New “nature performance bond” to tackle twin sovereign debt and biodiversity crises

A new financial instrument developed by the Finance for Biodiversity Initiative (F4B) could help tackle a growing sovereign debt crisis in developing nations while protecting sensitive ecosystems and biodiversity.

The new instrument – known as a “nature performance bond” (NPB) – complements traditional debt instruments, which collect interest until a fixed maturation date, with  a performance scheme focused on measurable economic, nature and climate outcomes. Under the terms of an NPB  issuers receive relief on both interest and principal as they achieve agreed nature-based outcomes, such as protecting forests, restoring wetlands, and reducing threats to wildlife. There would be no restriction on the use of proceeds, although a portion could be invested to achieve the committed nature performance outcomes.

NPBs can help to solve the twin crises of swelling sovereign debt and rampant biodiversity loss by creating a bridge between providers of financial capital and biodiversity-rich countries most in need of debt relief. Many of these nations have seen a disproportionate impact from  COVID-19 on their economies.

More information here.

Policy Briefing here.

Technical paper here.

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