The financialization of conservation The case of debt swaps for the oceans

This long read aims to scrutinise one particular financial instrument promoted by this conservation finance industry: the debt swap. Over the past few years, the world’s largest conservation organisation, The Nature Conservancy (TNC), has concluded three of these: in the Seychelles, Belize and Barbados.


Longread by

Andre Standing
Ocean coral

Beau Pilgrim/

Conservation finance has become the dominant ideology of most of the world’s biggest environmental NGOs. It is also heavily promoted by the World Bank, the United Nations and the European Union. The basic premise of conservation finance is that saving nature and averting the climate crisis requires enormous funds, but money derived from public and philanthropic grants is woefully insufficient. Proponents argue that the only way to bridge this funding gap is to tap into the trillions of dollars of private capital circulating through global financial markets. To do this, saving nature must be turned into a profit-making endeavour, appealing to what are known as ‘impact investors’.

The rise of conservation finance has transformed not only the way in which conservation is addressed, but by whom. People with backgrounds in finance, banking and business consulting are taking over the management of most of the big conservation organisations. Their governing boards are stacked with investment bankers, hedge fund managers and venture capitalists. Consequently, risky and opaque financial instruments, originating in financial markets, are being repurposed for environmental projects. As elaborated elsewhere by the author, this process represents another dimension of financialisaton; the process whereby financial markets, financial institutions, and financial elites are gaining greater influence over almost all aspects of society.1

This long read aims to scrutinise one particular financial instrument promoted by this conservation finance industry: the debt swap. Over the past few years, the world’s largest conservation organisation, The Nature Conservancy (TNC), has concluded three of these: in the Seychelles, Belize and Barbados. These deals are intended to expand marine protected areas, parts of the ocean where (certain) commercial activities are restricted with the goal of allowing wildlife to recover and be preserved. According to TNC, many more deals are in the pipeline. It has US government support for concluding deals in at least 20 coastal and small island developing states. Most recently, it is being reported that TNC is on the brink of securing a debt swap in Gabon, where it will buy $700 million of the country’s debt in exchange for ocean conservation, including a marine protected area, but also other commitments, such as on carbon trading and fish farming. Other countries rumoured to be negotiating these kinds of deals include St Lucia, Kenya, the Gambia, Ecuador and Namibia. If this ambitious programme succeeds, TNC estimates it will have saved 4 million square kilometres of the ocean. It will also have leveraged several billion dollars in private capital, giving it unprecedented power for an NGO over a vast area of the planet and the economic health of many highly indebted countries. This is a development that demands attention.

World leaders at the UNFCC Climate COP (COP-27) have made positive statements about debt swaps. These instruments will also feature prominently at the UN Biodiversity Conference (COP-15 of the UN Environmental Program) in Montreal this December, where the task is to agree on a global framework for the conservation of biodiversity. One of the key issues on that agenda is a commitment to designate 30% of the world’s land and oceans as protected areas by 2030. Debt swaps are likely to be seen as a viable way of achieving this. What is alluring about these deals is they claim to accomplish two things: they increase the flow of private capital for developing countries to use for saving nature and mitigating the climate crisis, and they provide relief for developing countries from their crippling debt crisis. Indeed, many organisations are recognising that ‘climate justice’ cannot be divorced from ‘debt justice’. The question, however, is: Do debt swaps really deliver either?

Sea star

Kristin Marie Enns-Kavanagh/Flickr/(CC BY-NC 2.0)

The history of debt-for nature swaps

To fully understand debt swaps they must be put in historical context. They also need to be understood in a wider perspective of the troubled relationship between developing countries and loans from investment banks.  

Debt swaps for conservation were first proposed in the 1980s, when they were used predominantly by environmental NGOs to raise money for rainforest conservation. They were inspired by equity swaps that were once seen as a viable way to save Western banks and developing countries from an economic disaster caused by the gluttony of recycling petrodollars in the 1970s. It has been estimated that during the 1970s $450 billion was deposited in US and European banks from Arab oil producing states, and that the irresponsible lending bonanza that followed saw developing country’s debt rising at astonishing levels: from under $200 billion in the mid 1970s to well over a trillion in the mid 1980s. Most of this debt was via bank loans for government projects with high interest rates, pegged to the US government’s interest rates. It is well documented that many of these loans lacked both transparency and due diligence.2 The money was often squandered while providing bankers and political elites fabulous wealth at the expense of citizens. For developing countries, the 1980s was famously dubbed ‘the lost decade’.

The bubble burst in 1979 when the US government aggressively raised interest rates to halt inflation back home, thereby increasing the value of developing countries’ debts by 25%.3 In 1982, Mexico became the first country to ever default on its debt repayments. In a panic, banks began to sell debts owed to them by developing countries to private investors at steeply discounted rates. For countries such as Peru, Western banks were willing to sell debts at a discount of as much as 95% (although they could recover part of their losses through tax accounting). Loan agreements between Western banks and foreign governments prohibited governments from buying their own debts, so to entice others to do so, they had to offer investors something in return. This was often done either by giving them the face value of the debt in local currency (enticing the investor to spend it in their countries) or a share of a nationally owned industry. These ‘equity swaps’ were controversial, blamed for a wave of costly privatisations and the capture of businesses by foreign investors for knock down prices.

In this context US conservation organisations identified an opportunity. Developing countries had other valuable assets they could trade for discounted debt—their wildlife and pristine rainforests. So, environmental NGOs such as WWF, Conservation International and The Nature Conservancy set up ‘equity swaps for nature’. There were several ways they did this. However, in essence they would use their own money to buy discounted debts from banks in the US and Europe. Then they would get developing country governments to provide the face value of the debt in local currency to be used on a conservation project of their choosing. Some of the deals involved a straight swap for cash, whereas others involved payments in kind. These deals usually involved a commitment by the host country to designate a new area of land as a protected park and allow the foreign NGOs a role in its management. Debt swaps were therefore considered a clever way of multiplying NGO’s limited funds and enlarging the size of rainforest parks.

These swaps were also described as deals to help lower the debts of developing countries. It was an important claim, first made by Thomas Lovejoy at WWF in an article in the New York Times in 1984. A prevailing view among conservationists was that the debt crisis was itself a primary driver of deforestation: highly indebted countries were selling off their natural resources to raise foreign cash to service debts to Western banks. Debt swaps were therefore seen as a ‘win win’ solution.

By the early 2000s, it was estimated that there had been 47 separate debt swaps paid by conservation organisations, with a total net spend of about $42 million.4 But for several reasons, including changes in US tax laws, new systems for debt restructuring led by the US, and then ultimately debt forgiveness, the market opportunities for equity swaps dried up, and so did those for nature swaps. The enthusiasm for debt swaps among conservation organisations also waned; they were expensive deals to finalise and the resulting agreements with governments were hard to enforce.

Like equity swaps in general, nature swaps were also controversial, being rejected by many social movements working with small-scale farmers and indigenous people because they threatened land rights and were seen as legitimising odious debts.5 They were also subject to critical assessments by multilateral organizations, including the World Bank.6 They had no effect on the debts of developing countries and rarely led to meaningful achievements in conservation. In 1993 the Italian academic Mauricio Minzi provided a withering summary of these criticisms;

‘Scholars and activists were mesmerised by the potential of debt-for-nature swaps; in buying distressed debt on the U.S. market, and, then selling it at face value to a LDC [Least Developed Country] one could leverage the financing of conservation programs. For instance, debt bought at twenty cents on the dollar could be used to finance the equivalent of one full dollar in conservation projects. In the roaring ‘80s, the mystique of financial engineering was very influential and people were prepared to believe that the mere shuffling around of paper could somehow create value. Unfortunately…the leverage of conservation dollars is at least in part a myth…Proponents of the swaps mistakenly believed that these transactions were generous forms of assistance provided by the North to the South. In reality, the economic substance of the swaps appears to benefit the North more than the South’.7


CaptSpaulding/Flickr/(CC BY-NC-ND 2.0)

Eurobonds and the new debt crisis

Debt for nature swaps involving commercial loans disappeared by the late 1990s. A few countries, particularly the US and Germany, went on to experiment with variations of them involving development aid, sometimes blending these with debt forgiveness, also with mixed results.8 So why have debt for nature swaps targeting commercial bank loans reappeared?

TNC has played a critical role in this development. For the past decade it has been putting together a team of experts, mostly former investment bankers and business consulting gurus, to reinvent nature swaps and make them more ambitious. It has done this by creating a sister organisation called ‘NatureVest’ in partnership with investment banks, particularly JP Morgan. TNC developed a strategy—code named the ‘audacious’ plan—that would make debt swaps more appealing to impact investors. The key to this plan was to stop using its own limited funds to buy debt. Instead, as will be explained shortly, it could use the money of private investors to buy much larger quantities. The focus of this work was no longer on rainforests, but tropical oceans.

NatureVest’s audacious plan relied on the existence of a new debt crisis. The genesis of this was forming after the financial crash of 2008. The stagnation of genuine aid in the period of austerity, coupled with the growth of Chinese lending, meant that the foreign debts of developing countries were creeping up again. However, the biggest direct source of the emerging debt crisis was another boom in reckless lending from Western investment banks.

There are several parallels between the debt crisis of the last decade and the lending bonanza in the 1970s. However, the mechanism of lending has changed. Previously, commercial debts of developing countries derived from direct bank loans. Since the early 2000s these loans had been superseded by sovereign issued bonds. These are loans issued by governments, arranged by banks for a substantial fee, that are then sold by the banks to other investors, or bondholders. The ‘bond notes’ derived from these deals are also traded in secondary markets. Owners of these notes receive interest rate payments, usually on an annual basis, until the end of the loan when the full value of the loan is repaid. Bonds have the advantage over bank loans as they can raise more money with the risks spread out to a larger pool of financial institutions. Also, unlike bank loans, which were usually targeted at specific projects, bonds can be used by governments for more general and vague purposes, operating like a ‘blank cheque’.9 Confusingly, bonds raised by governments in a foreign currency are called Eurobonds, although they are normally in issued in USD.

The growth in Eurobonds among developing countries over the past decade has been startling. This has been driven by low interest rates in the US and Europe after the financial crash and the demand by private investors for higher yielding bonds. Before 2008, the value of Eurobonds issued each year by developing countries was roughly $50 billion. Between 2010 and 2016 this annual average rose to $130 billion, and in 2017 it jumped to $225 billion. During the pandemic, the value of ‘emerging market’ sovereign Eurobonds grew even more.10 The advance of African Eurobonds is particularly remarkable. There were only 2 issued before 2008, but by 2021 more than 20 countries had issued their first ones and the total funds raised by African Eurobonds was estimated at over $136 billion. When the interest rates on these debts are factored in, the financial implications of paying back these loans are colossal. Furthermore, one of the concerns about Eurobonds is that some are issued without any public reporting, so the true value of developing countries’ Eurobond debt is not known.11

As part of its work to develop new debt swaps, NatureVest developed an index that tracked debt distress across developing countries. This showed them which ones were experiencing the most precarious debt, so they could target their efforts accordingly. The ideal time to go for a debt swap is when a country is nearing a debt default, because bond notes at that point are trading at low values on the secondary market and can be bought up cheaply. They published a paper on this scheme in 2018, describing how the environment for swaps was improving:

‘The global economy is experiencing another wave of rapid debt accumulation; debt loads in emerging market and developing economies reached a record high of US$55 trillion in 2018…Changes over the last few decades in financing instruments available to developing countries and economies in transition means there is more high-risk, commercial sovereign external debt available to purchase on secondary markets than ever before.’12

Belize Blue Hole

The TerraMar Project, CC BY 2.0 <>, via Wikimedia Commons

From the Seychelles to Belize

The first swap for oceans NatureVest tried to negotiate was in Belize in 2011. Belize was one of the most indebted countries in the world, largely due to reckless borrowing from the US bank Bear Sterns, one of the first banks that went bankrupt in the sub-prime mortgage scandal. But in 2012 the Belize government negotiated a debt restructuring deal, so the time wasn’t right for a swap. NatureVest turned attention to the Seychelles, also among the most debt distressed countries in the world at that time, partly due to unsustainable loans provided by other disgraced US banks, including the Lehmann Brothers.

An IMF debt restructuring package had taken the pressure off Seychelles debts as well, so again timing was not right for a debt involving bonds. Perhaps impatient for a deal, NatureVest instead offered to buy some of the Seychelles debt owed to Paris Club donors.13 This could then be swapped for commitments to declare 50% of the Seychelles oceans a marine park. NatureVest asked the Paris Club donors to sell $75 million dollars of Seychelle’s debt at a discount of 25%. The donors agreed to sell only $21.5 million at a discount of 6.5%. But the deal was sufficient as a proof of concept and gained impressive international media coverage.14 However, it was not a good example for the audacious plan: TNC did not raise private capital to finance the deal and instead had to provide the cash itself: about $15.5 million. They also required $5 million extra from philanthropic grants. But the deal was important for one major reason: for the first time a conservation NGO had lent money to a government to buy its own debt, and then charged them interest to pay it back. TNC charged 3% on their loan of $15 million, requiring it to be paid back in full over 10 years. This provides TNC an estimated return of $2.5 million on their investment.15

For 6 years after the Seychelles deal, NatureVest did not finalise any more debt swaps. That changed with the COVID pandemic and the acceleration of the debt crisis. NatureVest went back to Belize, this time with the help of Credit Suisse. Late in 2021—when the Belize government was on the brink of defaulting on its debt repayments—Credit Suisse arranged a loan for NatureVest to buy the entire commercial debt of the country, which had been consolidated into one ‘superbond’ with an outstanding value to bondholders of $533 million.

NatureVest announced that this was one of many deals in the pipeline. There was evidence supporting this: the US Development Finance Corporation (DFC) had offered NatureVest an investment guarantee to help raise money for the Belize transaction. These agreements were published on the website of the DFC’s website, with a reference to a master plan for 20 debt swaps in total that will create an additional 4 million square kilometres of marine protected areas.16

The next deal NatureVest secured was in Barbados, which involved them buying Eurobond debt worth $146.5 million. As indicated already, Gabon looks to be the next deal nearing completion, were NatureVest will purchase a Eurobond worth $700 million.17 From what can be gleaned from various sources, the next countries include Kenya, Cabo Verde, St Lucia, Namibia and Ecuador.18 During Cop-27, at a meeting at the Resilience Hub, sponsored by JP Morgan and others, the environment minister from the Gambia declared her government’s interest in working with TNC on a debt swap as well.

School of fish

Olivier ROUX/Flickr/(CC BY-NC 2.0)

How do these deals work?

The structure of these deals requires NatureVest to obtain a loan from an investment bank. So far NatureVest has worked only with Credit Suisse, although it might choose to work with others. This money is referred to as a ‘blue bond’, which is then lent to the government of the indebted country to pay out bondholders. In the case of Belize, the loan to the government did not come from NatureVest directly, but from a company they set up in the tax haven of Delaware, called the Belize Blue Investment Corporation (BBIC). Credit Suisse then repackaged the loan to the BBIC to be sold in notes to investors. Credit Suisse did not issue the new bond notes themselves but passed this over to Special Purpose Vehicle registered in Amsterdam, called Platinum Securities. It is assumed this SPV is a subsidiary of Credit Suisse. However, there is no online information available on who owns this company or works for them, and the company does not have a website. The Swedish pension fund Alecta announced it bought $75 million worth of bond notes from Platinum securities in January 2022.19

The key to these deals is an agreement by the owners of the original Eurobond to sell their debt at a discount. The successful buyout in Belize saw bondholders agree to a ‘haircut’ of 45% of the face value of their original debt; the value of the bond notes when they were first issued including all outstanding interest rate payments. The loan to Belize to buy out the bondholders was therefore $301 million. However, another $64 million was added for other costs. The contract between the BBIC and the government of Belize commits the government to several things:

  1. Repay BBIC with interest and compensate for legal and banking fees, as well as financial inducements (discounts for early buyers) of the new bond issued by Platinum Services. There was also an insurance contract attached to this deal that provided Belize temporary respite for repaying BBIC in case of a climate disaster, which they needed to pay for on an annual basis. In total these extra fees came to $40 million.
  1. Implement a range of policies for marine conservation, including scaling up marine protected areas from the current size of 20% to 30% of their oceans, implementing a strategic plan for the use of ocean resources (usually known as a marine spatial plan20), advancing fish farming in coastal areas, and engaging in blue carbon trading schemes.21
  1. Use a proportion of the money lent (the remaining $24 million from the loan) to set up a marine trust fund. This fund will invest the money over a 20-year period, which is estimated by TNC to result in annual revenues of 7%, or a total amount of $71 million after 20 years. It is not specified how the money will be invested.
  1. Establish a new national Conservation Fund to receive the money from the earnings on the trust fund and savings in the debt swap. Precise details of how this financing arrangement will work remain elusive, however according to an IMF report the Conservation Fund will receive annual payments from the Belize government of $4.2 million for the next 40 years.22 The role of this new Conservation Fund is to oversee policy implementation of the marine spatial plan and administer grants for marine conservation projects. TNC is given a permanent position on the governing board of this new organisation.

It is likely that the same general model has been used in Barbados and will be used in Gabon, although the exact figures depend on several variables, including the discount rate achieved in these deals and the value of bond being bought out.

Clown fish

Photo credit: Olivier ROUX/Flickr/(CC BY-NC 2.0)

Making sense of debt for ocean swaps

NatureVest’s debt swaps have been covered in an enormous number of reports and news articles, and they have received substantial attention in international events on ocean conservation, the climate crisis and debt restructuring. Almost all of this has been positive. These complex financial deals are celebrated as ingenious financing mechanisms that could be replicated and scaled up even further. During COP-27, Kristalina Kostial the deputy director of the IMF, described these debt swaps as a critical solution to the international community’s failure to provide adequate climate finance, adding that ‘carbon credits could feature as part of the swaps’.23

Few organisations seem to scrutinise these deals, especially in light of all the criticisms raised against the past debt for nature swaps. Yet many of the same critical issues appear relevant. To simplify, there are three broad themes that more critical debates over these deals should explore.

Transparency and democratic participation

We should expect international finance that helps developing countries tackle their debt crisis and fund nature conservation to be transparent. So far, however, these deals remain astonishingly opaque.

News of these deals is deliberately kept secret, probably to avoid inflating the market value of bond notes before debt buybacks. However, even after they have been concluded, public access to information is limited. The investment and conservation contracts signed between NatureVest and governments in the Seychelles, Belize and Barbados are not in the public domain. This means it is impossible for citizens to understand what their governments have signed up for.

So far, information on conservation commitments have filtered through via statements by TNC. But these statements lack detail. It is currently unclear why the full conservation contract itself cannot be published. Several of the financial terms of this agreement are also kept from public scrutiny, again with summary information only found in statements and press releases, sometimes with inconsistencies. One aspect that is left unreported is the profits being made by NatureVest and Credit Suisse, including through the SPV in Amsterdam. There will be various commission and legal fees occurring as debt is transferred throughout this web of company structures. There is also a possibility that interest charged by the BBIC to the government of Belize is less than the interest provided to companies buying the bond notes supplied by Platinum Services, meaning the intermediaries in this deal would be making further profits. The fact that NatureVest establishes new companies, registered in a tax haven, to handle payments and revenues, is concerning. It is important for TNC to clarify the financial structures of these deals and be transparent about the income from these arrangements.

Due to this secretive approach to debt swaps, they fail to achieve the free, prior and informed consent of people relying on marine resources for their livelihoods. This is critical. Debt swaps establish binding commitments for the management of marine resources, including expanding marine protected areas that might curtail economic activities, such as fisheries. They also introduce other contentious policies such as carbon trading and the development of commercial aquaculture. However, NatureVest and the host governments of these deals have failed to consult with citizens or parliament before signing the contracts. None of these deals have produced environmental and social impact assessments either. It is hard to imagine such undemocratic instruments being employed in Europe or the US, and difficult to reconcile this with international human rights instruments such as the Tenure Guidelines and SSFGs which recognise the rights of small-scale fishers.

Resolving this lack of consultation is not straightforward. Debt swaps targeting commercial loans also rely on stealth. In negotiating the buyout of bondholders, it is unlikely that NatureVest could succeed if it had to subject its plans to lengthy public debate. Anyone familiar with the process of developing national plans for the oceans will know that this can take a long time, particularly if it involves genuine participation form marginalised people. As such, debt swaps, following the model used by NatureVest, would seem fundamentally inappropriate for financing ambitious programmes for reforming policies on nature conservation or climate mitigation and adaptation.

The illusion of generosity

One of the claims surrounding debt swaps negotiated by TNC is that they represent an act of generosity by creditors. Often creditors are described as forgoing debt repayments, equating these deals with debt forgiveness. The Guardian’s write up of the debt swap in the Seychelles described that creditors had agreed to forgo millions in debt. This makes these deals seem relevant for global debates on compensation for loss and damage. But this is clearly misleading now, as it was for debt for nature swaps in the 1980s.

In the debt swap for the Seychelles, for example, Paris Club donors agreed to a mere 6.5% discount for their debts. This is an attractive deal to them because they receive an early payment in cash for debts that were not due to be paid in full for several years. However, what has been overlooked in this deal is that the donors all reported this discount as a grant. This means the money ‘gifted’ to the Seychelles reduces the donor’s commitments for other aid spending. It was not a transfer that increased aid flows from donor countries to developing countries. Bi-lateral debt swaps can be designed to reduce this problem; combining a greater element of debt forgiveness with rules that prevent donors from using an accounting trick to avoid additionality. But that did not happen in the case of the Seychelles.

When it comes to commercial deals involving Eurobond swaps, investors are not acting charitably either. They are being offered lump sum cash payments based on the market value of their bond notes. It is possible that bondholders would reject this offer of a buyout, preferring to hold out for the full value of their assets. However, it was clear in 2021 that Belize’s economic situation was worsening, and bondholders were holding assets that were depreciating in value. The value of bond notes of Belize’s superbond have been volatile,  trading as low as 30% of their face value in 2020. That bond holders were offered 55% of the face value in 2021 suggests it  was in the interests of investors to sell then, irrespective of their concerns for the oceans and the climate disaster. Still, the bondholders, represented by a committee, issued the dubious statement that they agreed to sell out because savings in the deal were going to a good cause.24

Debt justice

Positive assessments of nature swaps point to the fact they reduce the debt burdens of developing countries. In the past this claim was unconvincing because debt swaps were so small they achieved only tiny changes to the overall debt burdens of countries. That was also the case in the Seychelles, as the debt for ocean swap there reduced the country’s future debt obligations by less than $2 million. It was a drop in the ocean. But the situation is now changing in the mega deals targeting Eurobonds, and the credentials of nature swaps creating fiscal breathing space for countries seems to be strengthening.

In Belize, for example, it is described in news reports that the debt swap saved the country $189 million and NatureVest has swapped a high interest rate loan for a more favourable blue bond. While part of that is true, the IMF confirm the interest rate schedule for the new blue bond starts with a lower interest rate, of 3%, but after 4 years this rises to over 6%; the same rate that Belize was paying for its previous Eurobond.25 But most importantly, while Belize has reduced the total amount it has to pay to foreign creditors by $189 million, almost all of this money is reserved for spending by the new Conservation Fund for marine projects. There is limited fiscal space created by this swap for other pressing areas of government spending, such as health or education.

As debt swaps become larger transactions dealing with a sizeable share of a country’s foreign debt, they also become more relevant to other efforts for debt restructuring. In this view, they appear more problematic rather than less. For example, a substantial barrier to co-ordinated and effective debt relief has been the difficulty of bringing different creditors to the table, including bilateral lenders, multilaterals, and foreign private creditors. This leads to heightened concerns that debt relief will not be shared fairly. Furthermore, the scale of the debt crisis in many countries now is such that the only chance for lasting solutions is a co-ordinated response based on a transparent and participatory dialogue. However, debt swaps undermine this ideal: without consultation, they capitalise on a period of debt distress to benefit commercial lenders.26

A recent IMF publication analysed debt swaps alongside other forms of assistance for developing countries for both debt relief and financing for climate related spending.27 This report made it clear that debt swaps are sub-optimal solutions. For highly indebted countries requiring urgent assistance to deal with climate change, the case for scaling them up should be rejected:

‘Debt-climate swaps subsidize the creditors that do not participate in the operation. In contrast, deep debt restructurings generally come with frameworks that seek to ensure wide participation… For this reason, it is generally efficient to de-link the restoration of debt sustainability from fiscal support of climate action, which should be additional to the debt relief required to restore sustainability, and ideally come in the form of conditional grants (or a combination of grants and loans) rather than debt-climate swaps.’

It is therefore surprising that senior officials at the IMF have been advocating so stridently for scaling up debt swaps at COP-27, including praising TNC’s deals. Tellingly, the IMF in their latest country assessment for Belize did not consider the debt swap sufficient to change its view that the country was still stuck with unsustainable debt: highly likely to struggle to maintain payments to its creditors, with a strong probability of needing more comprehensive debt restructuring in the future.

Finally, international recommendations on debt justice also stress the need for public audits of debt, and the urgent need for regulating the way in which sovereign commercial loans are raised for developing countries. Moving out of the debt trap is therefore not simply achieved through financial restructuring, but also regulatory and political reforms. None of this appears to be advanced by debt swaps so far. Instead, the public relations surrounding nature swaps legitimise the institutions that have created and benefited from the reckless Eurobond market. In the 1980s debt for nature swaps were rejected as unwelcome distractions from campaigns on odious debt. The same could be said of the reincarnation of nature swaps today.

Saving nature

Finally, although the stated purpose of these swaps is to save nature, it is doubtful they will succeed. Many of the statements made about these swaps assume that the debt buyout and the commitments of governments to set up endowment funds for new conservation organisations will protect the oceans. The mere act of designating an enlarged area of the ocean as protected is taken at face value, conflated with nature being actually saved.

TNC’s limited public reports on its debt swaps are devoted to explaining the financial benefits of these deals. Almost nothing is provided on the considerable political and practical barriers countries face in following through on the ambitious conservation pledges. Meanwhile their conservation contracts reveal potential policy incoherence: they promote eco-tourism and commercial aquaculture, for example. These sectors may help boost economic growth or food production, but they have high risks of costly environmental externalities and exacerbating inequality.

The plans for spending the money from debt swaps are also questionable. Channelling all the money through a new Conservation Fund creates another organisation running parallel to, and possibly in conflict with, existing government agencies. The resulting Conservation Funds will have annual budgets that surpass government departments and will dwarf those of existing civil society organisations working with groups such as small-scale fisheries. The intention is that the Funds will disperse money to others through grants, but this arrangement is fraught with risks relating to democratic accountability and conflicts of interest. TNC’s guaranteed seat on the governing board of these Funds is also questionable, given their lack of democratic legitimacy or direct links to local communities.

In short, the mere act of increasing financial flows to conservation efforts does not solve deep-rooted conflicts over the use of resources, while it may work to aggravate them. Herein lies the fundamental dilemma in the debt for nature swap concept. This is the simplistic assumption that ecological destruction is due to an absence of funding and that this problem can be solved by more money. Once the absurdity of that belief is exposed, the entire proposition for conservation finance falls apart. Ecological justice is first and foremost a political struggle, not a financial one.

Brain coral

U.S. Geological Survey/Public domain

Final thoughts

The audacious plan by TNC deserves intense critical scrutiny. This is clearly difficult to do given the complexity surrounding its deals and their lack of transparency. However, if TNC delivers on this plan, then it will represent an astonishing development in the governance of the oceans. The arguments presented in this paper suggest the considerable international praise that debt swaps are receiving is unmerited. Unfortunately, few organisations involved in marine conservation seem to be ringing alarm bells. 

Debt swaps are just one of several innovative financial instruments being developed by the conservation finance industry. There are other forms of blue bonds, as well as CAT-Bonds and Rhino bonds, for example. The financialisaton of conservation is producing a bewildering set of instruments described through jargon that most of us find impossible to decipher. 

Addressing the heavy burden of unsustainable and illegitimate debt carried by Southern countries, who are increasingly confronting the worst effects of the climate crisis, is pivotal to addressing this global crisis. Comprehensive frameworks for debt forgiveness, economic justice, loss & damages and reparations will be needed if we are to move towards climate justice. However, debt for nature swaps instead represent a dangerous distraction, moving us further away from genuinely democratic solutions and just transitions, undermining the ability of working people to shape the policies that impact their lives, and further consolidating the power of international finance.  

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