“Debt swaps are in high demand. It’s very logical as we have a high demand for climate spending and this is a region with high debt on average,” IDB President Ilan Goldfajn told the Reuters Global Markets Forum. .
Current financial market conditions, with major central banks holding interest rates at multi-decade highs, also make the returns on these investments more attractive to the private sector, Goldfajn added.
“In the past we had very low interest rates and there were no discounts, so the benefit of the guarantees was not that great.”
These climate finance instruments are an effective way to attract private capital to raise the “trillions” emerging economies need to tackle climate change and protect local ecosystems, he said.