Credit Suisse failure may affect nature financing

March 22, 2023|Written by Todd Phillips

Before its failure at the weekend, Credit Suisse was a major player in nature financing efforts. Its sale to UBS leaves these markets in limbo as other institutions will need to decide whether to fill the space the bank occupied until now.

Bloomberg first reported the news that Credit Suisse’s failure potentially removes a key player from these markets. Credit Suisse had previously structured and arranged the world’s largest debt-for-nature swap for Belize in 2021. Debt-for-nature swaps are financial transactions in which a developing nation’s creditors pledge to effectively forgive some or all of the country’s debt in exchange for its pledge to protect nature.

For Belize, Credit Suisse sold US$364mn in new debt in exchange for the country’s pledge to spend US$4mn a year until 2041 to protect 30% of its oceans. Belize used the new funds to buy back old debt at roughly 55% of par.

Credit Suisse also structured a US$150mn debt-for-nature swap for Barbados in which the country pledged to protect 30% of its ocean as well.

Similarly, Credit Suisse had structured the World Bank’s US$150mn “rhino bond”. Under the terms of the bond, the World Bank makes investment payments to finance rhino conservation activities at two parks in South Africa. When the bonds mature, investors will receive their principal and a payment dependent on whether conservation has been successful.

Calls for central banks to ensure that financial firms preserve nature have become more prevalent in recent years. For example, academics at the LSE Grantham Institute say that nature-related risks to the financial system may result in tipping points caused by interactions between the biophysical environment and economic activity.

Credit Suisse also engaged in more general green financing. According to a 2022 report (pdf download), the bank had issued “one green bond and eleven structured notes” totalling US$631mn in green financing. Credit Suisse had also set a target in 2020 of providing 300bn Swiss francs on green financing by 2030. However, the bank had been criticised for its 2023 plan to achieve net-zero financed emissions, with climate advocates saying the plan fails to address emissions financed through its capital markets activities.

It remains unclear whether UBS, the final remaining Swiss global bank and purchaser of Credit Suisse, will stick to the acquired bank’s commitments or continue its nature-financing activities.

This page was last updated March 22, 2023

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