A new class of nature and climate KPI-linked sovereign debt instruments aims to generate liquidity through increased fiscal space and at the same time provide long-term structural changes to embed natural capital in sovereign debt markets.
These instruments – Nature Performance Bonds (NPBs), while tied to measurable targets for restoring wetlands, protecting forests, and reducing threats to wildlife and plant species, still allow for general use of proceeds. The NPBs can incentivise nature performance by offering a reduction in coupons payments and/or a principal adjustment on delivery of the targeted nature and climate outcomes.
NatureFinance’s work is being engaged by a growing number of market actors aligned with the view that radical innovation in the sovereign debt market is critical to unlocking a greener future and wellbeing for all.
