Embedded Files
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 5.1.3 State functions, which explains the various roles of the state in providing goods and services, protecting the population, and stabilising and guiding change
Section 6.1.1 Money systems, which describes the parts, relationships and functions of money systems
Section 6.1.3 Modern money creation, which explains how forms of money are created in modern money systems
Section 6.2.1 What is finance?, which defines finance and describes the main tools of finance
Section 6.2.2 Purpose of finance, which distinguishes between regenerative and extractive finance, and between values and financial valuation; and discusses the extent to which profit-oriented finance can support regeneration
Section 6.2.3 Financial power and inequality, which defines financial power and identify key actors and factors that influence where money flows
Section 6.3.1 Why redesign money and finance?, which addresses the questions of who has access to finance, what goals are being financed and what rules shape financing
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
discuss how global financial tools are being redesigned to support regenerative social and ecological goals
In 2021, Belize made news for a new kind of financial deal. The country had a lot of debt and wanted to protect its coral reefs. With help from The Nature Conservancy and a private bank, Belize made a debt-for-nature swap. The bank helped buy part of Belize’s debt and offered easier repayment terms. In return, Belize promised to protect large areas of its ocean and coast. The deal reduced Belize’s debt and funded conservation at the same time. It showed how a financial tool can be redesigned to support both people and nature.
Around the world, states, banks, and organisations are trying to redesign global financial tools that determine how money moves, what projects are funded, and who benefits. The next Section 6.3.9 looks at the rules of global finance, such as the laws and agreements that guide these tools. In reality, tools and rules are not separate. New tools often need new rules to guide them, and new rules can make better tools possible.
Figure 1. The famous Blue Hole, part of Belize’s marine protected area (MPA).
(Credit: tamifred, licensed from Adobe Stock)
Which financial tools are being redesigned?
Which financial tools are being redesigned?
In Section 6.1.1, we learned that finance has three main tools: credit (borrowing and lending), investment (putting resources into something now to support future value or benefit), and insurance (sharing risk). Most global financial tools that aim to support environmental or social goals are based on credit. Others experiment with investment or new market systems.
Each of the tools below has been redesigned to link finance with regeneration. To make them work well, designers must think carefully about the three questions we explored in Subtopic 6.2:
Who has access to finance?
What goals are being financed?
What rules shape financial relationships?
Debt-for-nature swaps
Debt-for-nature swaps
More than 50 of the world’s poorest countries now face the risk of debt default, together owing about $500 billion in debt repayments over the next few years. Many of these nations are biodiversity hotspots and among the most climate-vulnerable. Heavy debt means large parts of their budgets go to repayments instead of health, education, or environmental protection. This financial pressure can push states to exploit forests, wetlands, and reefs for short-term income, even though these same ecosystems store carbon, support biodiversity, and help stabilise the global climate. In this way, debt problems can damage the natural systems the whole world depends on.
A debt-for-nature swap reduces a country’s debt in exchange for protecting ecosystems or investing in climate action. There are two main kinds:
Two-party swaps, where a creditor and a debtor state agree directly to cancel or reduce debt in return for conservation work.
Three-party swaps, where an intermediary, such as a conservation organisation or development bank, buys the debt and helps manage the deal.
Figure 2. A two-party debt-for nature swap.
(Credit: Dialogue Earth)
Figure 3. A three-party debt-for nature swap.
(Credit: Dialogue Earth)
Belize’s 2021 three-party swap with The Nature Conservancy cut its external debt by about 10 percent of gross domestic product (GDP) and committed the country to safeguard its coral reefs. Similar deals are being explored in Gabon, Sri Lanka, Ecuador, Cape Verde, and Lao PDR.
To work well, these swaps need careful design. Local communities should help decide what is protected and how benefits are shared. The debt relief must be large enough to make a real difference, and conservation results must be clearly measured. When well managed, debt-for-nature swaps can turn a cycle of debt and environmental loss into one of debt relief and regeneration.
Green, blue and sustainability-linked bonds
Green, blue and sustainability-linked bonds
A bond is a way for a state or company to borrow money from investors. They promise to repay later with interest.
Green bonds and blue bonds were created to make borrowing serve environmental goals. The key change is that the money raised must be used for clearly defined projects that benefit people and the planet. Green bonds usually support renewable energy, clean transport, or energy-efficient buildings. Blue bonds focus on protecting oceans and coasts, such as restoring coral reefs or improving local fisheries.
Because investors increasingly want to support environmental action, these bonds can sometimes offer slightly lower interest rates than ordinary bonds. Investors accept smaller profits in exchange for helping fund sustainable projects. However, this effect is small and depends on the country’s wider financial situation. The bigger redesign is that these bonds build in accountability. Borrowers must report how the money is used and show the results, which helps build trust and transparency.
Figure 4. Green bonds are used for land-based sustainability projects like wind farms.
(Credit: Joshua Plattner, Pexels license)
A sustainability-linked bond is different. Instead of limiting how the money is spent, it changes the cost of borrowing based on performance. If the borrower meets agreed social or environmental targets, such as cutting emissions or expanding renewable energy, the interest rate stays the same or even decreases. If the goals are missed, the rate goes up. This makes the bond itself an incentive to achieve real-world results.
To make all of these redesigned bonds effective, there must be clear and trusted standards for what counts as ‘green,’ ‘blue,’ or ‘sustainable.’ Without strong verification, some projects might claim these labels without real impact. Fair access to investors also matters, so that all countries can use these tools without facing high costs or debt risks.
Nature-based finance: carbon and biodiversity credits
Nature-based finance: carbon and biodiversity credits
Carbon credits and biodiversity credits try to link money directly to environmental protection. A carbon credit represents one tonne of carbon dioxide (CO2) that has been removed from the atmosphere or avoided through actions like reforestation or renewable energy projects. A company that emits carbon can buy these credits to 'offset' part of its pollution. Biodiversity credits work in a similar way but focus on protecting species and ecosystems.
These credits are traded in special markets, where buyers and sellers exchange them like other commodities. The idea is to create a flow of money towards conservation. In some cases, these markets have funded useful projects and brought income to local or indigenous communities who protect forests, grasslands, or reefs.
However, designing these systems well is complex. Each credit must represent a real and measurable benefit for nature. That means data collection and verification are very important. If the data are weak, or the project would have happened anyway, then the credit has little value. Decision-making also needs to be fair. Local people should have a voice in how projects are run and how the benefits are shared.
A further design question is about ownership and monitoring. Who owns the rights to nature’s services: the company that pays, the community that protects, or the state that manages the land? Who checks that protection lasts over time? Clear and transparent rules are needed so that these markets reward genuine regeneration rather than becoming a way for polluting companies to extract value from nature and delay change.
Figure 5. Can biodiversity and carbon credits protect and regenerate nature? There are many questions to answer…
Credit: Deniz Şengül, Pexels license)
Special Drawing Rights (SDRs) and climate finance
Special Drawing Rights (SDRs) and climate finance
Special Drawing Rights (SDRs) are assets created by the International Monetary Fund (IMF) to help countries during global crises. They are not loans and do not need to be paid back. Countries can hold SDRs as financial reserves or exchange them for hard currency, such as US dollars or euros, when they need extra funds for imports or public spending.
SDRs are claims on the currencies of IMF members, not money people can spend directly. When a country uses its SDRs, another member—usually one with a strong currency—provides the hard currency in exchange. The IMF arranges these swaps. The money comes from existing reserves, not newly printed money.
You can think of SDRs as a kind of global insurance system. All IMF members take part, and during a worldwide crisis, each receives new reserves as a safety net. Countries that use their SDRs pay a small charge, while those that hold extra earn a small return. But the system is unequal, since rich countries receive the largest share and have the currencies needed for exchanges.
Figure 6. The International Monetary Fund (IMF) can issue Special Drawing Rights to help countries during times of crisis.
(Credit: IMF, public domain)
SDR allocations happen globally, not individually. The IMF issues them only when the world economy faces a major crisis. Each country’s share depends on its IMF quota, based on the size of its economy. Because of this, wealthy countries automatically receive the most. In 2021, during the COVID-19 pandemic, most of the new SDRs went to rich nations, though some later shared part of theirs with more vulnerable countries.
Many campaigners believe SDRs could support climate finance, funding renewable energy and adaptation without creating debt. To make this fair, decision-making at the IMF needs to change. The United States holds about 16.5 % of IMF votes, giving it veto power, and the G7 together hold around 41 %. Poorer countries have far less influence over how global finance is managed.
With fairer rules and stronger sharing systems, SDRs could become a lasting global tool for climate action and solidarity.
Can these tools support real regeneration?
Can these tools support real regeneration?
The tools in this section show several ways finance can be redesigned to serve people and planet. Some reduce debt, others direct investment, create new markets for nature, or build shared safety nets like SDRs. Each tool offers promise, but its impact depends on the values, rules, and power structures that shape how it is used.
To make these tools truly regenerative, designers and decision-makers need to ask three questions again and again:
Who gets access to finance?
What goals are being financed?
What rules and relationships come with the money?
Answering these questions with fairness and care is what turns good ideas into real change. The next Section 6.3.9 explores how changing the rules of global finance can make these redesigned tools part of a truly regenerative system.
6.3.8 Activity
6.3.8 Activity
Concept: Systems, regeneration
Skills: Thinking skills (critical thinking, transfer)
Time: varies, depending on the option
Type: Individual, pairs, group?
Option 1: Comparing new tools for global regenerative finance
Time: 30-40 minutes
On a piece of paper, or using a digital document, create a table like Table 1 below.
Individually, with a partner or in a small group, complete the table to gather information about the tools described in this section.
When finished, compare your table with another person, pair or small group. You can also check your work with the sample table by clicking the arrow. But do not use this until you have a go yourself.
Discuss:
Which of these tools seem most promising (largest potential benefits, least potential limitations)?
How might the design challenges for each tool be addressed?
Table 1. Comparing new financial tools
Click below for suggestions for Table 1, but only after you've given it a go yourself.
Option 2: Inquiring about biodiversity credits
Time: 40+ minutes (students may need more than one lesson to explore and understand Savimbo’s work)
Review the section on nature-based finance: carbon and biodiversity credits.
Visit the website of Savimbo, an organisation that offers biodiversity credits. Take a few minutes to explore what the organisation does and how it presents its work. For now, focus on getting a general overview.
Individually, in pairs or in a small group: Imagine you are part of an organisation (such as a business, city government, or non-profit) that is considering buying Savimbo’s biodiversity credits.
Using what you learned from this section, write five questions you would want answered before deciding whether to buy Savimbo’s biodiversity credits. These should show that you are thinking critically about how Savimbo’s work connects to the big questions around finance, fairness, and regeneration. And you can also ask specific questions about how Savimbo’s biodiversity credits work.
Research the website to find answers to as many of your questions as possible. Make short notes on what you discover.
For any questions you cannot answer, note what kind of information or evidence you would need and where or how you might find it.
Write a short reflection (three or four sentences): Would your organisation decide to buy Savimbo’s biodiversity credits? Why or why not? What would make you more confident in your decision?
If there is time, you could also discuss this as a class or share your ideas with another group.
Ideas for longer activities and projects are listed in Subtopic 6.5
Checking for understanding
Checking for understanding
Further exploration
Further exploration
Conserving Belize’s marine biodiversity - a short video and article from The Nature Conservatory about Belize’s marine protected area and its importance for people and planet. Difficulty level: easy
Explainer: What are debt-for-nature swaps? - A clear article from Dialogue Earth that outlines how a debt-for-nature swap works: a developing country reduces or cancels part of its debt in exchange for conservation or environmental commitments. The article examines the structure, benefits and challenges of this tool. Difficulty level: moderate
7 Things You Need to Know About SDR Allocations - A factsheet from the International Monetary Fund (IMF) explaining how Special Drawing Rights (SDRs) are created, what they do, why they matter for global finance, and how allocations affect debt and reserves. Difficulty level: moderate
Ecuador Announces Debt Conversion for Amazon Conservation — An article from The Nature Conservancy describing a major debt conversion in Ecuador that unlocked hundreds of millions of dollars for the Amazon Biocorridor Program. It shows how redesigned tools can link public debt relief with large-scale ecosystem protection. Difficulty level: moderate-hard
Sources
Sources
Chandrasekhar, A., & Quiroz, Y. (2024, July 18). Q&A: Can debt-for-nature ‘swaps’ help tackle biodiversity loss and climate change? Eco-Business. https://www.eco-business.com/news/qa-can-debt-for-nature-swaps-help-tackle-biodiversity-loss-and-climate-change/
International Monetary Fund. (2023). Special Drawing Rights (SDR). Retrieved from https://www.imf.org/en/About/Factsheets/Sheets/2023/special-drawing-rights-sdr
NatureFinance. (2025, April). Innovative financing structures as game changers for nature and climate [Report]. https://www.naturefinance.net/wp-content/uploads/2025/04/InnovativeFinancingStructuresasGameChangersforNatureandClimate-1.pdf
Soutar, R., & Koop, F. (2024, April 12). Explainer: What are debt-for-nature swaps? Dialogue Earth. https://dialogue.earth/en/nature/47862-explainer-what-is-debt-for-nature-swap/ (Original work published 2021, November 2)
United Nations Development Programme. (2023). New wave of debt swaps for climate or nature. Signals Spotlight 2023, Theme 9. https://www.undp.org/future-development/signals-spotlight-2023/new-wave-debt-swaps-climate-or-nature
United Nations Environment Programme. (n.d.). Finance for Nature: Equitable, net zero and positive. https://financefornature.unep.org/
Whiting, K. (2024, April 26). Climate finance: What are debt-for-nature swaps and how can they help countries? World Economic Forum. https://www.weforum.org/stories/2024/04/climate-finance-debt-nature-swap/
Terminology
Terminology
values: ideas about what is important or good
finance: to provide funding for a person or organisation
debt: an amount of money owed to an individual or organisation
debt-for-nature swap: an agreement where part of a country’s debt is cancelled or reduced in return for commitments to protect or restore ecosystems
conservation: preventing the wasteful use of a resource
state: a system that provides essential public services, and also governs and regulates other economic institutions
credit: borrowed money that must be paid back later, often with interest
investment: money spent for the enhancement of human or physical capabilities
insurance: a system where people pay into a shared fund so that if someone faces a loss, like a fire or accident, they receive financial help to recover
market: a system where people buy and sell goods and services for a price.
system: a set of interdependent parts that organise to create a functional whole
regeneration: restoring and revitalising something
debt default: when a borrower cannot or does not repay debt as agreed
biodiversity: the variety of living organisms on Earth
budget: a plan showing how money will be earned and spent over a set time, usually a year
wetland: a distinct ecosystem flooded or saturated by water, either permanently or seasonally
income: money received from work or investments
ecosystem: the interaction of groups of organisms with each other and their physical environment
debtor: a person, organisation or country that owes money
development bank: a state or mission-driven bank that finances long-term social and economic development
gross domestic product (GDP): the total value of all goods and services produced in an economy in a time period
debt relief: an agreement that reduces or restructures debt to ease financial pressure
bond: a financial tool where an investor lends money to a government or company in return for regular interest payments and repayment of the original amount
investor: an individual that puts money into an entity such as a business for a financial return
interest: the price a borrower pays to borrow a sum of money
green bond: when businesses borrow money (bonds) to raise money for socially or ecologically positive projects, and pay regular interest to bondholders
blue bond: a type of bond where governments or organisations borrow money and use it to protect oceans and marine ecosystems
renewable energy: energy from sources that are continuously available or regenerate quickly
profit: total revenue minus total cost
sustainability: meeting people’s needs within the means of the planet
transparency: when decisions and rules are open and visible to the public
sustainability-linked bond: a way for a government or company to borrow money where the cost of repayment changes depending on whether agreed social or environmental goals are met
interest rate: the price a borrower pays to borrow a sum of money
incentive: something that motivates or encourages someone to do something
carbon credit: permission to emit a set amount of carbon dioxide, which can be bought and sold within carbon markets
biodiversity credit: a standardised credit that corresponds to a specific amount of biodiversity protection or restoration, used to direct funding to nature projects
carbon dioxide (CO2): gas produced by burning carbon or organic compounds and through respiration, naturally present in the atmosphere and absorbed by plants in photosynthesis
reforestation: the process of replanting an area with trees
pollution: the presence of a substance that has harmful effects on the environment
commodity: something that can be bought and sold, often, though not always referring to raw materials
indigenous community: the original settlers of an area (pre-invasion/colonialism) who have retained their culture apart from colonisers
Special Drawing Right (SDR): a form of international financial support that countries can access and convert into major currencies when they need money
asset: something that is useful or valuable
International Monetary Fund (IMF): an agency of the United Nations responsible for the financial stability of the global monetary system
loan: a sum of money that an individual or group borrows from banks or other financial institutions
financial reserve: money set aside to manage future risks or emergencies.
hard currency: a widely trusted currency used in global trade
currency: a system of money in general use in an area
economy: all the human-made systems that transfer and transform energy and matter to meet human needs and wants
veto power: the ability to block decisions within an international institution
solidarity: unity or agreement of feeling or action, especially among individuals with a common interest
power: the ability to influence events or the behaviour of other people
care: the act of providing what is necessary for the health, welfare, upkeep, and protection of someone or something
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