Two thirds of low- and middle-income countries face significant challenges in making ongoing payments for their national debt. As a result, many now spend more on debt service than on important issues like education and health. Those countries are also home to many of the world’s most critical ecosystems, where conservation is most needed.
In 2016, the Nature Conservancy pioneered an innovative new way to fund environmental conservation. Now called the Nature Bonds program, it helps countries refinance commercial debt and use the savings to finance projects that protect nature and address climate change. Begun with a single pilot in Seychelles, Nature Bonds projects have unlocked $1 billion dollars for conservation in six countries and led to commitments protecting nearly 1 million square miles of oceans, land, and rivers. Funds are distributed through independent conservation trust funds that benefit local communities that depend on natural resources for their livelihoods.
In November 2024, the Nature Conservancy convened representatives from developing countries, development finance institutions and banks, NGOs, and other stakeholder organizations at The Rockefeller Foundation Bellagio Center (Bellagio Center) to plan how to scale the impact and global footprint of this successful program. According to Lorenzo Mendez, Principal on The Rockefeller Foundation’s Innovative Finance Team, “The convening brought together the right people — not just to talk, but to align. Everyone left the Bellagio Center with a clearer sense of their role in the ecosystem and what it will take to move from bespoke transactions to a mature market.”
We talked to Melissa Garvey, global director of the Nature Bonds program, and Kevin Bender, the Nature Conservancy’s former director of Greening Sovereign Debt, about what makes this approach effective, what it takes to bring a big idea to scale, and the power of convening, coalitions, and transparency to drive global impact.
Our six Nature Bond projects have unlocked $1 billion for conservation and led to commitments protecting 242 million hectares of oceans, land and water. This is an alternative solution that works at the scale of the problems we aim to solve.
Melissa GarveyGlobal Director, Nature BondsThe Nature Conservancy
How do Nature Bonds projects help support conservation and climate efforts?
Melissa
Imagine you want to refinance your mortgage, but you don’t have a great credit score. You have a wealthy aunt who offers to co-sign to help you get a better interest rate and a longer repayment period, but she has one condition. She wants you to take the savings you get from the lower interest rate and use them to put solar panels on your roof.
Nature Bonds projects work in a similar way. The debt refinancing is on a much larger scale. And instead of a wealthy aunt, the support comes from development banks, development finance institutions, and private individuals who provide credit enhancements — guarantees or insurance for the borrowing countries.
Kevin
At their core, Nature Bonds projects are a simple idea: use cheaper debt to buy back expensive debt. By doing so, they offer a powerful, sustainable new way to protect nature, over the long term and on a major scale. The independent conservation trust funds provide strong transparency and accountability. The money they distribute goes to support governments in managing protected areas, provide grants for small organizations, and create endowments that ensure vital conservation and climate efforts can continue for generations to come.
What makes Nature Bonds projects a breakthrough solution?
Kevin
Nature Bonds projects do have precedent. They evolved from bilateral debt-for-nature swaps – loans from one country to another, where the lender says something like “Put half of the money into forest protection, and we’ll forgive the other half.” But those don’t cover commercial debt, which is often the most expensive debt and the debt that countries want to refinance. Our first commercial debt conversion in Belize lowered the country’s debt by 12% of GDP. In doing so, it freed up more than $180 million for conservation, ensuring that those funds can support people, communities, and the environment, rather than paying global bond holders.
Melissa
Working with commercial debt enables us to develop larger projects that are already moving the needle. A project in Ecuador involved 11 indigenous nations in defining new protections and management of an essential part of the Ecuadorian Amazon that is larger than Norway. Belize is committed to protecting 30% of its oceans by next year. Our six projects have unlocked a billion dollars for conservation and led to commitments protecting 242 million hectares of oceans, land and water. It’s an alternative solution that works at the scale of the problems we aim to solve. Crucially, these projects work with and for local communities. In Belize, for example, funds unlocked by the project have created hundreds of jobs over the past three years and trained hundreds more residents in skills like coral restoration, manatee rescue and rehabilitation, and seaweed farming.
What goes into taking an approach like this to scale?
Melissa
Building coalitions is vital. Other NGOs were also working in this space, and we knew we would be smarter together than working separately. So we gathered with the World Wildlife Fund, Conservation International, the International Wildlife Conservation Society, Key Charitable Trust, ReWild, and Zoma Labs to collaborate on more of these projects in a high-integrity way.
Kevin
As creators of this approach, we’ve done a lot of handholding to get things going. But over the long term, our goal is to reduce the Nature Conservancy’s role. Scaling involves bringing many moving parts — financial instruments, conservation commitments, and multiple parts of the government and the financial sector — together. We created a toolkit to map out the process and help governments understand what they are getting into, so they can decide whether they want to take part. To make this work, everybody has to work together and own their role.
What led to the 2024 Bellagio Center convening, and how has it helped to scale this approach?
Kevin
We weren’t anywhere near scale, but we had enough data to know what the pain points were, where we could make things more efficient, and how we could accelerate getting projects to financial close and implementation. There was massive interest, and the Bellagio Center convening was the perfect solution at the perfect time. It pulled everybody away from their desks to a setting where you can whiteboard, walk outside, and debate.
Melissa
The participants I spoke to all left excited. They told me that the convening was a great use of their time and an important step in moving forward. We use an open-source approach for the Nature Bonds program. Rather than keeping transaction details under wraps, we developed case studies of closed transactions and created a toolkit to teach government ministers and other project participants how Nature Bonds projects are developed and implemented. We want to put these out in the world to make sure that others can do these kinds of things in a high-quality way. The convening gave us the opportunity not just to share the toolkit, but to build upon it and figure out how we can use it more. Our goal is to grow that transparency and trust as we scale the Nature Bonds program.
Kevin
Getting everyone around the same table, away from the pressure of financial close and project implementation, makes a huge difference. Take the reporting, for example. Each group uses the conservation trust fund reports differently. We use them to monitor conservation efforts and ensure they get done. Investors use them to understand how their money is being used. Credit enhancement providers need them because they take on risk by putting their name and credit rating behind the project. So everyone had different ideas of what the reports should be. But doing three different sets of reports every time would be confusing and labor intensive. When we got everyone together at the Bellagio Center, we found that nobody had a problem with streamlining the process. They just hadn’t been able to see how the pieces fit into the bigger picture because the groups hadn’t been working together. At the convening, they found common ground for a more efficient, replicable solution that meets everyone’s needs. We still have a lot of work to do, of course, but the ideas and alignment coming out of it all put us in a much better position to expand this approach.
What impact do you think scaling could create?
Kevin
My favorite criticism is that we’re not going to solve the world’s debt problems with this structure. If the worst you can say about Nature Bonds projects is that they won’t completely eliminate global debt challenges, we’re doing pretty good. This instrument is a clever way to help fund and provide technical assistance to support conservation, and it can significantly move the needle. The solution is just one of the tools in our toolbox for protecting nature, but it’s a good one. Working together, we can significantly scale this approach and play an important role in filling the gap on conservation and resilience financing.
Melissa
Given the amount of unsustainable debt in the world, the opportunities for this kind of approach are enormous. There’s the potential to make available $100 billion that could fund conservation and climate. We don’t think we’ll be able to do all of that, but there is a gigantic opportunity to improve biodiversity, address climate resilience, and support mitigation while strengthening communities. These projects also bring tremendous leverage for philanthropy. In Ecuador, a $3 million philanthropic investment unlocked close to half a billion dollars in conservation funding. It’s not a panacea, of course. But it’s a way to stretch the philanthropic funding that’s out there in the world, and it’s going to be an essential approach as we try to address some of the world’s greatest problems.
Ideas don’t change the world on their own. It takes connection, action, and commitment to turn an innovative concept into a breakthrough that reimagines an issue, transforms a community, or solves a crisis. To Eric Pelofsky, The Rockefeller Foundation’s Vice President, Global Economic Recovery, Nature Bonds projects represent a perfect example of that concept in action. “The gathering at the Bellagio Center helped turn a breakthrough into a blueprint,” Pelofsky said. “The world needs scalable tools to address debt, climate, and equity — and the Nature Bonds program is one of them.”
Learn More:
- Read the Nature Bonds Toolkit for governments, partners and other stakeholders.
- Watch Melissa Garvey discuss the Nature Bonds Program at the 2024 Sun Valley Forum.
- Listen to a conversation on the Nature Bonds program on the Eco Money Podcast.
While The Rockefeller Foundation provided support to the author to create this project, the Foundation is not responsible for the project and does not recommend or endorse the contents of the article.