Innovative financing for Africa: harnessing debt for climate and nature

Abstract

Africa is severely impacted by the triple crisis of debt, climate change and nature loss. The continent’s debt now stands at more than 70% of GDP. There is potential to address these crises through ‘general purpose’ debt financing linked to climate and nature key performance indicators (KPIs). For severely indebted African countries this could be through debt-for climate-and-nature conversion or swaps. For less debt distressed countries with good market access, the best instrument would be general-purpose performance bonds for climate and nature. There is growing demand for these instruments among African governments, but for this approach to succeed key African creditors including China and the private sector would need to engage, with support from the G20, UN, IMF, World Bank and African Development Bank.