Legal and General Pledges 1 Billion Dollars to Expand Debt for Nature Swaps

Legal and General, the UK’s largest asset manager, has committed up to 1 billion dollars over the next five years to support a new wave of debt for nature swaps in developing countries, marking one of the most significant private sector pledges to the growing conservation finance market.

The investment firm said it plans to act as a cornerstone investor in upcoming transactions designed to help governments cut debt servicing costs while directing more funding toward environmental protection. The commitment would nearly double Legal and General’s total allocation to nature conservation and sustainable development projects in emerging markets to around 2.4 billion dollars.

Debt for nature swaps allow heavily indebted countries to refinance existing government bonds or loans at lower interest rates. In exchange, governments commit to investing the savings in conservation initiatives such as marine protection, forest preservation or climate resilience programmes. The structure typically relies on credit guarantees that protect investors against political risk, making the transactions more attractive to institutional capital.

Legal and General previously backed high profile swaps in Ecuador linked to the Galapagos Islands, as well as agreements in Belize and Gabon. Those deals were supported by guarantees from the US International Development Finance Corporation. However, momentum slowed after political changes in Washington reduced US government backing for similar transactions.

The latest initiative is being coordinated by specialist firm Enosis Capital, which aims to streamline the process by bringing together investors, insurers and environmental groups under a single framework. Insurance provider AXA XL will offer political risk cover, a key component in ensuring that refinanced bonds meet investment grade standards.

Jake Harper, a senior investment manager at Legal and General, said the objective is to make transactions faster and more efficient. He noted that by committing capital upfront, the firm can help reduce delays that have historically complicated debt swap negotiations.

The market for debt for nature swaps remains relatively small, with around 6 billion dollars in deals completed over the past five years. Supporters argue that scaling up the model could unlock substantial funding for biodiversity and climate projects at a time when ecological indicators are deteriorating. The Living Planet Index, compiled by the World Wide Fund for Nature and the Zoological Society of London, has reported sharp declines in global wildlife populations over recent decades.

Enosis Capital co founder Ramzi Issa said around a dozen new swaps are currently under discussion. Beyond conservation, there is growing interest in related structures such as debt for education and debt for food security arrangements.

Industry observers say the involvement of a major institutional investor like Legal and General could encourage more governments to consider the model. By providing long term capital and working alongside insurers and conservation groups, the initiative seeks to position London’s financial sector at the centre of innovative climate and development finance.