Performance-based debt instruments have the potential to transform the way nature, climate and other sustainability outcomes are factored into debt markets. This potential is manifest in corporate debt markets, where sustainability-linked investments have fast made up a significant share of new issuance. Yet the possibilities for these instruments to support sovereigns in protecting or enhancing a country’s valued, productive natural capital is perhaps even larger. Several countries now look set to use ‘Nature Performance Bonds’ to support targets and objectives around nature and climate, while at the same time offering flexibility in use of proceeds to support immediate fiscal objectives. F4B has compiled answers to some of the most frequently asked questions about these instruments to help issuers and investors navigate these developments.
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