by Julie McCarthy, CEO of NatureFinance
Finance ministers meeting in Washington face a question the credit system has so far refused to answer: why does preserving nature count for nothing on a sovereign balance sheet, while destroying it registers as growth?
Following the Gulf conflict and oil prices above $100 a barrel, twelve low- and middle-income countries (LMICs) — among them Ghana, Kenya, Côte d’Ivoire, Egypt, Honduras, and Paraguay — are facing rising bond spreads, with major debt payments due this year. Several more are already in default. This is not a governance failure story, though governance failures exist. It is a measurement story — and measurement is something financial markets pride themselves on getting right.
Calling this yet another debt crisis misdiagnoses the problem. Some of these countries made fiscal choices that compounded their vulnerability. But poor governance does not explain why a country’s intact forest cover, its soil health, or its biological agricultural systems are invisible to sovereign credit ratings. What we are observing is a design flaw that precedes and outlasts any individual government — one that systematically undervalues the natural wealth that could provide the most durable route to fiscal resilience.
A punishing logic
Sovereign credit ratings capture fiscal deficits, debt-to-GDP ratios, and inflation. They do not capture forest cover, soil health, coastal mangroves, or biodiverse agricultural systems — assets that underpin economic productivity, absorb shocks, and reduce dependency on imported energy. A country that has chosen not to liquidate its natural capital appears on the standard ledger as poorer than one that has stripped its forests for short-term commodity export. The problem runs deeper than the headline metrics. The qualitative governance indicators that feed directly into sovereign credit models — including the World Bank’s Worldwide Governance Indicators used by Fitch and Moody’s — were never designed to recognise natural capital stewardship as a fiscal asset.
This is a measurement problem costing these countries billions in unnecessary risk premia. NatureFinance’s analysis of Ghana shows that credible commitments to reduce deforestation could boost its sovereign rating by up to two notches, unlocking $93-935 million annually in new revenues. Across 26 nature-rich LMICs, biodiversity-adjusted credit modelling estimates that nature-related downgrades under a business-as-usual scenario would increase annual interest payments by up to $53 billion — a systematic, compounding penalty on the countries least responsible for nature loss, most exposed to its consequences, and least able to afford the investments that could reverse it. Financial markets are collecting a premium for risks that their own demand patterns helped create and that their own methodologies have yet to measure — leaving the countries paying the price with neither the power nor the fiscal space to meaningfully prevent them.
Correcting that measurement failure requires more than methodology reform. It requires showing what becomes possible when nature-rich economies are given the institutional tools to convert biological wealth into economic resilience.
What nature-rich countries can do — if the architecture exists
When OPEC’s 1973 oil embargo sent energy prices surging, Brazil built an alternative. The Proálcool program converted centuries-old sugarcane cultivation into an industrial-scale biofuel sector — not for environmental reasons, but as economic strategy. Half a century later, sugarcane ethanol remains a structural source of Brazil’s energy security and an important tool in helping weather the current Gulf conflict’s price shocks. Brazil has continued building on that logic, launching its National Bioeconomy Strategy and the EcoInvest program, which has mobilised over $24 billion in commitments across its first three auctions between 2024 and 2025, attracting private and foreign capital into energy transition, land restoration and green infrastructure.
Ghana, Kenya, Honduras, and others named at the outset of this piece have comparable biological endowments. What they have lacked is what Brazil had in 1975: a state decision to treat that endowment as an energy and fiscal strategy — and a financial system willing to price it as such.
Most nature-rich LMICs have the natural wealth. What they lack is the institutional architecture to convert it into resilience. None of it shows up in their borrowing costs. None of it registers in IMF Article IV surveillance — where nature appears at best as a development recommendation, sitting outside the debt sustainability analysis and growth projections that actually drive lending decisions.
The RST fix — and the longer redesign
Of the IMF’s Resilience and Sustainability Trust (RST)’s $40 billion capitalization, $26 billion remains undeployed. The binding constraint is not quantum — it is eligibility and program design. Reorienting entry criteria and terms around country-driven, nature-positive resilience commitments, and calibrating lending terms to reflect their macrofinancial value, is achievable within the RST’s existing framework independent of its longer-term institutional trajectory.
The underlying problem is a category error: nature-related assets are treated as environmental variables when they are macroeconomic ones. Correcting it means three connected shifts — in how sovereign ratings measure risk, in how MDBs account for natural productive capacity in their lending terms, and in how debt restructuring converts fiscal space into bioeconomy investment tied to measurable economic transition, not conservation pledges. None of it reaches speed or scale without private capital alongside public — crowded in through sustainability-linked bonds and bioeconomy project finance, not as dependency, but as the market signal that finally prices nature correctly.
The countries gathering in Washington this April are not asking for charity. They are asking for a financial system that can read a balance sheet correctly. It is not a redistribution of wealth. It is a recognition of it.
