# Green debt swaps firmly on the agenda, says new Planet Tracker report Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-07-30 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Green Debt Swaps: Why African Countries Should Be Priority Meta Description: Discover why the World Bank and IMF are prioritising African countries for green debt swaps, helping boost climate spending and economic recovery. URL: https://financedigest.com/green-debt-swaps-firmly-on-the-agenda-says-new-planet-tracker-reporthtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/bank-conceptg1iourw-sbi-300188025-1736838100658-compressed.jpg) _With the World Bank and the IMF planning green debt swaps, financial think tank reveals why African countries should be the priority debtors_ **LONDON –** The World Bank and the International Monetary Fund (IMF) are promoting green debt swaps and are working to have a plan in place by November, ahead of COP26. The two Bretton Woods Institutions are developing an ‘organising framework’ that will connect debt relief to a country’s plan for investing in environmental improvement. A [green debt](https://www.financedigest.com/green-bonds-are-set-to-drive-corporate-esg-debt-out-of-slump-in-2023-barclays.html "Green bonds are set to drive corporate ESG debt out of slump in 2023 -Barclays") swap involves an indebted developing country undertaking – in exchange for cancellation of a portion of its foreign debt – to establish local currency funds to be used to finance an environmental, climate or nature programme. Green debt swaps have three main benefits: they enhance climate/nature/green spending, boost economic recovery, and reduce external [sovereign debt](https://www.financedigest.com/analysis-no-china-no-deal-bid-to-break-sovereign-debt-logjams-gets-weary-thumbs-up.html "Analysis-No China, no deal: Bid to break sovereign debt logjams gets weary thumbs up"). The joint requirements for green [debt swaps indicated by the World Bank](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad") and the IMF are high levels of indebtedness and a “climate” or “green” agenda. In a new report published today, Planet Tracker examines this broad climate and environmental definition against two main measures: the Notre Dame [Global Adaptation Index](https://www.financedigest.com/2017-global-payroll-complexity-index-reveals.html "2017 Global Payroll Complexity Index Reveals ") (ND GAIN) and a country’s percentage of protected areas as a proportion of national territory. The ND GAIN aims to summarise a [country’s vulnerability to climate](https://www.financedigest.com/g7-launches-climate-shield-fund-some-countries-wary.html "G7 launches climate ‘Shield’ fund, some countries wary") change and other global challenges, such as over-crowding, food insecurity and inadequate infrastructure, in combination with its readiness to improve resilience. It aims to help governments, [businesses and communities better prioritise investments](https://www.financedigest.com/analysis-uk-crisis-forces-off-kilter-businesses-to-halt-investment.html "Analysis-UK crisis forces ‘off kilter’ businesses to halt investment") for a more efficient response to these global challenges. Highly [Indebted Poor Countries](https://www.financedigest.com/ecb-hikes-rates-throws-lifeline-to-indebted-countries.html "ECB hikes rates, throws lifeline to indebted countries") (HIPCs) have a lower (worse) ND GAIN score of 36.5, compared to the rest of the world (ROW) at 52.6. Norway has the highest (best) score in the world at 76.7. Planet Tracker aggregated the ND [GAIN scores with debt](https://www.financedigest.com/wall-street-gains-dollar-climbs-on-solid-data-debt-ceiling-progress.html "Wall Street gains, dollar climbs on solid data, debt ceiling progress") levels, giving them equal weight, and ranked the top 10 HIPCs. The resulting list contains only countries on the African continent. The report’s author, John Willis, Director of Research at Planet Tracker, said: “When we ranked [countries by the percentage of protected areas as a proportion of national](https://www.financedigest.com/imf-and-the-national-bank-of-belgium-sign-sdr-350-million-borrowing-agreement-to-support-lending-to-low-income-countries.html "IMF and the National Bank of Belgium Sign SDR 350 million Borrowing Agreement to Support Lending to Low-Income Countries") territory, this produced a very different list.  Oceania and Latin America (including the Caribbean) rank as the highest priority, because they have a large number of small island states with a [low proportion of their territorial waters covered](https://www.financedigest.com/monte-dei-paschis-cash-call-93-covered-so-far-despite-low-shareholder-take-up.html "Monte dei Paschi’s cash call 93% covered so far despite low shareholder take-up") by marine protected areas.” He added: “However, when Planet Tracker aggregated debt level and [protected areas metrics into one combined score](https://www.financedigest.com/the-dos-and-donts-of-protecting-your-credit-score-this-christmas.html "The dos and don’ts of protecting your credit score this Christmas"), the resulting list only contained countries in the African continent. This shows that regardless of the methodology used, and because of its prominence in the HIPC group, the African continent should have high priority when determining which countries are most in [need of green](https://www.financedigest.com/leaders-recognise-the-importance-of-green-transport-at-cop27-but-we-need-data.html "Leaders recognise the importance of green transport at COP27, but we need data") debt swaps.” To make these swaps more widespread, the report recommends that: - The **debtor nations** [need](https://www.financedigest.com/if-the-nation-backs-fintech-we-need-to-address-a-few-things.html "If the nation backs FinTech, we need to address a few things") to determine whether their development plans can align with sustainable financial instruments and, if not, what needs to be adapted. The finance ministries and central banks of these countries should be contacting [International Financial](https://www.financedigest.com/the-hidden-financial-woes-of-international-students-heading-for-the-uk.html "The Hidden Financial Woes of International Students Heading for the UK") Institutions (IFIs) as well as their creditors. Some argue that the debtor nations, especially from emerging and [developing countries](https://www.financedigest.com/britain-launches-trade-system-for-developing-countries.html "Britain launches trade system for developing countries"), need to get into the driving seat. - **Creditor countries** will also need to play their part. They should review their [debt restructuring frameworks to incorporate issues](https://www.financedigest.com/necessary-lessons-in-debt-six-out-of-ten-brits-wouldnt-feel-comfortable-discussing-any-money-issues-with-their-children.html "Necessary lessons in debt? Six out of ten Brits wouldn’t feel comfortable discussing any money issues with their children") such as environmental/green and nature/biodiversity objectives. They can also [invest in the research required to embed sustainability](https://www.financedigest.com/closing-the-sustainable-investment-gap.html "Closing the sustainable investment gap") risks into fiscal and monetary policy rules globally, sharing this through other institutions. - [The **private sector** alsohas](https://www.financedigest.com/dollar-slides-on-contraction-in-private-sector-activity.html "Dollar slides on contraction in private sector activity") an important part to play. Presently, there are well documented inflows into sustainable products, so [investors can play a systemic role in responding](https://www.financedigest.com/how-should-investors-respond-to-donal-trumps-election-victory.html "How should investors respond to Donal Trump’s election victory?") to and moving this agenda. Where investors are unprepared to do it alone, blended [finance options](https://www.financedigest.com/funding-options-bids-for-backing-to-help-small-businesses-take-control-of-their-finances.html "Funding Options bids for backing to help small businesses take control of their finances") may be possible. - The **international [financial institutions](https://www.financedigest.com/the-push-and-pull-of-identity-security-adoption-in-the-financial-services-industry.html "The push and pull of identity security adoption in the financial services industry")** **(IFIs)** continue to push the agenda on this topic. They have already provided leadership in [sustainable finance](https://www.financedigest.com/sustainable-finance-the-wave-of-the-future.html "Sustainable Finance: The Wave of the Future"), funding different types of products such as blue bonds. IFIs are able to work with governments and investors to identify and deploy [innovative instruments](https://www.financedigest.com/the-minimally-invasive-surgical-instruments-market-to-stick-to-the-innovative-invigoration.html "The Minimally Invasive Surgical Instruments Market To Stick To The Innovative Invigoration") or reboot the process. They can also be important providers of technical assistance to countries to align their policies, identifying and eliminating perverse incentives and shifting available [public finance](https://www.financedigest.com/2019-year-must-re-build-public-trust-finance.html "2019 is the year we must re-build public trust in finance") in the direction of the chosen funding mechanisms, all of while can act as an encouragement of private capital flows as well. The full report, _Green Debt Swaps – Firmly On The Agenda_, is available [here](https://urldefense.proofpoint.com/v2/url?u=https-3A__planet-2Dtracker.org_tracker-2Dprogrammes_cross-2Dprogramme-2Dpapers_-23green-2Ddebt-2Dswaps&d=DwMFaQ&c=gOrgfQB8xVH7F0lP7MQhi8CyVXMBvYqNyP3LuSSb8Lw&r=ihAlDs5JBAn54SB40pNiXMd4FO-_ZDw0mMTHM3vip-0&m=cIPTIohfbH6mscuXFF_yQMNNcArKzObM3tpmwZ8JwP4&s=7Gi3CsI6f12Rgl1aMsFfbqSeM3AYx9uVYeCRHxK7wFU&e=). Notes for editors **ABOUT PLANET TRACKER** Planet Tracker is a non-profit financial [think tank](https://www.financedigest.com/new-uk-pm-must-be-radical-to-stop-power-bill-catastrophe-think-tank.html "New UK PM must be radical to stop power bill catastrophe – think tank") aligning capital markets with planetary boundaries. It was created primarily for the investor community to analyse the risk of market failure related to environmental limits which, other than [climate change](https://www.financedigest.com/scientists-in-germany-turn-up-heat-on-seagrass-in-climate-change-fight.html "Scientists in Germany turn up heat on seagrass in climate change fight"), are often not aligned with investor capital. Planet Tracker generates breakthrough analytics to redefine how financial and environmental [data interact with the aim of changing the practices of financial decision makers to help avoid](https://www.financedigest.com/the-race-to-avoid-data-dinosaur-extinction.html "THE RACE TO AVOID DATA DINOSAUR EXTINCTION") both environmental and financial failure. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---