Drowning in Debt: Understanding Debt-for-Climate Swaps Through a Case Study of the Belize Blue Bond
Business Law, Public Responsibility, and Ethics
Debt-for-climate swaps are an increasingly popular policy to help developing countries achieve debt sustainability and invest in climate action. However, there is a lack of research that critically evaluates the limitations of debt-for-climate swaps. In this paper, I seek to understand the challenges and successes of debt-for-climate swap through an analysis of the 2021 Belize Blue Bond, a case study representing the most ambitious and innovative debt-for-climate swap to date. I begin with an overview of the global eco-bond market and the history and structure of debt-for-climate swaps. I then retrace the economic history of Belize to contextualize the events leading up to the 2021 debt-for-climate swap and its aftermath. Next, I delve into the details of the Belize Blue Bond agreement and attempt to analyze its successes and shortcomings. Through an economic analysis and an ethics-based discussion, I will argue that the Belize Blue Bond cannot guarantee long-term debt sustainability and warrants allegations of greenwashing. Next, I will condense the lessons learned from the Belize Blue Bond and argue that debt-for-climate swaps are only effective under a narrow set of conditions. Instead, I will make the case for de-linking debt restructuring and climate finance as a more efficient alternative to debt-for-climate swaps.