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Debt-to-Sustainability Swaps (D2S): A Practical Framework

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  • Chekir, Hamouda
  • Kessler, Martin
  • Albinet, Charles

Abstract

Amidst growing liquidity challenges and mounting debt burdens, governments have to forego some of their priorities, especially when they represent long-term commitments, such as sustainability investment. Debt-To-Sustainability Swaps (D2S) have become a popular tool to address this dual tension. Yet, their limitations are also well known: they are fit for purpose in a limited number of cases, and tend to be complex arrangements. When are D2S useful? How much can they reduce debt? What are the conditions for a meaningful sustainability impact? This paper describes when and where swaps are useful, and goes beyond these considerations by proposing a practical guide on the economics, impact and governance of such transactions.

Suggested Citation

  • Chekir, Hamouda & Kessler, Martin & Albinet, Charles, 2024. "Debt-to-Sustainability Swaps (D2S): A Practical Framework," FDL Policy Notes 2404, CEPREMAP.
    • Handle: RePEc:cpm:notfdl:2404
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    File URL: https://findevlab.org/wp-content/uploads/2024/07/FDL_Policy-Note_D2S_June-2024.pdf
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    References listed on IDEAS

    as
    1. Acharya, Sankarshan & Diwan, Ishac, 1993. "Debt Buybacks Signal Sovereign Countries' Creditworthiness: Theory and Tests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 795-817, November.
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    More about this item

    Keywords

    Sovereign Debt; Liquidity Challenges; Debt Burdens; Governments; Green Finance; Climate Finance; Sustainable Finance; Debt-To-Sustainability Swaps (D2S); Economics; Governance;
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