Paper short abstract:

Debt-for-nature swaps represent a renewed attempt by sovereign creditors to stipulate how borrowing states spend debt relief, using the rhetoric of climate action to legitimate external interference in climate investments and detach climate financing from global climate justice considerations.

Paper long abstract:

Debt-for-nature swaps are fast becoming an enticing win-win solution to the interlocking biodiversity, climate, and debt crises for global climate and development policymakers. At COP28, leading development banks launched a joint taskforce investigating the feasibility of scaling up ‘sustainability-linked financing’, including debt-for-nature swaps. For their advocates, by conditionalising debt relief on climate and nature-linked investments, debt-for-nature swaps offer a novel way of alleviating debt distress while securing climate action. However, recent debt-for-nature swaps in Belize, Ecuador, and Gabon have been strongly criticised by activists and scholars for delivering minimal debt relief, relying heavily on offshore tax havens, and severely undermining state sovereignty. This paper situates the rise of debt-for-nature swaps amidst a broader historical struggle over sovereign debt governance, specifically the capacity for sovereign creditors to determine and enforce how borrowing states spend debt relief. I contend that advocates of debt-for-nature swaps, particularly in the private consulting and finance sectors, have invoked the globally recognised need for more ambitious climate action to justify the reshaping of sovereign debt governance. I further argue empirically that, by linking long-term climate financing needs to urgent debt crises, recent debt-for-nature swaps have served to decouple the question of ‘who pays’ from global climate justice considerations. Thus, debt-for-nature swaps are fast becoming asset, and indeed sovereignty, fire sales, with decades-long implications for states across the Global South. I conclude by surveying prominent alternative approaches centred on unconditional sovereign debt cancellation and the establishment of an international sovereign bankruptcy mechanism.