Catalysing private-sector capital through credit enhancement & sustainability-linked sovereign financing

To scale sustainability-linked sovereign financing (e.g., debt conversions, sustainability-linked bonds), credit enhancement mechanisms like credit guarantees are essential. These guarantees boost ratings, enabling vulnerable sovereigns to secure cost-effective financing for climate and biodiversity programs, easing debt burdens. Africa holds substantial potential for credit enhancement in sovereign borrowing, currently underutilized due to misaligned incentives within international financial institutions (IFIs). Notably, major IFIs, including the African Development Bank and MIGA, are seeking collaboration to address these barriers. 

A Working Group on Credit Enhancement convened an August 2023 workshop among IFI experts to co-design scaling mechanisms. This workshop aimed to build consensus in Africa for this crucial instrument to mobilize climate/nature financing. This follow on Africa Climate Summit side event co-hosted by Climate Change High-Level Champions, The Sustainability-linked Sovereign Debt Hub, and The Nature Conservancy will spotlight global and African debt conversion deals' momentum, including Gabon's recent deal aided by credit enhancement. It will also present initial high-level findings from the August workshop, discuss practical applications of these solutions for African sovereigns amidst escalating climate, nature, and debt crises, and garner feedback from key stakeholders. The event's goal is to generate interest and backing for a forthcoming solution launch at COP28, expanding sustainability-linked sovereign debt instruments.

Confirmed panellists include representatives from:

• AfDB 
• DFC 
• BoA
• TNC 
• FSD