Averting the crises: how a new approach to debt could raise US$400 billion for climate and nature
Sixty per cent of low-income countries are already in or at high risk of debt distress, while the global economic and debt sustainability outlook is quickly deteriorating due to higher interest rates, higher food prices and depreciating currencies. At the same time, macroeconomic risks caused by the crises of climate change and nature loss further undermine current siloed efforts to recover. Innovative climate and nature-linked debt instruments can help to address the current crises. This analysis estimates that these instruments could mobilise upwards of US$105 billion from debt relief for climate and nature in the short term, and more than US$329 billion in new debt issuances, with the possibility of even more in the medium and long term. Based on these findings, the paper recommends increased support for and promotion of these instruments, and a new architecture for international debt treatment.
