Legal & General’s $1 billion commitment positions it to anchor a new generation of debt-for-nature swaps at a time when U.S. political risk backing has receded, potentially reshaping a $6 billion niche market.
Britain’s largest asset manager, Legal & General, has committed up to $1 billion over the next five years to become a cornerstone investor in a fresh wave of debt-for-nature swaps across developing economies, a move designed to inject scale and speed into a market that has slowed in recent years.
The commitment comes at a delicate moment for the sector. Debt-for-nature swaps — financial restructurings that allow governments to refinance expensive sovereign debt in exchange for conservation pledges — have relied heavily on U.S. political risk guarantees in recent years. Since President Donald Trump returned to power, key support from the U.S. International Development Finance Corporation has dried up, creating a bottleneck in deal flow.
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Against that backdrop, L&G’s $1 billion allocation signals a strategic attempt by private capital to fill the gap.
Institutional muscle in a niche market
The new commitment will nearly double L&G’s exposure to nature conservation and sustainable development in emerging markets to $2.4 billion. It also makes the firm a dominant player in a segment that has seen only around $6 billion in transactions over the past five years.
“We will give us the ability to be the cornerstone investor (in the planned set of debt swaps), or hopefully in some circumstances, solely fund the transactions,” Jake Harper, senior investment manager at L&G, told Reuters.
By offering to anchor transactions, or in some cases fully finance them, L&G is aiming to streamline what has historically been a complex, multi-party process. Sovereign borrowers, development finance institutions, insurers, and environmental groups must align on structure, conservation commitments, and legal safeguards before a deal can close. That complexity has a limited scale.
“What we’re trying to solve is how to make these transactions quicker, and that is what hopefully this will achieve,” Harper said.
The operational architecture behind the push is being led by Enosis Capital, a specialist firm co-founded in late 2024 by Ramzi Issa after years of structuring debt swaps at Credit Suisse. Enosis has brought together L&G, major environmental organizations, and insurance giant AXA XL, which will provide political risk cover — often a decisive element in making the new bonds attractive to institutional investors.
Issa said the goal is to offer countries a near “ready-made” consortium capable of executing transactions more efficiently.
“We want to get to market quicker by offering a comprehensive package in these transactions,” he said, noting that around a dozen swaps are currently in development.
How debt-for-nature swaps work
Debt-for-nature swaps free up fiscal space by allowing governments to buy back or refinance expensive sovereign bonds or loans and replace them with cheaper, longer-dated instruments. The cost reduction is made possible through a credit guarantee, typically from a development finance institution or multilateral agency, which enhances the credit quality of the new issuance.
The savings generated — often amounting to tens or hundreds of millions of dollars over the life of the transaction — are ring-fenced for conservation initiatives, marine protection, forest preservation, or biodiversity programs.
Recent headline transactions include Ecuador’s 2023 deal tied to the Galápagos Islands, which L&G backed, as well as swaps in Belize and Gabon. Those transactions relied in part on guarantees from the U.S. development finance apparatus. With that backing now limited, the market has slowed.
The ecological case for scaling up remains pressing. According to the latest Living Planet Index compiled by the World Wide Fund for Nature and the Zoological Society of London, global populations of mammals, birds, fish, reptiles, and amphibians have declined by 73% on average since 1970.
For conservation advocates, debt swaps represent one of the few mechanisms capable of mobilizing large pools of private capital while aligning sovereign balance sheet management with environmental outcomes.
Investment-grade profile
A central appeal for institutional investors lies in the credit structure. Because the new bonds are typically backed by partial guarantees, they can achieve investment-grade ratings even when the underlying sovereign borrower carries higher risk. That profile makes them suitable for insurers, pension funds, and asset managers bound by strict risk mandates.
Harper said there is now “a movement” among long-term UK investors to increase allocations to emerging markets, and that debt swaps offer a structured way to do so with downside protection.
Beyond conservation, L&G’s $1 billion could also support adjacent models such as debt-for-education or debt-for-food swaps, expanding the template to other development priorities. That evolution would test whether the guarantee-backed structure can be replicated at scale across sectors.
If fully deployed, L&G’s pledge alone would represent roughly one-sixth of the total volume of debt-for-nature swaps completed globally in the past five years. In a market still considered experimental, that scale is material.
Adam Tomasek, head of the Debt for Nature Coalition, said the upfront capital commitment and Enosis’ integrated model should encourage more governments to consider swaps. “This is a monumental step forward,” he said.
The broader question is whether private-sector coordination can compensate for reduced U.S. government backing. Political risk guarantees remain pivotal; without them, borrowing costs would likely rise, and investor appetite could wane.