Ecuador, the Seychelles, Sri Lanka: new agreements are reducing national debt to fund nature conservation.

In the 1990s, Irish singer Bob Geldof and his friends campaigned to "drop the debt" to alleviate the economic struggles of developing nations. Ten years later, G7 finance ministers wrote off 122 billion euros of debt for 36 countries.

Now, in 2022, debt relief is being planned in a different way.

A debt-for-nature swap could create a situation where countries with high debt levels, teetering on the brink of insolvency, are offered a path to solvency. However, there is a catch to this rather smooth path: the money must be used for environmental protection.

Agreements are being prepared with Ecuador, Cape Verde and Sri Lanka. What would they mean and what is included in them?

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Money lent to countries is called a sovereign bond, and the rate at which these bonds are traded—or how much people are willing to pay for them—can reveal a great deal about a country's financial state. If bond values are low, interest rates increase, generally making borrowing more expensive for both the state and its citizens.

For instance, when Liz Truss was Prime Minister of the UK, the value of government bonds fell due to her financial policies, a move many considered reckless and ill-considered.

"Debt-for-nature" deals, or "green bonds", would allow countries struggling with debt to reduce their financial burdens in exchange for nature conservation. This could mean refinancing debt payments or being offered better interest and repayment terms.

The money saved would then be directed towards nature conservation, with conservation opportunities being utilised by countries that possess significant natural resources and credit resources.

For example, Ecuador is conducting negotiations with Pew Charitable Trusts, as well as the Inter-American Development Bank and the US International Development Finance Corporation.