This report analyses current trends of adaptation finance provided and mobilised by developed countries for developing countries. It explores potential action areas for international providers to scale up funding for climate change adaptation, including by unlocking the potential of the private sector.

This publication is aimed at helping IUCN's members to understand the scope and mechanisms of debt conversion and to spot opportunities for their own action in this important field.

Successive crises including COVID-19, Russia’s war of aggression in Ukraine and the climate emergency are exacerbating inequalities between and within countries and stifling progress to achieve the Sustainable Development Goals (SDGs) and the Paris Agreement. While developed countries deployed historic stimulus packages to build back better, developing countries lacked fiscal and monetary buffers to respond. Countries with the fewest resources face challenging trade-offs between short-term rescue and long-term financing for a sustainable recovery.

The aim of this note is to help stakeholders optimize their decision-making on when, where, and how to use debt-for-development swaps (“debt swaps”), ensuring they bring the intended benefits to all parties involved. It also proposes new approaches to structure these mechanisms, making them less transaction-heavy and more sustainable while maintaining accountability for fulfilling policy and spending commitments. Debt swaps are agreements between a government and one or more of its creditors to replace existing sovereign debt with one or more liabilities1 that include a spending commitment towards a specific development goal. These goals may include nature conservation, climate action, education, nutrition, support for refugees, among others. The spending commitment is often associated with the country's decision to pursue an important development policy.