2023-Public-Sector-Perspectives

Key components of value for debt-for-sustainability swaps going forward For cost efficient, scalable and replicable debt-for-sustainability transactions, the structures should leverage the below “components of value”: Figure 9: Components of value for debt swaps • Sovereign: A debtor under some level of duress or that has a large spread differential between its own funding level and concessional funding, and willing to commit to environmental or development outcomes; • NGO: Anchor that is prepared to fund a debt exchange in return for a specific environmental or developmental outcome, as well as to be ready and able to measure and monitor outcome KPIs; • Development bank: Partner that enhances a debt swap structure through full/partial guarantee, political risk insurance, breach of contract or other forms of risk mitigation; • Institutional investors: DFIs and donors that can provide concessional funding, low IRR equity or first loss equity. Citi is uniquely positioned to execute the full process of a debt-for-sustainability swap and to deliver the best solutions by leveraging our close relationships with sovereigns, NGOs, foundations, philanthropies, development banks and investors as well as by using our long- established expertise in capital markets, liability management, and sovereign debt & rating advisory. References 1. https://www.iif.com/Publications/ID/5153/Global-Debt-Monitor-Crisis-Brewing 2. https://www.bis.org/publ/bisbull05.pdf 3. https://www.nature.org/content/dam/tnc/nature/en/documents/NatureVest-2022-Impact-Report.pdf 4. https://www.iied.org/20651iied 5. https://www.iif.com/Publications/ID/4702/Green-Weekly-Insight-Debt-for-Nature-SwapsTackling-the-Triple-Threat#:~:text=Green%20Weekly%20Insight%3A%20 Debt-for-Nature%20Swaps–Tackling%20the%20Triple%20Threat,triple%20threat%20of%20debt%2C%20climate%20change%20and%20biodiversity 6. http://www.igsd.org/wp-content/uploads/2020/08/Background-Note-on-Debt-Swaps-11Aug20.pdf 7. https://www.unescwa.org/publications/climatesdgs-debt-swap-mechanism 8. https://sgp.fas.org/crs/misc/RL31286.pdf 9. https://climateanalytics.org/publications/2018/debt-for-climate-swaps-caribbean-outlook/#:~:text=Public%20debt%20significantly%20restricts%20 capacity,vulnerabilities%20to%20climate%20change%20impacts 10. https://www.cepal.org/sites/default/files/news/files/nydbetreliefcaribbeannovember2017.pdf 11. https://www.cbd.int/doc/nbsap/finance/Guide_GEF_Nov2001.pdf 12. https://www.imf.org/en/Publications/WP/Issues/2022/08/11/Debt-for-Climate-Swaps-Analysis-Design-and-Implementation-522184 13. https://www.oecd.org/environment/outreach/39352290.pdf 14. https://unesdoc.unesco.org/ark:/48223/pf0000211162 15. https://www.reuters.com/article/us-imf-world-bank-climate-swaps/imf-world-bank-to-unveil-green-debt-swaps-option-by-november-georgieva-says-idUSKBN2BV2NU Citi Perspectives for the Public Sector 75