The Scalability of Credit-Enhanced EM Climate Debt: What Role Can Guarantees, Collateralization, Securitizations, and Investment Funds Play?

The Scalability of Credit-Enhanced EM Climate Debt
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Volume/Issue: Volume 2025 Issue 002
Publication date: January 2025
ISBN: 9798400298974
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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Investments and Securities-General , Money and Monetary Policy , Environmental Economics , Securitization , Loans , Credit , Sovereign bonds , Bonds , Insurance , Credit ratings , Climate finance , Collateral , Securities , Global , Credit enhancements , blended finance , debt-for-climate swaps , climate mitigation , climate adaptation , climate finance , guarantees , securitization

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Summary

This paper reviews the main types of credit enhancement approaches used to support climate debt issuances by EMDE borrowers. Fragmentation on the part of the providers of credit enhancements was identified as a major factor impeding scalability of credit-enhanced debt. The acceptance of credit-enhanced debt is also hampered by the structural characteristics of the capital markets, especially the fragmentation of the investor base. To place significant amounts of credit-enhanced climate debt with private sector investors, MDBs, DFIs, and other stakeholders should focus on simple and replicable debt structures. Securitizations and investment funds could help fund private sector climate investments in EMDEs.

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