 Hello, my name is Paul Steele and I'm the Chief Economist at the International Institute for Environment Development, which is a research institute based in the UK. Within the Institute I work on climate finance and biodiversity finance and the debt swaps which I will be presenting today falls between these two themes. I've been with the Institute for six years and before that I was with the United Nations for eight years working with Ministers of Finance and Asia-Pacific on how climate and nature can be integrated into economic decision making. Today I'm going to talk about the triple crisis of debt, climate and nature and how they can be addressed by debt swaps to build back better post-COVID-19. As you see from the graph, debt, both public and private, has been rising in developing countries over the last few decades. In particular, private debt, as shown by the blue colour, has been rising much faster than public debt. Since COVID has arisen in the last year or so, the amount of debt distress has increased as shown by this graph, which in the faint dotted line shows the increased debt as forecast in 2020 as opposed to the forecasted debt in 2019. So you see the increase as a result of COVID. This is happening in the context of triple crises of not only debt but also climate change and biodiversity loss. So what are debt for climate and nature swaps and how can they address this triple crisis? Debt for climate and nature swaps are when a creditor allows the debt to be reduced in one of three ways. Firstly, by conversion to a local currency from an international currency. Secondly, to be paid a lower interest rate or thirdly, some form of debt right off. And the money saved from this debt relief or debt restructuring can be invested in one of three ways. Either climate resilience or adaptation or emissions mitigation or reducing the emissions of greenhouse gases or thirdly, biodiversity protection or some form of conservation of natural resources. And I'll come back to these in more detail. So what are the economic benefits of this approach? And I want to highlight five in this slide. First of all, expanded fiscal space in the debtor country's government budget, allowing it to spend on things that it couldn't before when it was having to service the debts. Secondly, increased investment for climate and nature, as I've already explained. Thirdly, increased economic growth through sustainable investments because investments in nature and climate increase the growth rate. Fourthly, reduction in the debt stock, sufficient to improve debt sustainability. And finally and importantly, in the development context, a decline in poverty through pro-poor investments. And again, I'll come back to this. So here in more detail are the kind of investments that can be made by debt for climate and nature swaps. First of all, investments in emissions mitigation. And here I give an example of debt for solar or wind renewable energy. This enhances economic growth by increasing the productive use of energy for small and medium scale enterprises, for example. And it's also poverty reducing because it provides energy access for poor women and men. And the example we've given here is a Euro guy Spain debt for wind project swap from 2007. The second type of investment, the debt for climate and nature swap could involve is investment in climate adaptation or resilience. And here we've given the example of climate resilient agriculture. This is growth enhancing because it increases agriculture output and productivity and it's poverty reducing because it improves food security for poor women and men. And we've given here an example actually from the United States in a developed country where they had a debt for nature program. And you see here in the picture a farmer from Mozambique who's dependent on rate fed subsistence in agriculture. And therefore this is prone to climate shocks. So climate resilient agriculture would help her with her crop yields. And finally investments in biodiversity or conservation can be an outcome of debt for climate and nature swaps. And we've given here our forestation or tree planting in watersheds. These are growth enhancing because they increase the productivity of water infrastructure such as dams or hydropower investments. And they're poverty reducing because the trees can be planted in such a way that employment is provided for women and men in the affected areas. And the example we've given here is from a Brazil US debt for forestry swap in 2010. So as you can see here, debt swap support the sustainable development goals. Both those related to nature, climate as well as hunger and poverty. Debt swaps have also received growing attention because of the post COVID green recovery, which a number of agencies and organizations are now talking about. President Biden in his climate plan has made a commitment to provide green debt relief for developing countries that make climate commitments. And this has recently been given added impetus by his executive order. Just this last few days where the order gives a commitment to provide debt relief for alignment with the Paris Agreement. They've also been ongoing internal in discussions within the International Monetary Fund and the World Bank. China, which is the largest official bilateral creditor and the G20. Within the United Nations, the financing for development initiative has included the option of debt for climate and nature swaps. And then it's important not to forget that these debt swaps need to be demanded by debt country leaders. And a number of these leaders have recent for express their interest in taking forward debt for climate and nature swaps. And this includes Cabo Verde, Uganda, Jamaica, Pakistan, Costa Rica, Namibia and Ecuador. So a whole host of countries across the world are showing growing interest. So what debt swaps have actually taken place? Recently in 2018, the Seychelles government swapped about 30 million official debt from marine parks for climate resilience, fishery management, biodiversity conservation and ecotourism. And the partners in that debt for climate and nature swap with a nature conservancy, the global environmental facility and the United Nations Development Program. However, while these debt swaps have been around for some time, in fact, since the 1980s, they have had some shortcomings. The past debt swaps have focused on smaller projects with the funds often managed in trust funds by international non-governmental organizations or NGOs. This has had high costs of negotiation and administration or what we call high transaction costs with limited ownership by governments in the countries, the debtor countries. So we've made a proposal for upscaling debt swaps and shifting to systemic programs by using budget support where the funds are managed through a debtor government's own budget with appropriate fiduciary standards to avoid leakages and corruption. The budget support approach has three main advantages. It allows for much larger amounts of funds to be swapped as part of the debt swap and this is needed in the case of the massive debt distress of COVID. It increases debtor government ownership because it goes through the debtor government's own budget and it shifts accountability to national citizens again through the budget process as opposed to an external NGO which maintains accountability. So in this approach, swaps has budget support and managed as performance-based payments based on agreed policy commitments. And the number of examples of these performance-based payments in other contexts which I just want to highlight to show this is a well-understood mechanism. An international monetary fund in their balance of payments and macroeconomic support pays installments to developing country government budgets linked to policy actions with periodic reviews. The World Bank through their development policy-based lending again makes payments to government sector and overall budgets for certain criteria. The European Union has a large budget support program where payments are again made into government budgets for certain programs that are pre-agreed beforehand. And finally, from the environmental context, Norway makes payments for reduced emissions from deforestation and forest degradation or REDD Plus where payments are made for certain forestry criteria. So what are the performance-based commitments for large-scale swaps that could be put in place? This requires key performance indicators to be agreed between the debtor and the creditor against which payments would be made. And these key performance indicators would be linked to nationally determined contributions in the case of climate or national biodiversity strategies and action plans in the case of biodiversity. And examples are thousands of dollars of spending on climate adaptation, for example, social protection for climate disasters, or thousands of households made climate resilient, or tons of climate emissions mitigated linked to energy access, or the hectares of watersheds are forested with employment by poor women and men, or the hectares of land restored with employment by the poor, or square kilometers of marine protected areas set up for fresh breeding and ecotourism. So all these are examples of key performance indicators that could be used in the swap process. In our research, we've looked at the priority countries for climate and nature debt swaps, and we've identified these priorities by ranking countries according to four criteria. First of all, their debt distress, secondly, their climate vulnerability, thirdly, their biodiversity richness, and fourthly, their credit worthiness, or how effectively they'll use the funds if they were to receive them. In terms of the first priority countries you see in the table there, Cape Verde and Vietnam, in terms of the second priority countries, Honduras, Kenya, Nicaragua, and Papua Guinea, and in terms of the third priority countries, you again see a list of countries. But as you see from this list, it's a whole mix of different countries, both small island developing states and much larger economies, and it ranges across Africa, Asia, and Latin America. So what are the incentives for different organizations to get involved in restructuring using climate and nature debt swaps? For the debtor countries, particularly their ministries of finance and central banks, there are a number of advantages. Firstly, as I've already highlighted at the beginning, there's increased economic growth as a result of climate and nature investments. There's improved debt sustainability, and there's greater ownership of the debt swaps by receiving the reduced debt payments through their own budget. The climate negotiators, there's new and innovative climate finance that would potentially dwarf the Green Climate Fund. For China, which I've already said is the largest official creditor, they're hosting the UN Biodiversity Convention later this year, and one of the key objectives of that convention is to finance biodiversity. So debt for nature swaps would address that concern. But private creditors, which we saw at the beginning, are a growing source of credit to developing countries. There are a number of possible benefits. First of all, increased debt sustainability, again through investments that produce growth, and this would lead to reduced haircuts in the short term. So even though in the short term there might be some reduced debt repayments in the longer term, the debt sustainability would improve. For some of the asset managers and private creditors, there might also be alignment with their sustainable investment commitments, such as commitments to net zero emissions by 2030. And there might be also a way of linking up debt for climate swaps with possible existing climate emission credits. For the Paris Club of official creditors, there's finance for climate investments and reduced post-hippic lack of debt sustainability as we're already in another debt crisis, which could hopefully be resolved by these investments in climate and nature, which produce growth. And finally for the UK as host of the UN climate change convention, there would be new and innovative sources of climate finance. So here with our final slide are some concrete next steps. We call on the international community to work with debtor countries to develop an international highly indebted countries climate and nature program swap initiative. This would mimic the debt relief program of the 1990s, but be focused on climate and nature outcomes. So to achieve this, we need to establish a technical working group under guidance of an international body such as the World Bank and IMF. And this has already been taken forward by the World Bank and IMF. We need to discuss and pilot debt for climate and nature swaps with interested debtor countries such as the small island developing states, which are particularly vulnerable. We need to persuade creditors to join, especially some of the creditors such as China, the multilaterals and private creditors, who are now large creditors to developing countries. We need to mobilize additional financing for climate and nature swaps through IMF special drawing rights reforms. And finally, we need to develop a memorandum of understanding and cause of comparability treatment through the G20 under the Italian presidency. So by taking these concrete next steps, we can make sure that debt swaps for climate and nature outcomes become a reality. Thank you very much.