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Debt-for-Nature Swaps: The Belize 2021 Deal and the Future of Green Sovereign Finance

Belize conducted a debt-for-nature swap operation in 2021 that was heralded as a model for facilitating both debt relief and action on climate change. The country was able to commit an estimated US$107 million for conservation projects at the same time it restructured its unsustainable debt. The transaction relied on two essential, yet intertwined features: first, the backing of the United States’ Development Finance Corporation (DFC) and, second, Belize’s environmental conservation undertakings with real financial and legal consequences. The legal commitments made in the debt-for-nature swap outstripped the typical commitments made by sovereigns in green, social and sustainable bonds and sustainability-linked bonds.