As host of COP16, Colombia sought to legitimise and gain allies for its proposal to swap debt for nature. As the plenary session, suspended due to lack of quorum, resumes, the country is intensifying its diplomatic efforts to turn the weight of foreign debt into an opportunity for environmental and climate action.
COP16 ended, leaving one of its most important tasks pending: mobilising financial resources to reach $200 billion annually by 2030 to finance the National Biodiversity Action Plans (Target 19 of the Kunming-Montreal Global Framework). The closing plenary session, which was supposed to adopt a final summit report, was suspended at 8:00 a.m. on Saturday, November 2, because delegates from more than half of the countries had left the room after more than ten hours of deliberations.
Although the suspension of the plenary does not invalidate the decisions that were approved—such as the creation of the Cali Fund for the distribution of benefits obtained from digital sequence information—it is still unclear when the countries party to the Convention on Biological Diversity (CBD) will meet again in Bangkok, Thailand, to reach an agreement on the points that were left pending. This must happen before the next COP, to be held in Yerevan, Armenia, in 2026.
One of the proposals that was left in the air is the inclusion of debt swaps within the financing strategy of the Global Framework, which was championed by the COP presidency, headed by the Colombian Minister of Environment, Susana Muhamad, practically until the last minute of the final plenary. According to a report from Carbon Brief from the plenary hall, a draft decision presented by the presidency at 3:30 am attempted to include the recognition of ongoing efforts to reform the international financial architecture and its importance for closing the biodiversity financing gap. This draft also sought to position the increase in fiscal space in the face of sovereign debt and the issuance of special drawing rights as elements of discussion to achieve the goals of the Global Framework.
However, this topic was only vaguely included in the draft decision of the presidency, which acknowledges the efforts to accelerate the reform of the international financial system and the importance of ensuring that this reform helps close the biodiversity financing gap. It also asks the executive secretariat to conduct studies on the relationship between debt sustainability and the implementation of the Convention.
The momentum of COP16
“With the change from debt to climate action, we move to new modes of production, to a different relationship between human beings in the face of production and wealth,” said the President of Colombia, Gustavo Petro, during his opening speech at COP16.
In this regard, Minister Susana Muhamad explained to us at the end of a press conference on Tuesday, October 29, that “the specific swaps are bilateral, but the issue of how there can be a more inclusive mechanism, which includes instruments like this one, is part of the broader negotiation on the financing strategy of the Kunming-Montreal Framework, where it can be one of the options.”
While debt swaps are not approved or rejected at a COP, the Cali summit was a pivotal event that reinforced the legitimacy of this proposal and created convergences among international actors to help implement it in Colombia and other countries.
An example of this was the position document presented by the Brazilian delegation, which calls, on behalf of the negotiating group of megadiverse countries—which brings together 20 countries and concentrates 70% of the world’s biodiversity—to reform the international financial system to “support developing countries without generating more debt” and without “replacing the legal responsibility of developed countries.”
In this same vein, the Chancellor of Colombia, Luis Gilberto Murillo, announced after a bilateral meeting with the State Secretary of Germany, Jochen Flasbarth, that that country “will generate symbolic gestures of support through a very small debt-for-nature swap operation.”
Likewise, during the high-level sessions of COP16, six of the largest conservation organisations on the planet launched a coalition to promote conservation and climate action through converting sovereign debt, a mechanism that, according to their calculations, could unlock up to $100 billion for low-income countries.
The “Climate Marshall Plan” advances in Washington
Since the Summit for a New Financing Pact in Paris in June 2023, President Petro has repeatedly proposed swapping public external debt to finance a “Climate Marshall Plan” in international forums. COP16 was not the exception.
The term alludes to the US government’s initiative to drive the reconstruction of Europe after World War II through the transfer of more than $13 billion between 1948 and 1952. But this time, his proposal seeks to drive the energy transition and biodiversity conservation through the forgiveness of part of the external debt of the countries of the Global South.
“This initiative introduces a debt-for-climate action swap mechanism aimed at releasing fiscal space so that countries can invest in climate mitigation and adaptation, as well as in the decarbonisation of their economies,” explained Ambassador Daniel García-Peña, whom President Petro entrusted with the mission of promoting this proposal from Washington, where the leading international financial institutions are headquartered.
“The central proposal is a large global issuance of special drawing rights, channelled into a climate fund. This measure represents an opportunity for developing countries to access significant resources that reinforce their ability to respond to the global climate crisis,” added the ambassador.
Special drawing rights (SDRs) are an international reserve asset created by the International Monetary Fund (IMF) that functions as a “world currency.” Countries can exchange them for real currencies, allowing them to obtain liquidity without increasing their debt. An example is the SDRs issued by the IMF in 2021, equivalent to $650 billion, to help economic recovery after the COVID-19 pandemic. This is a precedent for the type of issuance that Colombia proposes to finance climate action.
“Diplomacy for Life”
According to Ambassador García-Peña, the debt swap and the reform of the international financial architecture are “at the highest priority” on his agenda. As part of the “diplomacy for life” promoted by the Ministry of Foreign Affairs, his work consists “in consolidating strategic alliances with senior US government officials to articulate a shared vision, encompassing both bilateral cooperation and dialogue with multilateral actors to strengthen the climate agenda of the Colombian government.”.
García-Peña highlighted the support his embassy has given to the work of the Expert Group on Debt, Nature, and Climate Change, established by Colombia, France, Kenya, and Germany, which presented its initial report in Washington during the World Bank Annual Meetings, which coincided with the first week of COP16 in Cali.
Among its conclusions, the report states that it is only possible to act in the face of the climate crisis by addressing the debt crisis facing many low-income countries. It proposes a series of recommendations to reform the debt sustainability assessment used by the IMF and the World Bank. The final report will be presented in April 2025, with concrete proposals to strengthen the feasibility of a global debt-for-nature swap.
In addition to the debt swap and the Climate Marshall Plan, the embassy in Washington is working with the US government, multilateral financial institutions, private donors, and private sector financial actors to mobilise the necessary resources for Colombia’s Climate Action and Socioecological Transition Portfolio, which was presented at COP28 in Dubai in December 2023.
An old “new” solution
The first debt swaps began to be implemented in Latin America in the late 1980s, and, to date, this type of swap has been carried out twice in Colombia. The first, between 1992 and 1993, which swapped just over $322 million in debt with Canada and the United States, channelled through the Ecofondo; and the second, in 2002, for $10 million in debt with the United States, channelled through the Fondo Acción, with significant participation from three major conservation NGOs.
Felipe García, manager of the Center for Biodiversity Economics and Finance at Instituto Humboldt, opined that these experiences “had important results,” allowing many projects to be developed in the territory and positively impacting environmental and biodiversity conservation issues.
“The challenge is that these are complex issues to move forward and require both a great technical capacity at the institutional level and political will from the countries with which these swaps are negotiated. The institution mandated to lead this type of instrument is the Ministry of Finance; the challenge is institutional coordination with other offices, such as the Ministry of Environment, which allow them to be carried out,” added García.
“The problem with these swaps is that they have become increasingly complex over time,” said Carola Mejía, coordinator of Climate Justice, Transitions, and the Amazon at Latindadd (Latin American Network for Economic and Social Justice). Mejía has closely followed one of the most recent debt swaps in Latin America, in the Galapagos Islands, in Ecuador, and warned about the lack of transparency in the negotiations, the violation of the rights of information and participation of the communities, and that “in general, the swaps are not negotiated fairly, as it is the creditor countries that impose the conditions and the debtor countries have to assume what is proposed to them.”
“In this case, we can see that it is not only a negotiation of debt reduction and release of fiscal resources; in reality, it involves a new loan, the issuance of a blue bond, and the creation of a fund that is mostly managed by the private sector, with the participation of foreigners who will make decisions about the conservation of a marine area,” said Mejía.
Téophile Zognou, president of the African Funds Consortium for the Environment (CAFÉ), currently accompanying two debt-for-nature swap processes in Gabon and Madagascar, agrees. “The real problem is the negotiation process, which is sometimes very long and complex. It is shocking that institutions and bilateral donors impose so many conditions on biodiversity funds: technical assistance and numerous intermediaries, which imply a percentage, and in the end, much less than 30 percent reaches the ground,” said Zognou.
Getting out of the vicious debt cycle
In a report published in September, Zero Carbon Analytics warned that 93% of the countries most vulnerable to the climate crisis are already facing or at significant risk of experiencing debt problems. In Latin America and the Caribbean, 81% of the climate finance received between 2016 and 2020 was in the form of loans. This means mitigation and adaptation activities often become part of this debt crisis.
María Di Paola, researcher and author of the report, concluded that “the debt-for-nature swap market is still very small. Estimates vary, but calculations show that they only offset about 0.11% of the debt payments of low- and middle-income countries between 1987 and 2023. The International Monetary Fund itself mentions that debt-for-climate-action swaps only make economic sense in a limited number of cases. For all these reasons, it is evident that other solutions, such as conditional grants or debt restructuring, may be more effective.”
Mejía from Latindadd opined that the countries of the North must fulfil their responsibility and assume the historical reparation of their climate and ecological debts, for which “debt cancellation could be an agile mechanism to release resources; of course, it is complicated to see how it will be guaranteed that they will go to conservation or the fight against climate change, but I think that will depend a lot on a monitoring scheme on how the resources are used at the national level.”.
“We also demand reforms to the international financial system and in global economic governance so that the countries of the Global South have an equally important voice and vote as the countries that are the historical climate and ecological debtors, which are the ones who are unfortunately governing the IMF and the World Bank,” Mejía concluded.
