Debt-for-nature Swap - Types

Types

In a commercial debt-for-nature swap or three-party debt-for-nature swap, a non-governmental organization (NGO) acts as the funder/donor and purchases debt titles from commercial banks on the secondary market. Since the late 1980s, organizations such as Conservation International, The Nature Conservancy, and the World Wildlife Fund have participated in international debt-for-nature swaps. The NGO transfers the debt title to the debtor country, and in exchange the country agrees to either enact certain environmental policies or endow a government bond in the name of a conservation organization, with the aim of funding conservation programs.In total, recorded third-party debt-for-nature swaps have generated nearly US$140 million in conservation funding from 1987-2010 (see Table 1).

Bilateral debt-for-nature swaps take place between two governments. In a bilateral swap, a creditor country forgives a portion of the public bilateral debt of a debtor nation in exchange for environmental commitments from that country. An example of a bilateral swap occurred when the U.S. Government, under the Enterprise for the Americas Initiative, forgave a portion of Jamaica's official debt obligations and allowed the payments on the balance to go into national funds that finance environmental conservation. These funds established the Environmental Foundation of Jamaica in 1993. Multilateral debt-for-nature swaps are similar to bilateral swaps but involve international transactions of more than two national governments. Recorded bilateral and multilateral debt-for-nature swaps have generated nearly US$900 million in total conservation funding from 1987-2010 (see Table 1).