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Ledger 1 : 33 — For each dollar financing nature-based solutions in 2023, about $33 financed activities harmful to nature. (UNEP)
Cases / Insurance, liability and compensation funds · Ecuador · 2023

Galápagos debt-for-nature swap used US$656 million of US political risk insurance

Short record: the main facts, with sources. A full case file has not been prepared.

Nature's voice · report
No measurement of the harm done to me here is on record.
Did nature suffer? Not measured.
Not on record
  • The record does not name which of my species, waters, soils or forests were harmed.
What the record lacks: 1 none on record · 2 insufficient · 1 not measured See the gaps

Ecuador bought back bonds with a face value of about US$1.6 billion and issued a US$656 million Galápagos bond insured by the US Development Finance Corporation. Yale Journal put the reduction in external debt at about 2.16 per cent, against conservation funding of at least US$12 million a year.

What?
Ecuador issued a US$656 million Galápagos bond insured by the US Development Finance Corporation, in a debt-for-nature swap. The Daily Herald (Reuters)
Where?
Galápagos Islands, Ecuador The Daily Herald (Reuters)
When?
May 2023 The Daily Herald (Reuters)
Who?
Gained
  • Government of Ecuador — External debt reduced by about 2.16 per cent, about US$843.5 million in net present value Yale Journal
  • Credit Suisse — Blick reported that, because of the guarantees, Credit Suisse bore practically no risk
Lost
  • Former holders of the bonds bought back — Bonds traded between 35.5 and 53.3 cents on the dollar before the buyback, per Blick
Harmed
None on record
Why?
The US Development Finance Corporation said the swap would protect the Galápagos, describing it as the largest marine conservation debt conversion.
How?
New bonds replaced bonds bought back at a discount; DFC insurance covered investors, and private insurers provided more than US$390 million of reinsurance to DFC, per Chubb. Chubb
6 of 6 questions answered from the record

What happened

The record, in order.

The Daily Herald, citing Reuters, reported a record debt-for-nature swap in which Ecuador issued a US$656 million Galápagos bond with a 5.645 per cent coupon.

The same report said the swap was backed by an US$85 million Inter-American Development Bank guarantee and US$656 million of DFC political risk insurance, with at least US$12 million a year for conservation.

Yale Journal reported that the swap reduced Ecuador's external debt by about 2.16 per cent, or about US$843.5 million in net present value.

    In court and with insurers

    Every proceeding and every insurer decision on record.

    Lawsuits and rulings

    No court case on record. No court has ruled on this case.

    Insurers

    No insurer decision on record.

    What we don't know

    Undisclosed, unproven, untried: recorded as data.

    Nature

    • Not measured Harm to nature: The record holds no measurement of harm to nature.

    Record

    • Insufficient Reported but not verified: DFC figures put total debt service savings above US$1.1 billion over the life of the bond.
    • Insufficient Reported but not verified: Ecuador committed US$450 million to conservation over 18 years.
    • None on record Not stated in the sources reviewed: the fees earned by the intermediary banks.

    Did the harm stop?

    Not stated in the sources reviewed.

    Who paid?

    Not stated in the sources reviewed.

    Sources

    Voices on record: ✓ Company or project— Government and regulators— Courts✓ Press and investigations— Communities and civil society✓ Researchers

    Company or project

    Press and investigations

    Researchers

    Connected cases

    Related matters, and cases linked to this one through the same organisations, with the role each played in both.
    Terms used on this page

    Carbon and conservation finance

    Debt-for-nature swap
    A deal in which a government's debt is bought back or refinanced at a discount, and part of the savings is committed to conservation.

    Insurance

    Political-risk insurance
    Insurance that protects lenders and investors against losses caused by government actions, such as a state failing to pay.
    Reinsurance
    Insurance bought by insurers to pass part of their own risk to other companies.

    Institutions

    DFC
    The US International Development Finance Corporation, a government agency that lends to and insures private projects abroad.

    Bonds and banking

    Arranger
    The bank that structures and sells a bond or loan deal, usually for a fee.
    Coupon
    The interest rate a bond pays its investors each year.
    Guarantee
    A commitment by a third party, often a development bank, to pay if the borrower does not.

    Law and courts

    Arbitration
    A private dispute process in which an appointed arbitrator, instead of a court, decides the case.
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