Last month, the Environmental, Social, and Governance (ESG) investing movement got a hard reality check about one of its favorite financial tools.
Known as debt-for-nature or climate swaps, the tool played a role in a recent coup in Gabon.
The nation’s democratically elected government was overthrown by rival militants just a week after the completion of a $500 million swap agreement, illustrating the problems with these instruments in both theory and practice.
Climate swaps take existing emerging market debt and either refinance it at a lower rate or extend the terms of the loan.
The emerging nations then take the money raised and use it for biodiversity protection and climate adaptation.
Continue reading the entire piece here at the New York Post
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal. This piece is adapted from City Journal online.
Photo by ERIC FEFERBERG/AFP via Getty Images
