4th September 2025
“Debt-for-Climate Swaps (DFCS) are an agreement between a sovereign and its creditors that reallocates a portion of ongoing debt obligations toward investments in climate action. Such transactions provide opportunities for countries to enhance both fiscal stability and climate resilience, mobilising critical investment in areas such as renewable energy, urban infrastructure, sustainable agriculture and water security, forest conservation and restoration”. (1)
The biggest such scheme has been undertaken by Ecuador: “The Galapagos conversion … exchanged $1.628 billion in Ecuadorian government bonds for a $656 million impact loan*. The transaction will generate savings to the Ecuadorian fiscus of $1.126 billion through 2041. In return, Ecuador will direct savings of $323 million by 2041 to the conservation of the Galapagos and establish a new endowment fund maturing to $227 million to finance their preservation thereafter.” (2)
*Ecuador obtained a loan of to buy back $1.6 billion US bonds (face value) now valued at $656million because of the decline in Ecuador’s economy. Then Ecuador was provided with a ‘blue loan’ of $656million. Blue Loans are designed such that some of the money will positively improve marine biodiversity so helping to mitigate for climate change; by making such loans, the lender can improve their green credentials. In this instance Ecuador agreed to provide $17.5 million a year to protect the marine protected areas surrounding the Galapagos Islands. (3)
Blue loans – also known as blue bonds – are probably better described as Debt For Nature Swaps (DFNS). There are also Green loans or bonds which can finance Green Loans protecting land based biodiversity. So far they have been more DFNS than infrastructure focused DFCS.
(1) –https://www.greenclimate.fund/document/debt-climate-swaps-exploring-avenues-and-opportunities
The Green Tau 