Investment Blueprints for Collaborating on Sustainably Financing the Post-Pandemic Recovery

CONTEXT

As the world moves into a post-COVID recovery phase, leaders across the public and private sector are calling for recovery finance measures to be aligned with the SDGs and the climate objectives of the Paris Agreement.

To help facilitate action on this issue, CPI developed three investment blueprints for financial instruments that can deliver concrete action consistent with cross-institutional collaboration encouraged by the Framework for Sustainable Finance Integrity. These blueprints describe financial structuring and other implementation requirements that, we believe, show strong promise for green and resilient recovery finance. These are intended as proposals for discussion and, ultimately, action.

SUSTAINABLE FINANCE BLUEPRINTS

DEBT FOR CLIMATE SWAPS

The pandemic has exacerbated the debt vulnerabilities of many low- and medium-income countries. Many sovereigns face a liquidity crunch because government revenues declined due to reduced economic activity, while the timing and the quantum of external debt servicing payments has remained the same.

For Low-Income Countries (LICs), interventions such as the Debt Service Suspension Initiative (DSSI) provide liquidity relief. However, no such interventions exist for Middle-Income Countries (MICs) with high external sovereign debts. Even for MICs that don’t need debt rescheduling or do not face any immediate liquidity crisis, spending towards achieving climate goals will be challenging under current conditions.

Source: Climate Policy Initiative
Author: Vikram Widge