Research-based
policy recommendations
for the G7

Using Debt Conversions to Support the Sustainability Agenda

Abstract

Countries across the global are facing a sovereign debt challenge in the wake of the economic impacts of Covid. This will likely result in an increasing need for debt restructuring and debt forgiveness operations. As global institutions look at this issue, they have an opportunity to ensure that these restructuring and forgiveness interventions are truly sustainable by incorporating climate and nature risk. The G7 countries are influential creditors in the sovereign debt market. As such, setting out a joint statement of intent and direction through the G7 process would be an important market signal. Importantly, the G7 countries – when acting together – can also influence discussions and outcomes at the IMF and other influential sovereign debt fora to ensure that debt conversions and debt forgiveness operations explicitly secure climate and biodiversity benefits.