A financially significant deal announced by the Government of Ecuador and Credit Suisse (prior to its merger with UBS) in May 2023, has raised the prospect of debt-stressed countries writing down distressed debt on favourable terms in return for a commitment to allocate part of the “savings” for conservation or climate projects. This “debt-for-nature” swap is one in a recent series which, unlike in the past, has been structured and arranged by private players, with “blue or green” bond issues that raise the money to finance the buyback of expensive debt at heavily discounted prices. The combination of debt reduction, improved debt terms and locked-in conservation spending is presented as a “win-win” outcome for all concerned. But as critics have been quick to point out, there is much to be wary of in these complex transactions.
