Debt-for-nature deals worth billions aimed at protecting vital ecosystems worldwide face uncertainty as key U.S. backing from the International Development Finance Corporation may wane under President Trump’s administration, risking delays or cancellations of major conservation projects.
Billions of dollars in debt-for-nature deals aimed at protecting critical ecosystems from Africa to Latin America face uncertainty or may need to be restructured due to concerns that key U.S. support could diminish under President Donald Trump’s administration. These agreements, which reduce a country’s debt in exchange for environmental conservation commitments, have gained momentum in recent years, with prominent projects involving the Galapagos Islands, coral reefs, and the Amazon rainforest.
The U.S. International Development Finance Corporation (DFC) has played a vital role, providing political risk insurance for more than half of these deals over the past five years, covering nearly 90% of the $6 billion in swapped debt. However, insiders reveal that several pending swaps are now uncertain, following criticism of the DFC’s climate efforts by incoming CEO Ben Black and U.S. government efficiency chief Elon Musk. While the exact value of these deals remains unclear, recent DFC-backed swaps have exceeded $1 billion each.
Neither the White House nor the DFC responded to inquiries about future involvement. A DFC official, speaking anonymously, confirmed that the agency stepped down earlier this year as co-chair of a global task force established in 2023 to expand debt swaps. Meanwhile, U.S. Treasury Secretary Scott Bessent has criticized multilateral lenders’ climate initiatives amid a broader U.S. withdrawal from the Paris Agreement.
Countries such as Angola, Zambia, and at least one Latin American nation now face the risk of having to modify or abandon their debt-for-nature swap plans due to this uncertainty. Angola’s Finance Minister Vera Daves de Sousa said the country, heavily indebted and home to ecosystems vital for endangered wildlife, has engaged with the DFC on two potential swaps — one focused on nature conservation and another on broader development goals like education. She acknowledged openness from the DFC, especially regarding the development swap, while emphasizing that both nature and development opportunities are important for Angola.
In Zambia, which had considered a swap linked to its national parks harboring a large percentage of Africa’s elephants, progress has stalled. Finance Minister Situmbeko Musokotwane confirmed they are not actively pursuing the swap but have not completely abandoned it.
Debt-for-nature swaps, which convert expensive government bonds into cheaper ones to generate funds for conservation, are seen as attractive options for smaller, highly indebted countries facing climate challenges. The International Institute for Environment and Development estimates that 49 of the world’s poorest nations could potentially swap a quarter of their combined $430 billion debt.
Given the current signals from Washington, experts advise these countries to reconsider reliance on the DFC and explore alternatives such as credit guarantees from multilateral development banks and private sector insurers, as demonstrated by the Bahamas last year. Historically, the DFC’s political risk insurance, which can cover up to $1 billion, has been essential for attracting buyers of lower-cost bonds by mitigating payment default risks.
Eva Mayerhofer of the European Investment Bank, which supported a 2024 Barbados swap, expressed uncertainty about who could replace the DFC’s role in regularly facilitating such debt conversions. The Inter-American Development Bank, involved in several recent swaps alongside the DFC, declined to comment on whether its projects were affected.
Stephen Liberatore of investment firm Nuveen, a major investor in debt swaps, noted that while alternative risk insurers could emerge, the impact on cost savings and conservation funding remains uncertain. He highlighted the key question: whether private entities can provide risk insurance at a comparable price to the DFC without reducing the amount of savings available for environmental protection.
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