nature swaps have generated $1 billion toward tropical forest conservation initiatives.[9]

This $1 billion is an investment in the ecosystem services that companies depend upon. Ecosystem services are external benefits that are not traditionally included in economic calculations.

For instance, coral reefs support fisheries. Coral reefs also provide coastal protection from storms and are a source of recreation and tourism. Although it is virtually impossible to come up with a precise number, one estimate places the annual global net benefit of coral reefs at $30 billion.[10] The loss of coral reefs, then, would represent an annual loss, an external cost, of the same amount. Therefore, any money generated by DNS for conservation should be thought of as an investment in our survival and the green/blue economy.

However, it is also important to recognize the limits of DNS. One concern is that DNS may not always address land rights appropriately. While the first DNS in Bolivia protected large tracts of tropical forest, it also led Tsimane Indians allegedly to be unable to secure formal tenure to their lands.[11]

DNS Role In Conservation Finance

Yet, interest in DNS is increasing as they reinvent themselves to fit current needs. The TNC’s blue bond is an example that addressed a gap in the DNS realm and generated renewed interest in marine conservation and market-based solutions to mitigate collapsing fisheries risk.

Debt-for-nature swaps present a mechanism for financial institutions to expand their role in conservation finance. They are one of many tools in the conservation toolkit, and they should be executed in conjunction with greater efforts on the part of the developed world to decrease carbon emissions and mitigate ongoing biodiversity collapse from the 6th Mass Extinction.

To learn more about other conservation financing instruments in additional to DNS, such as impact investing and ecotourism, see the book entitled, “Conservation of Tropical Rainforests: A Review of Financial and Strategic Solutions.”[12]  The author, Brian McFarland, also has a forthcoming book on the conservation of tropical coral reefs which looks at 30 case studies, spanning 23 countries and 6 continents, including: DNS in the Philippines and Jamaica; the blue bond issuance in the Seychelles; and government funding for Australia’s Great Barrier Reef.


[1] OECD (2019), Biodiversity: Finance and the Economic and Business Case for Action, report prepared for the G7 Environment Ministers’ Meeting, 5-6 May 2019.

[2] Kilbane Gockel, C., and L. C. Gray. 2011. “Debt-for-nature swaps in action: two case studies in Peru.” Ecology and Society. 16(3): 13.

[3] Resor, J.P. “Debt-for-nature swaps: a decade of experience and new directions for the future.” FAO.

[4] Resor, J.P. “Debt-for-nature swaps: a decade of experience and new directions for the future.” FAO.

[5] The Nature Conservancy. “Blue Bonds: An Audacious Plan to Save the World’s Oceans.” April 16, 2019.

[6] Thande, George. “Seychelles preserves swathes of marine territory in debt-for-nature deal.” Reuters. February 22, 2018.

[7] World Bank Treasury. “Seychelles: Introducing the World’s First Sovereign Blue Bond.” May 21, 2019.

[8] Smith, Julian. “Wild Ideas.” TNC. September 1, 2019.

[9] Scientific American. “Biospheric Bartering: Debtor Nations Pay the Bills and Conserve Their Resources.” August 5, 2011.

[10] Scripps Institution of Oceanography. “Value of Corals.”

[11] Hassoun, Nicole. "The Problem of Debt for Nature Swaps from a Human Rights Perspective." Journal of Applied Philosophy 29, no. 4 (2012): 359-77. Accessed April 7, 2020.

[12] Amazon Author Page. “Books by Brian Joseph McFarland.”

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About the Author

Brian McFarland And Natalie Wu
Brian McFarland is the Director of Carbonfund.org’s Project Portfolio where he identifies, conducts due diligence, and structures the financial support for climate change mitigation projects. Brian is also the Director of Project Origination for Carbonfund.org’s wholly-owned subsidiary CarbonCo, where he identifies, designs, and advises on the implementation of several REDD+ projects throughout Brazil. In addition, Brian leads some of CarbonCo’s consulting engagements. Natalie Wu is a student at Johns Hopkins.

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