Debt and Biodiversity: A Chinese Leadership Opportunity

April 9, 2021

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This paper sets out the opportunity for China to engage in developments linking debt and biodiversity. The emergence of a new generation of debt instruments would allow China to advance the risk profile of nature in sovereign debt markets, secure nature outcomes that benefit debtor countries, and advance the goals of international commitments, while unlocking resources for meeting broader fiscal demands.

The paper argues for an equally rapid and ambitious approach for China to develop Nature Performance Bonds (NPBs). These bonds offer a key opportunity for China to integrate the pricing of nature-related risks and performance into financial markets. This would build and expand its existing market capabilities, and catalyse the issuance and trading of these financial instruments in domestic and international markets.

The report sets out three practical steps that China could take, which include: advancing research on prospects for nature-specific debt instruments and nature-supporting market arrangements; participating in international initiatives to advance the integration of nature in debt markets;

and developing a programme of innovative domestic pilots to underpin an international leadership role in issuance and trading.

This report has been developed as a contribution to the Special Policy Study on Green Finance of the China Council on International Cooperation on Environment and Development (CCICED).

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