US climate pullback threatens planned debt-for-nature deals
The 'debt-for-nature' swaps, which reduce a country's debt in return for conservation commitments, have gained traction in recent years with deals involving the Galapagos Islands, coral reefs and the Amazon rainforest among the most prominent.
The US International Development Finance Corporation (DFC) has been a key player, providing political risk insurance for over half of the deals done over the last five years, accounting for nearly 90 per cent of US$6 billion of swapped debt.
A source with direct knowledge of the plans said the DFC had about five swaps in the pipeline which are now in question, with CEO-in-waiting Ben Black and US government efficiency chief Elon Musk both criticising its climate work.
The source did not specify how much debt was covered by the swaps but pointed out that the last few DFC-backed deals involved over US$1 billion each.
Spokespeople for the White House and the DFC did not respond to requests for comment on future DFC involvement in such deals.
A NEWSLETTER FOR YOU
Friday, 12.30 pm ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
Sign Up
Sign Up
A DFC official who spoke on condition of anonymity confirmed to Reuters it stepped down earlier this year as co-chair of a global task force set up in 2023 to expand the use of debt swaps.
US Treasury Secretary Scott Bessent has also hit out at multilateral lenders for climate change work amid a broader US retreat that has seen it withdraw from the Paris Agreement to curb global warming.
Angola and Zambia, and at least one Latin American country, are among those whose 'debt-for-nature' swap plans risk needing to be reworked or even abandoned due to DFC uncertainty, four sources that have been directly involved in the projects said.
Angolan Finance Minister Vera Daves de Sousa said her country, which is one of the most indebted in Africa and whose rivers feed the Okavango basin vital for endangered elephants and lions, has been talking to the DFC about two potential swaps.
One is a debt-for-nature deal, the other a broader 'debt-for-development' swap tied to education and young people.
'We feel openness from them (DFC), but especially on the debt-for-development swap,' de Sousa recently told Reuters.
'We respect their vision,' she added. 'For us, there is no difference – we have opportunities on the development side, and we have opportunities on the nature side.'
New reality
Generating money for conservation by exchanging costly government bonds for cheaper ones is seen as an obvious choice for smaller nations grappling with heavy debt loads and climate change pressures.
UK-based non-profit, International Institute for Environment and Development, estimates that the world's 49 poorest countries seen most at risk of debt crises could swap a quarter of the over US$430 billion they now owe.
Given the signals coming from Washington, those that do should drop hopes of DFC support and look at alternatives, said White Advisory managing director Sebastian Espinosa, who has advised Barbados, Belize and Seychelles on such swaps.
Those could include credit guarantees from major multilateral development banks, potentially alongside private sector insurers and guarantors, as pioneered by the Bahamas last year.
Historically, though, DFC backing has been crucial in scaling up deals, offering up to US$1 billion in political risk insurance. That protects those who buy the new lower-cost bonds if the governments involved fail to make payments.
The Inter-American Development Bank, involved in five of the last nine debt-for-nature swaps – sometimes alongside the DFC – declined to comment on whether any of its plans were being affected.
Investment firm Nuveen's Stephen Liberatore, who has been a cornerstone investor in some debt swaps, said while substitutes for the DFC could be found, the knock-on effects were yet to be seen.
'What is the price for a private entity (to provide risk insurance) versus a public entity like the DFC?' Liberatore said. 'Does it change the amount of savings (which are then spent on conservation)? That's the ultimate question.' REUTERS
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
42 minutes ago
- Straits Times
Trump fires US labor official over data and gets earlier than expected chance to reshape Fed
Signage is seen at the United States Department of Labor headquarters in Washington, D.C., U.S., August 29, 2020. REUTERS/Andrew Kelly WASHINGTON/NEW YORK - President Donald Trump on Friday fired a top Labor Department official on the heels of a market-shocking weak scorecard of the U.S. job market, accusing her without evidence of manipulating the figures and adding to already growing concerns about the quality of economic data published by the federal government. In a second surprise economic policy development, the door for Trump to make an imprint on a Federal Reserve with which he clashes almost daily for not lowering interest rates opened much earlier than anticipated when Fed Governor Adriana Kugler unexpectedly announced her resignation on Friday afternoon. The two developments further rattled a stock market already reeling from his latest barrage of tariff announcements and the weak jobs data. The benchmark S&P 500 Index sank 1.6% in its largest daily drop in more than two months. Trump accused Erika McEntarfer, appointed by former President Joe Biden, of faking the jobs numbers. There is no evidence to back Trump's claims of data manipulation by the Bureau of Labor Statistics, the statistical agency that compiles the closely watched employment report as well as consumer and producer price data. A representative for the BLS did not respond to a request for comment. Friday began with BLS reporting the U.S. economy created only 73,000 jobs in July, but more stunning were net downward revisions showing 258,000 fewer jobs had been created in May and June than previously reported. "We need accurate Jobs Numbers. I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. She will be replaced with someone much more competent and qualified," Trump said in a post on Truth Social. Top stories Swipe. Select. Stay informed. Singapore Opening of Woodlands Health has eased load on KTPH, sets standard for future hospitals: Ong Ye Kung Singapore New vehicular bridge connecting Punggol Central and Seletar Link to open on Aug 3 Singapore New S'pore jobs portal launched for North West District residents looking for work near home Business Property 'decoupling' illegal if done solely to avoid taxes: High Court Singapore HSA investigating teen who was observed to be allegedly vaping in MRT train Asia KTM plans new passenger rail service in Johor Bahru to manage higher footfall expected from RTS Singapore Tengah facility with over 40 animal shelters, businesses hit by ticks Singapore 60 years of building Singapore DATA CONCERNS A Trump administration official who requested anonymity said that while all economic data is noisy, the White House has been dissatisfied with how large the revisions have been in the recent data and issues with lower survey responses. The problem started during COVID and has not been addressed in the years since. "There are these underlying problems that have been festering here for years now that have not been rectified," the person said. "The markets and companies and the government need accurate data, and like, we just weren't getting that," the official said. The BLS has already reduced the sample collection for consumer price data as well as the producer price report, citing resource constraints. The government surveys about 121,000 businesses and government agencies, representing approximately 631,000 individual worksites for the employment report. The response rate has declined from 80.3% in October 2020 to about 67.1% in July, BLS data shows. A Reuters poll last month found 89 of 100 top policy experts had at least some worries about the quality of U.S. economic data, with most also concerned that authorities are not addressing the issue urgently enough. In addition to the concerns over job market data, headcount reductions at BLS have resulted in it scaling back the scope of data collection for the Consumer Price Index, one of the most important gauges of U.S. inflation, watched by investors and policymakers worldwide. Trump's move fed into concerns that politics may influence data collection and publication. "Politicizing economic statistics is a self-defeating act," said Michael Madowitz, principal economist at the Roosevelt Institute's Roosevelt Forward. "Credibility is far easier to lose than rebuild, and the credibility of America's economic data is the foundation on which we've built the strongest economy in the world. Blinding the public about the state of the economy has a long track record, and it never ends well." FED CHANGE SOONER THAN EXPECTED Meanwhile, Kugler's surprise decision to leave the Fed at the end of next week presents Trump an earlier-than-expected opportunity to install a potential successor to Fed Chair Jerome Powell on the central bank's Board of Governors. Trump has threatened to fire Powell repeatedly because the Fed chief has overseen a policymaking body that has not cut interest rates as Trump has demanded. Powell's term expires next May, although he could remain on the Fed board until January 31, 2028, if he chooses. Trump will now get to select a Fed governor to replace Kugler and finish out her term, which expires on January 31, 2026. A governor filling an unexpired term may then be reappointed to a full 14-year term. Some speculation has centered on the idea Trump might pick a potential future chair to fill that slot as a holding place. Leading candidates for the next Fed chair include Trump economic adviser Kevin Hassett, Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh and Fed Governor Chris Waller, a Trump appointee who this week dissented with the central bank's decision to keep rates on hold, saying he preferred to start lowering them now. Trump, as he was leaving the White House to spend the weekend at his Bedminster, New Jersey, estate, said he was happy to have the open slot to fill. "I would not read any political motivation into what [Kugler is] doing, although the consequence of what she's doing is she's calling Trump's bluff," said Derek Tang, an analyst at LH Meyer, a research firm. "She's putting the ball in his court and saying, look, you're putting so much pressure on the Fed, and you want some control over nominees, well, here's a slot." REUTERS
Straits Times
42 minutes ago
- Straits Times
US court maintains restrictions on Los Angeles immigration arrests
Sign up now: Get ST's newsletters delivered to your inbox A federal appeals court late on Aug 1 affirmed a lower court's decision temporarily barring US government agents from making immigration-related arrests in Los Angeles without probable cause. Rejecting the Trump administration's request to pause the Lower Court's order, the three-judge appeals panel ruled that the plaintiffs would likely be able to prove that federal agents had carried out arrests based on peoples' appearance, language and where they lived or worked. President Donald Trump called National Guard troops and US Marines into Los Angeles in June in response to protests against the immigration raids, marking an extraordinary use of military force to support civilian police operations within the United States. The city of Los Angeles and other Southern California municipalities joined a lawsuit filed in June by the American Civil Liberties Union accusing federal agents of using unlawful police tactics such as racial profiling to meet immigration arrest quotas set by the administration. A California judge last month blocked the Trump administration from racially profiling immigrants as it seeks deportation targets and from denying immigrants' right to access to lawyers during their detention. In the unsigned decision on Aug 1, the judges of the US Court of Appeals for the Ninth Circuit largely rejected the administration's appeal of the temporary restraining order. The judges agreed with the lower court in blocking federal officials from detaining people based solely on 'apparent race or ethnicity', speaking Spanish or accented English, or being at locations such as a 'bus stop, car wash, tow yard, day labourer pick up site, agricultural site, etc'. Top stories Swipe. Select. Stay informed. Singapore Opening of Woodlands Health has eased load on KTPH, sets standard for future hospitals: Ong Ye Kung Singapore New vehicular bridge connecting Punggol Central and Seletar Link to open on Aug 3 Business Property 'decoupling' illegal if done solely to avoid taxes: High Court Singapore HSA investigating teen who was observed to be allegedly vaping in MRT train Asia KTM plans new passenger rail service in Johor Bahru to manage higher footfall expected from RTS Singapore Tengah facility with over 40 animal shelters, businesses hit by ticks Asia 'Every day, we think about how to upgrade': China's factories see rise in robot adoption Singapore 60 years of building Singapore The Department of Homeland Security and US Immigration and Customs Enforcement did not immediately respond to requests for comment outside business hours. Los Angeles Mayor Karen Bass called the order a victory for the city. 'The Temporary Restraining Order that has been protecting our communities from immigration agents using racial profiling and other illegal tactics when conducting their cruel and aggressive enforcement raids and sweeps will remain in place for now,' she said in a statement. Mr Mohammad Tajsar, senior staff attorney at the ACLU Foundation of Southern California, welcomed the ruling in statement: 'This decision is further confirmation that the administration's paramilitary invasion of Los Angeles violated the Constitution and caused irreparable injury across the region.' REUTERS
Straits Times
an hour ago
- Straits Times
US appeals court keeps bar on Los Angeles federal immigration arrests
Sign up now: Get ST's newsletters delivered to your inbox A federal appeals court late on Friday affirmed a lower court's decision temporarily barring U.S. government agents from making immigration-related arrests in Los Angeles without probable cause. Rejecting the Trump administration's request to pause the lower court's order, the three-judge appeals panel ruled that the plaintiffs would likely be able to prove that federal agents had carried out arrests based on peoples' appearance, language and where they lived or worked. President Donald Trump called National Guard troops and U.S. Marines into Los Angeles in June in response to protests against the immigration raids, marking an extraordinary use of military force to support civilian police operations within the United States. The city of Los Angeles and other Southern California municipalities joined a lawsuit filed in June by the American Civil Liberties Union accusing federal agents of using unlawful police tactics such as racial profiling to meet immigration arrest quotas set by the administration. A California judge last month blocked the Trump administration from racially profiling immigrants as it seeks deportation targets and from denying immigrants' right to access to lawyers during their detention. In Friday's unsigned decision, the judges of the U.S. Court of Appeals for the Ninth Circuit largely rejected the administration's appeal of the temporary restraining order. The judges agreed with the lower court in blocking federal officials from detaining people based solely on "apparent race or ethnicity," speaking Spanish or accented English, or being at locations such as a "bus stop, car wash, tow yard, day laborer pick up site, agricultural site, etc." The Department of Homeland Security and U.S. Immigration and Customs Enforcement did not immediately respond to requests for comment outside business hours. Los Angeles Mayor Karen Bass called the order a victory for the city. "The Temporary Restraining Order that has been protecting our communities from immigration agents using racial profiling and other illegal tactics when conducting their cruel and aggressive enforcement raids and sweeps will remain in place for now," she said in a statement. Mohammad Tajsar, senior staff attorney at the ACLU Foundation of Southern California, welcomed the ruling in statement: "This decision is further confirmation that the administration's paramilitary invasion of Los Angeles violated the Constitution and caused irreparable injury across the region." REUTERS
