by Mark Jones

London (Reuters) – The European Investment Bank (EIB), the European Union’s financing institution, is set to carry out its first “debt for nature” swap this year, aimed at encouraging the protection of biodiversity.

Debt-for-nature swaps, which allow countries to reduce their debt in return for conservation commitments, have been attracting growing interest since Ecuador’s record $1.6 billion deal struck last month to protect the Galápagos Islands.

“We work with a number of countries,” said Maria Shaw-Barragan, director of loans at the development bank’s “EIB Global” division, a division specializing in loans to third countries.

Development banks play a crucial role in providing “credit guarantees” that allow cash-strapped states to borrow cheaply to protect their ecosystems.

Conservation actors have long hoped for the EIB to position itself in this sector, as its balance sheet is large, more than twice that of the World Bank’s lending division.

Maria Shaw-Barragan did not indicate which countries will be affected, or for what amounts, so as not to influence the price of the bonds concerned – “debt for nature” swaps work best when the debt is bought at a discount – but the official specifies that, in sub-Saharan Africa alone, 5 to 10 countries would be concerned.

Zambia and Ghana are in default and therefore likely excluded from a deal, while bankers note that bonds from Angola, Kenya, Nigeria, Uganda, Senegal, Côte d Ivoire, Rwanda, Mozambique and even South Africa are all under pressure.

The first EIB operation should be finalized by the end of the year or the beginning of 2024, Maria Shaw-Barragan added, or “within the next 12 months” at the latest.

Two other operations should then quickly take place, and the EIB could be involved in up to five projects per year.

THE BIODIVERSITY CHALLENGE

Halting the rapid decline of biodiversity is an increasingly pressing priority for world leaders, who have pledged to protect 30% of land, coastal and marine areas by 2030.

Debt-for-nature swaps aren’t new, but could play an increasingly important role: 140 swaps have taken place in the past 35 years, totaling just $5 billion in debt.

The mechanism is expected to be highlighted during a summit in Paris on Thursday by French President Emmanuel Macron and Prime Minister of Barbados Mia Mottley, whose country carried out a “debt-for-nature” swap last year. , and which calls for the generalization of this type of operation.

Maria Shaw-Barragan said the EIB would not intervene in countries already in default, but swaps will help affected governments replace their short-term debt with new 10- or 15-year debt at a lower rate .

“Extending maturities and reprieves is very important for countries right now, and can make a huge difference,” said Maria Shaw-Barragan.

(Report Marc Jones, Corentin Chapron, edited by Kate Entringer)

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