A financing instrument often referred to, regarding green development and conservation, is the debt-for-nature swap. But what is a debt-for-nature swap? This was the topic for a panel discussion on Tuesday, the pre-conference day for the 2026 Africa Green Economy Summit, in Cape Town.

Debt-for-nature swaps are liability managing instruments for sovereigns, explained investment and climate finance expert and founder and CEO of Gabonese venture capital enterprise Mwaana Inc. Akim Daouda. "You're managing your debt."

"Debt-for-nature swaps work by taking expensive debt and exchanging it for a cheaper loan," summed up sustainable development financial company Oceans Finance South Africa CEO Erik Wandrag. "It's not a panacea. It doesn't work everywhere."

Daouda gave a scenario to show how such swaps work. Imagine a country with a sovereign debt that was trading at a high spread - say, 900 basis points. Under a debt-for-nature swap, that debt is replaced by new debt guaranteed by a multinational finance institution. Because that debt is guaranteed, the creditors will accept a lower spread, say 600 basis points. The country would then use the money saved on debt repayments to fund conservation. 

One of the key preconditions for a debt-for-nature swap is that the country concerned is committed to the initiative, highlighted Wandrag. Such swaps take years to arrange - in his experience, an average of four years. 

To implement a debt-for-nature swap, a country needs access to cheaper debt, and a government willing to invest in conservation, affirmed Worldwide Fund for Nature Namibia/Sustainable Finance Coalition sustainable finance coordinator Rowan le Roux. The objective of the deal had to be clear. Is it to release funds to directly fund conservation? Or was it "political" - for example, to make necessary the declaration of more conservation areas?

He further noted that debt-for-nature swaps needed to be properly structured. And sometimes other financial instruments might be better.

Wandrag cited the option of sustainability-linked bonds. But, whatever option was chosen, it still had to be repaid. "It's cheaper - it's not free," whatever option was chosen.

When asked what the most important question was to ask, before entering into a debt-for-nature swap, Daouda replied "[w]hat is the debt, what is the price, what is the maturity?" Le Roux's response was: what is the conservation objective? And Wandrag's was: what are the conservation priorities you want to achieve? What is your debt management approach?