Nature-related financial opportunity use case: Debt-for-nature swap supported by credit insurance for marine conservation
5 June 2024 - CISL’s ClimateWise, in collaboration with MS Amlin, has published one of the first nature-related financial opportunities use cases, showcasing a debt-for-nature swap supported by credit insurance for marine conservation in Ecuador.
Download the use case
Members of ClimateWise worked with CISL and academic partners from the University of Cambridge to determine a common language and framework for financial institutions to identify and assess nature-related financial risks and opportunities so that these can be measured and managed.
This use case is one of a series, each assessing a specific type of nature-related financial opportunity, aimed at galvanising further assessments of nature-related opportunities across the insurance industry. The opportunity use cases were developed using the LEAP approach (Locate, Evaluate, Assess and Prepare) from The Taskforce on Nature-related Financial Disclosures (TNFD) framework as a grounding model.
MS Amlin has investigated nature-related financial opportunities by assessing debt-for-nature swaps supported by credit insurance for marine conservation in Ecuador.
Ecuador's strategic position, especially with the Galápagos Islands, underscores its vital role in marine conservation despite economic challenges from the pandemic. To address issues such as overfishing, Ecuador initiated a Debt-for-Nature Swap (DfNS), exchanging debt restructuring for commitments to preserve marine ecosystems. MS Amlin, facilitating the reinsurance, highlights the transformative power of financial institutions in sustainable development, serving as a model for similar collaborations globally. Moving forward, continuous monitoring, reporting and adaptation strategies are crucial to ensure the initiative's integrity and impact, highlighting the importance of regulatory frameworks and technological innovations in governing and enhancing the effectiveness of such initiatives.
Quotes
Dr Nina Seega, Director of the Centre for Sustainable Finance, CISL, said:
The insurance industry is absolutely key for enabling investment into nature. These use cases demonstrate how insurance products can be used to support emerging markets and developing economies in building resilience to climate and nature-related financial risks and paving the way for a more sustainable and resilient economy overall.
Laura Deltenre, Senior Project Manager, Centre for Sustainable Finance, CISL, said:
An estimated 1 million species are at risk of extinction, with alarming implications for ecosystems worldwide. There is a need for insurance companies to engage on nature loss and transition towards nature-positive strategies. Using the TNFD’s LEAP approach, ClimateWise and two of its members, Howden and MS Amlin, have developed two of the first nature-related financial opportunities use cases. They highlight the essential role of natural assets in fostering financial resilience and protecting biodiversity.
Amir Sethu, Head of Sustainability, MS Amlin, said:
Our involvement in Ecuador's debt-for-nature swap highlights the growing role insurers can play in opening new doors for innovative nature-based financing and the intrinsic link between nature, climate change, social and economic development goals. As experts in handling the world’s most complex risks, the Lloyd’s market can help unlock capital flows for crucial conservation projects that protect biodiversity and build resilience to climate impacts. By collaborating across sectors and pooling expertise, we can mobilise investments on a scale no individual organisation could achieve alone.
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Citing this report
University of Cambridge Institute for Sustainability Leadership and MS Amlin (CISL and MS Amlin), 2024. Nature-related financial opportunity use case: Debt-for-nature swap supported by credit insurance for marine conservation. Cambridge, UK: University of Cambridge Institute for Sustainability Leadership.