The Republic of Ecuador closed a $1.53 billion debt-for-nature conversion of its international bonds, freeing up $800 million in net fiscal savings by 2035. More than half, $460 million, will be used to conserve terrestrial and freshwater ecosystems in the Ecuadorian Amazon. The partners say this is the largest amount raised for conservation in any debt conversion.
Debt-for-Nature or Debt-for-Climate Swaps allow countries that harbor much of the world’s biodiversity, are the most vulnerable to climate impacts and emit relatively little greenhouse gas (GHG) to protect against the impacts of climate change. Many of these countries owe external debt that they are unable to pay and that will become increasingly difficult to pay as the impacts of climate change mount. Rather than paying interest to countries that have more resources and have contributed more emissions, these conversions free up funds to enable countries to fund resilience and conservation measures for these valuable ecosystems.
The forests, rivers and wetlands of the Amazon region mitigate climate change and provide critical food, freshwater, and cultural, economic and climate benefits to local communities, the people of Ecuador, and beyond. Like the rest of the world, Ecuador faces rising average temperatures, changes in rainfall patterns, and extreme weather events—all of which directly impact human health and livelihoods.
Partners in the transaction include the U.S. International Development Finance Corporation (DFC), the Inter-American Development Bank (IDB), Bank of America and and The Nature Conservancy’s Nature Bonds Program, which combines debt refinancing, ecological and social science, conservation planning and policy to support countries in achieving their conservation and climate goals, close the nature finance gap, and support local communities. BofA was the arranger and initial purchaser of the new financing used to fund the tender of the pre-existing Ecuadorian sovereign bond. The $460 million will support the Amazon Biocorridor Program (Programa Biocorredor Amazónico, BCA).
“The Government of Ecuador reaffirms its commitment to conserving the Amazon region by implementing innovative financing mechanisms,” said Juan Carlos Vega, Ecuador’s Minister of Economy and Finance. “As part of a responsible fiscal management framework, we have carried out a financing operation that not only alleviates the burden of public debt but also ensures sustainable resources for the development of the BCA.”
The Amazon Biocorridor Program aims to improve the management of 4.6 million hectares of existing protected areas and protect an additional 1.8 million hectares of forests and wetlands. This model will also protect 18,000 kilometers of rivers, bolster climate resilience, and support human well-being. Indigenous Peoples and Nationalities are participating in its co-design, ensuring they have a role in decisions that impact their territories and well-being.
“The Amazon Biocorridor Program is not simply a strip of territory; it is a comprehensive management model that strategically addresses the major environmental challenges of our time,” said Inés Manzano, Minister of Environment for Ecuador. Through innovative mechanisms in financing and conservation, this program places the Amazon at the center of a transformative vision that not only protects one of the most biodiverse ecosystems on the planet but also ensures the long-term resilience of Ecuador, the Amazon region, and the entire world.”
The debt conversion is expected to generate $400 million plus an estimated $60 million in endowment returns over time. Of the $400 million ($23.5 million per year over 17 years), $19 million will fund the Amazon Biocorridor Program annually, including TNC’s technical support. An additional $4.5 million annually will capitalize an endowment that is expected to generate approximately $60 million in additional returns for a total projected end value of $137 million by 2041, bringing the total funds for conservation expected to be unlocked to approximately $460 million overall.
This is the sixth project supported by TNC’s Nature Bonds Program and it is the first ever Nature Bonds project focused on terrestrial and freshwater conservation. Together, the six projects are expected to generate approximately $1 billion in conservation funding and support governments to reach new protection commitments or improved management of nearly 242 million hectares of ocean, land, lakes and wetlands and 18,000 km of rivers.
