Linking sovereign debt to climate and nature outcomes: a guide for debt managers and environmental decision makers

Abstract

This guide is part of a concerted effort by the international community to address the triple crisis of high and rising debt levels in developing countries, the climate change emergency, and the accelerated degradation of the natural world. Solutions to tackling this triple crisis holistically and inclusively can be found in the context of the international financial architecture. Multiple innovations in sovereign debt financing are offering numerous benefits to indebted countries. This guide outlines some of these innovations and provides useful information for governments seeking to achieve climate and nature outcomes while simultaneously strengthening their sovereign balance sheets. The debt financing innovations that have been emerging are now central to the effort to holistically address these three interlinked threats to human development. IIED, Potomac Group, and their United Nations partners have published this ‘how-to’ guide for linking sovereign debt to climate and nature outcomes. The goal of this guide is to provide governments and their partners with an actionable plan for taking advantage of these innovations to improve debt sustainability and also increase climate and nature investment.