Britain’s largest asset manager, Legal & General (L&G), has pledged up to $1bn over the next five years to act as a cornerstone investor in a new wave of “debt-for-nature” swaps across developing countries, it told Reuters.
Debt-for-nature swaps are designed to cut interest payments on sovereign debt, enabling governments to redirect savings toward conservation and environmental protection. However, activity in the market has slowed after the return of Donald Trumpto the White House led to a reduction in key US government backing for such initiatives.
L&G previously supported Ecuador’s landmark 2023 debt swap linked to the Galapagos Islands, as well as similar agreements in Belize and Gabon. The firm is now backing a broader effort to revive and scale the market.
The push is being led by specialist advisory firm Enosis Capital, which has brought together environmental groups and insurance provider AXA XL to offer political risk cover — a key component in making these transactions viable for institutional investors.
Jake Harper, senior investment manager at L&G, said the commitment would allow the firm to act as a cornerstone investor in the planned transactions and, in some cases, potentially fund deals entirely.
The $1bn pledge will nearly double L&G’s total investment in nature conservation and sustainable development across emerging markets to $2.4bn. It will also cement the firm’s position as one of the largest players in a niche segment of the debt market that has seen roughly $6bn of debt-for-nature deals completed over the past five years.
Harper said a key objective is to streamline and accelerate the execution of such transactions, which are often complex and time-consuming.
How debt-for-nature swaps work
Debt swaps typically involve buying back a country’s costly bonds or loans and replacing them with cheaper financing backed by a credit guarantee. This guarantee — often provided by development banks or insurers — reduces the perceived political and repayment risk for investors, lowering borrowing costs for the issuing country.
The environmental stakes are significant. According to the latest Living Planet Index compiled by the World Wide Fund for Nature (WWF) and the Zoological Society of London, global populations of mammals, birds, fish, reptiles and amphibians have declined by an average of 73% since 1970 — underlining the urgency of scaling conservation finance.
