Evaluating Impacts of Debt-for-Nature Swaps on Debt, Climate and Biodiversity (2025-2026)

Background 

In the 2020s, amid record levels of debt distress exacerbated by the pandemic and rising interest rates, debt-for-nature swaps (DfNS) have emerged as a potential tool for alleviating debt burdens. Almost a dozen new DfNS have been announced, most of which focus on marine conservation and are substantially larger than previous swaps. Yet significant questions remain about whether this new DfNS model represents a sustainable and effective solution for addressing both conservation needs as well as debt distress. Understanding the history of this financial instrument can help shed light on this concern.

DfNS were first introduced in 1984 to reduce the debt burden of low-income countries in exchange for their commitment to environmental protection. Initially, DfNS were carried out by environmental non-governmental organizations (NGOs) working directly with debtor governments. In the 1990s, a second generation of DfNS emerged, involving direct negotiations between creditors and debtor governments.

Both types of DfNS gained popularity during the 1980s and 90s but largely fell out of favor after 2000, in part due to their shortcomings. For example, debtor governments found the financial benefits to be too small compared to the complex negotiation process; sovereignty concerns arose in debtor countries due to creditor and NGO influence; and uncertainty remains about the effectiveness of DfNS in driving meaningful conservation outcomes. In the last five years, a new generation of DfNS have emerged that rely on the engagement of both the private and public sectors. Will these new instruments address past concerns?

Project Description 

This project team will analyze five recent DfNS in Belize, Ecuador, El Salvador, Bahamas and Barbados to evaluate how these new swaps measure up with respect to financial impact, conservation impact, sovereignty concerns and transparency.

Team members will focus on four key questions:

1. Can the improvements of the new generation of DfNS be quantified compared to earlier swaps?
2. What explains the variation in conservation impact, sovereignty infringement and transparency across the recent DfNS?
3. How can the debt swap model be reformed to enhance conservation impact and debt relief?
4. Can these swaps be scaled to significantly contribute to the achievement of national commitments to climate and biodiversity?

To answer these questions, team members will focus on three concurrent research pathways:

1. Financial Impact: Team members will analyze changes in debt sustainability and sovereign credit ratings through financial modelling of debt servicing, credit rating data analyses and key informant interviews (KIIs) with government officials and other stakeholders.
2. Conservation Impact: The team will analyze changes in biodiversity and ecosystem health and reductions in conservation threats (e.g. illegal fishing) through remote sensing, surveys of fish markets, government data, and KIIs with local NGOs, fishers and other stakeholders.
3. Sovereignty and Transparency: Team members will evaluate transparency concerns through analysis of government data, media analyses and KIIs with community representatives, local NGOs and other stakeholders

Based on this analysis, the team will develop a series of proposed reforms to improve the effectiveness, scale and appeal of future swaps.

Anticipated Outputs

Cross-country analyses of strengths and weaknesses of recent debt-for-nature swaps (DfNS) model; case studies of five DfNSs; peer-reviewed publication(s); policy briefs on DfNS reforms; roundtable with DfNS stakeholders

Student Opportunities 

Ideally, this project team will include 6 graduate students and 4 undergraduate students from a range of backgrounds. In particular, the team is seeking students with interest or experience in quantitative analysis of imagery data, statistical methods (e.g., regression, probabilistic modeling), financial modelling, machine learning, biodiversity and ecosystem monitoring, carbon monitoring, sovereign debt sustainability analysis, survey and interview design and implementation, writing and graphic design.

Students will be grouped in pairs to analyze the DfNS in a single country and prepare a case study that includes background material, a DfNS diagram, a table of financial and conservation impacts, and a summary of accomplishments and challenges.

The team will split into subteams for cross-country analysis, focusing on topics like assessing marine protected area impacts (e.g. analyzing satellite images of illegal fishing vessels), sovereign debt distress (e.g. analyzing credit ratings and debt-to-GDP ratios) and conducting key informant interviews on sovereignty and transparency. Students may join multiple subteams.

The project team will meet weekly for 2.5 hours.

Professional and graduate students will have the option to extend their work into a master’s project or PhD thesis chapter.

Timing 

Fall 2025-Spring 2026

Fall 2025:  Standardize format for analysis of country case studies; assemble data; prepare cross-country analysis; present data to group at large

Spring 2026:  Complete country case study policy brief and cross-country analyses; prepare publication(s); participate in roundtable in Washington, D.C.

Crediting 

Academic credit available for fall and spring semesters.