1. Introduction

Africa stands at a critical juncture in the global climate finance landscape. The continent bears disproportionate climate impacts while grappling with mounting debt burdens that constrain its ability to invest in climate resilience and green development. Traditional climate finance mechanisms have proven insufficient to bridge the gap between Africa’s climate needs—estimated at $2.8 trillion by 2030—and available resources. This reality has sparked experimentation with innovative financial instruments that promise to unlock new sources of funding while addressing multiple development challenges simultaneously.

Two pioneering initiatives exemplify both the promise and complexity of this new wave of climate finance mechanisms. Gabon’s 2023 debt-for-nature swap—the first of its kind in continental Africa—demonstrates how financial markets can be leveraged to reduce sovereign debt while generating funds for marine conservation. Meanwhile, the Central African Forest Initiative (CAFI), established in 2015, is a sophisticated, multi-donor approach to forest conservation that combines high-level policy dialogue with results-based financing. Together, these examples provide valuable insights into what is needed to design, implement, and maintain innovative climate finance at scale.

However, both initiatives also expose core tensions in climate finance design: between financial innovation and transparency, between global expertise and local control, and between immediate results and long-term sustainability. As Africa aims to mobilize climate finance from billions to trillions, understanding these trade-offs and tackling the structural challenges they unveil will be crucial for driving transformative climate action across the continent.

2. The Central African Forest Initiative

The Central African Forest Initiative (CAFI) aims to support country-level efforts to reduce emissions from deforestation and forest degradation. CAFI also aims to promote conservation, sustainable forest management, and the enhancement of forest carbon stocks (REDD+). Additionally, it facilitates investments in low-emission development to mitigate climate change and reduce poverty in Central African nations. It is expected to operate until December 2027 (Climate Funds Update, n.d.). CAFI combines a multi-donor Trust Fund with a platform for high-level political dialogue focused on forest conservation and sustainable land use across Central Africa. Its Theory of Change suggests that by pooling donor funds, providing technical support, and engaging in political dialogue, it can fund reforms, improve forest governance, and promote sustainable rural development. Expected outputs include the adoption of National Investment Frameworks (NIF), signing Letters of Intent (LOI) with time-bound commitments, and implementing programs related to forestry, land use, and development. The anticipated outcomes are reduced deforestation and degradation, improved carbon stock preservation, strengthened governance, and enhanced rural livelihoods (Central African Forest Initiative, 2023b).

Table 1: CAFI’s key stakeholders and their roles.

CAFI’s fund structure has all deposits going into a single UN Multi-Partner Trust Fund (MPTF). The UN MPTF Office acts as trustee. Donor funding is achieved by executing a Contribution Agreement, followed by a transfer to the MPTF on an agreed-upon date. All contributions are unearmarked with utilization determined after the fact. Partner Countries receive support via set mechanisms. The Executive Board and each partner government sign a multi-year LOI that fixes a maximum funding amount (envelope) that can be accessed based on achievement of policy-level milestones set in the LOI. For each funding envelope, projects draw down funds based on approved results frameworks and disbursement schedules. Country-specific programming frameworks or competitive calls for Expressions of Interest allocate tranches to accredited Implementing Agencies. Disbursements occur through one of three channels: direct grants to the implementing agency, pass-through funding to a national climate fund (e.g., FONAREDD in DRC), and Results-Based Payments (Central African Forest Initiative, 2023a).

Table 2: A summary of key achievements compiled by the author based on data from Central African Forest Initiative (2024b).

2.1 Critical Analysis

Table 3: Analysis of program strengths and weaknesses

CAFI aligns with the national development plans of its partner countries, enhancing its local relevance. However, Africa contributes less than 4% to global GHG emissions, yet only 32% of climate finance flows to the continent are adaptation-focused, and 21% dual benefit (Climate Policy Initiative, 2024). Although CAFI projects sometimes yield dual benefits, they remain mitigation-focused and relatively detached from emerging continental mechanisms, such as the Africa Adaptation Acceleration Program (AAAP). Its emphasis on policy dialogue, governance, and results-based disbursements is appropriate given the institutional and governance constraints in Partner Countries. On the other hand, continued reliance on international implementers limits national ownership and appropriation of best practices by locals. CAFI’s impact is most visible in land-use planning, community forestry, and clean energy access (Central African Forest Initiative, 2024a). While these are commendable outcomes, CAFI’s long-term impact remains difficult to attribute and quantify due to data limitations and its wide variety of interventions. Its original termination date was recently extended to 2027, yet no formal shutdown or transition strategy has been published. Sustainability is further constrained by the low absorption of national systems, reliance on grant financing, and limited integration into domestic economic ecosystems. Without durable revenue models after funding or handover frameworks, once CAFI support ends, the goals realized may be reversed. Strengthening sustainability will require clear exit planning and project financial performance.

2.2. Barriers & Opportunities

Table 4: Analysis of program barriers and opportunities

Africa’s climate finance landscape is rapidly shifting toward adaptation, driven by escalating climate vulnerability, the immediacy of the need, debt distress, and limited fiscal space. Adaptation and dual-benefit finance now account for over 50% of tracked flows, reflecting both need and donor alignment (Climate Policy Initiative, 2024). CAFI’s model risks becoming misaligned unless it repositions itself to explicitly include measurable adaptation outcomes, which will be critical to its future relevance and funding access. Africa is emerging as a key geography in global carbon markets, now accounting for 26% of the global credit supply, driven by initiatives such as the Africa Carbon Markets Initiative (ACMI). CAFI’s results-based payment to Gabon sets a precedent, but to scale this model, CAFI must support partner countries with robust MRV systems, equitable benefit-sharing frameworks, and Article 6 readiness.

Private capital participation remains limited, often constrained by perceptions of high risk and the lack of de-risking tools. Integrating blended finance tools and engaging African DFIs and commercial intermediaries would increase CAFI’s impact. Simultaneously, investor and donor expectations are shifting toward aligned reporting with ISSB, SDG, and ESG frameworks. CAFI must enhance its disclosure and KPI systems to stay investable.

2.3. Recommendations

Revise CAFI’s mandate to explicitly integrate adaptation objectives. This includes embedding targets around water security, sustainable agriculture, and community health. The objectives of additionality and effectiveness justify this since Africa’s climate finance needs remain overwhelmingly adaptation-driven. For example, CAFI emphasizes REDD+ goals and forest emission reduction metrics but does not systematically track resilience metrics or support programming aligned with national adaptation plans (Central African Forest Initiative, 2023b)​. Expanding the mandate would enhance CAFI’s eligibility for donor resources, better align with Africa’s NDCs, and deliver sustained benefits. It would also help mitigate the risk that mitigation investments are undermined by unaddressed local climate impacts. In the DRC and Cameroon, this reframing would enable investments in food system resilience, tenure security, and climate-smart services, while preserving forest carbon assets.

Secondly, creating a blended finance window that partners African DFIs and local banks to offer de-risking instruments, such as first-loss guarantees. This is justified by the financial principle of leverage and the catalytic effect. CAFI’s local private sector engagement remains limited, as does the use of catalytic capital instruments. Launching the Regional Private Sector Facility, backed by $100 million in grants, signaled intent but lacked a robust linkage to domestic capital markets (Central African Forest Initiative, 2024a)​. Meanwhile, the 2022 DRC reporting revealed the absence of any strategy to mobilize private finance (Central African Forest Initiative, 2023a). Partnering will expand reach to undercapitalized enterprises in sustainable agriculture, clean energy, and forest-based value chains. It will also reduce long-term reliance on grants, foster market development, and enhance project ownership.

Finally, all new LOIs and programs must include detailed institutional transition plans that outline the phased handover of implementation to national agencies, local capacity-building milestones, and long-term financing strategies. This addresses the climate finance principles of country ownership and sustainability. CAFI’s current reliance on international implementers and centralized decision-making has constrained national ownership and weakened delivery capacity. For instance, FONAREDD in DRC continues to struggle with coordination, underperformance, and delayed reporting (Central African Forest Initiative, 2023a). Including institutional transition plans would ensure that local entities are equipped to sustain interventions. It would also enable countries to independently access climate finance from other sources​.

3. Gabon Debt-For-Nature Swap

Gabon’s multilateral debt-for-nature swap (DFNS), also known as ‘debt conversion,’ was completed in 2023. It was the first deal of its kind on continental Africa, aimed at reducing the country’s sovereign debt burden while simultaneously investing in marine conservation off its coast. Destruction of Earth’s wild places, such as forests and oceans, accelerates climate change by releasing stored carbon into the atmosphere and reducing the planet’s capacity to absorb greenhouse gases, making conservation efforts a critical form of climate finance (TNC, 2025). Gabon has committed to protecting 30% of its land, ocean, and freshwater habitats by 2030, a goal known as ‘30×30’ (UNEP, 2024): “the biggest conservation commitment the world has ever seen” (TNC, 2025). For context, Gabon’s oceans are home to about one-third of the world’s leatherback turtles (Wachira, 2023).

In short, the DFNS involved Gabon issuing a $500 million 15-year blue bond, maturing in 2038, to repurchase some of its older debt (equivalent to 4% of total sovereign debt) at a discount, committing to using the savings and the lower interest cost of the new bond to widen marine conservation areas and strengthen fishing regulations (Wachira, 2023). Existing debt was repurchased using the proceeds of the blue bond, specifically 6.95% bonds due in 2025 at 96.75c on the dollar and 6.625% and 7% 2031 bonds at 85c on the dollar (Collard, 2023a; West, 2023), offering a moderate discount compared to the distressed debt swaps seen in countries like Ecuador and Belize (Simeth, 2024). At the same time, the United States International Development Finance Corporation (DFC) provided insurance on the blue bond, which boosted the bond’s credit rating from Caa1/B- to Aa2, according to Moody’s, and reduced the coupon rate to 6.097% (Standing, 2023). In this way, savings on Gabon’s sovereign debt, equating to $125 million, were generated (West, 2023), which has been ringfenced for spending on ocean conservation, and in local rather than hard currency. The conditions of the deal require Gabon to meet specific environmental milestones over the duration of the bond, where not meeting targets could trigger financial penalties (Simeth, 2024) or even a default (West, 2023). The deal was met with strong investor demand, highlighting the growing interest in sustainable finance mechanisms (Collard, 2023b).

The Bank of America (BofA) was the sole arranger of the bond issue and managed the transaction process, while The Nature Conservancy (TNC), a U.S. non-profit organization (NPO), acted as an advisor on the deal and supported the structuring process. TNC is also responsible for overseeing that the conservation commitments are adhered to. The Gabonese government, Gabonese people, particularly those living on the coast, and the reefs and ocean life in the area are also key stakeholders. Despite the coup ousting President Ali Bongo and Finance Minister Lee White, just two weeks after the deal was concluded (Standing, 2023), Gabon has made timely coupon payments on the bond, appearing to remain committed (Jones, 2023). Over the past year, Gabon, in partnership with TNC, has advanced marine planning to identify key ocean areas for protection, with implementation over the next decade and ongoing efforts to monitor and address unregulated fishing (Environmental Finance, 2024).

3.1. Critical Analysis

Gabon’s DFNS represents an innovative approach to combining debt relief with climate finance, focusing on marine conservation. While the deal shows strong potential, its financial savings are less significant compared to other swaps (Simeth, 2024), and its success hinges on transparency and effective implementation (Collard, 2023c). The project addresses local needs and conservation goals, but its long-term impact will depend on strong governance (Simeth, 2024) and consistent funding to ensure continued commitment to sustainable marine management (TNC, 2023). The success of this initiative could serve as a template for other nations facing similar challenges, particularly in continental Africa.

Strengths include: (1) Gabon’s DFNS presents an innovative use of financial markets to support both debt reduction and environmental conservation. The blue bond was syndicated in traditional bond markets, unlike previous DFNSs, which were privately distributed by Credit Suisse (West, 2023), providing access to a wider pool of investors and encouraging a wider range of emerging market bond investors to make more sustainable investments. (2) While some have criticized the financialization of nature in response to the climate and biodiversity crises (e.g., Climate Action Network, 2023), this should be considered a strength. The ocean is a major cash-generating asset for Gabon, meaning that the DNFS has long-term financial benefits: protecting the ocean ultimately makes Gabon a better prospect for future investment (Collard, 2023c), and it inspires marine conservation, which is a key mitigant to the looming climate crisis. (3) The blended structure, with credit enhancement provided by DFC insurance, is crucial to make the deal attractive to a wider range of investors while ensuring that the government benefits from reduced debt servicing costs (Simeth, 2024).

Weaknesses include: (1) Some criticize the opacity involved in these complex deal structures. For example, Collard (2023c) reveals that in the event of default at a sovereign level, there is a lack of clarity around how the bond would be treated. (2) Simeth (2024) draws attention to the very high transaction costs involved in such complex and lengthy transactions. Costs that have not been made public. (3) Bluewashing risks are also important to note. As Simeth (2024) points out, Gabon had already protected 26% of its marine areas by 2017. Against a commitment of 30% (‘30×30’ above), critics argue that the bond issue is underambitious in terms of conservation goals (Standing, 2023). Instead, DFNSs should provide additional benefits for nature and the climate that would not otherwise have happened (Simeth, 2024). (4) Although TNC commits to protecting the interests of marginalized groups and local communities dependent on natural resources, Standing (2023, p.55) argues that imbalances of power mean that “decisions will [likely] be captured by those with more resources and political influence.”

However, Gabon’s DFNS remains an effective and promising model for combining debt relief with climate action, which can be replicated elsewhere. The initiative has shown a positive impact to date by demonstrating debt savings for Gabon and defining ocean areas to protect. Furthermore, the swap should also be recognized for its contribution to managing unregulated fishing, not just for marine area designation.

3.2.  Barriers and Opportunities  

Barriers include: (1) Unlike other DFNSs in more distressed countries, as above, Gabon repurchased its bonds at prices between 85 and 96.75c on the dollar, compared to nations like Ecuador and Belize that received much steeper discounts (West, 2023). This could have limited the financial relief Gabon gained (Collard, 2023b). This lower level of savings reduces the immediate financial impact of the deal. As such, some argue (e.g., Culverhouse, S. in Collard, 2023b) that complicated deals like this are not suited to countries that are not in debt distress. Nonetheless, the extended debt maturity profile remains attractive (Collard, 2023c). (2) The complex financial structure and lack of financial transparency regarding the allocation of bond proceeds have also been met with criticism (e.g., Standing, 2023; Collard, 2023c; Simeth, 2024). The high transaction costs involved in structuring the deal have not been fully disclosed, limiting understanding of the deal’s true financial benefits (West, 2023). Repeated replication of such swaps could help reduce transaction costs in the future. (3) Some have raised concerns about how the funds will be used for conservation, questioning whether the benefits could be overstated (Collard, 2023c). However, Harper, J. (in West, 2023) argues that in DFNSs, the incentives for the borrowers to allocate funds correctly are well thought-out and included in contractual agreements.

Opportunities include: (1) A key opportunity for DNFSs broadly and Gabon’s DNFS specifically is to standardize oversight of DNFS conservation efforts, for example, using a framework like the International Capital Market Association’s (ICMA) Guidelines for Blue Finance. Simeth (2024) reveals that a review of blue bond issuances finds that none have such a framework, nor do they provision for a second-party opinion. Standardized disclosure statements (such as the Task Force for Nature-Related Financial Disclosures) should also be incorporated as a standard prerequisite. This will help to address bluewashing allegations, ensuring that benefitting governments, like Gabon, are held to their conservation promises. (2) Engaging local communities in the management of marine conservation projects can ensure the success and sustainability of the swap. Ensuring that fishing communities are directly involved in decision-making processes will likely lead to better conservation outcomes and equitable benefits for those dependent on marine resources. Standing (2023) emphasizes the importance of addressing power imbalances to ensure that marginalized voices are heard and have influence over conservation efforts. (3) Gabon’s marine ecosystems are part of the larger Atlantic Ocean biodiversity, shared with neighboring countries. There is a significant opportunity to expand the model’s impact through regional cooperation for shared outcomes, including ocean protection and climate resilience. This would be invaluable for countries facing debt distress and seeking to address climate impacts.

As nature-based solutions (NbS) gain traction globally, Gabon’s DFNS aligns with the growing focus on sustainable and climate-resilient strategies. With increasing international interest in NbS, Gabon could attract more private capital and multilateral support for its marine (and terrestrial) conservation efforts, further enhancing the deal’s impact and Gabon’s reputation as a green and blue investment destination.

3.3. Recommendations for future DFNSs

(1) Out of five recent DNFSs, TNC acted as arranger on four (Simeth, 2024). Increasing the number of NPOs that sponsor such projects, as well as the number of development institutions providing credit enhancements, motivated by promoting conservation and addressing climate change impacts, would increase the number and pace of such issuances (West, 2023). This aligns with the climate principle of scaling up financial resources for adaptation and mitigation in vulnerable regions, while also helping countries manage their debt burdens more effectively. At the same time, as West (2023) posits, greater definition, transparency, and education are needed around DFNSs so that markets can better understand these instruments. Despite confusions, as presented in this paper, there is nothing to show that the essential concept of DFNSs does not work (West, 2023): they free up fiscal capacity and with strong checks in place (along with the recommendation above for standardized frameworks to prevent impact washing), there is great potential to ensure that funds are capably allocated to environmental outcomes.

(2) Develop a strong pipeline of countries with (1) high levels of indebtedness and (2) that are vulnerable to the impacts of climate change, and scale DFNSs so that they provide tangible benefits to these countries. As Collard (2023b) points out, “climate and debt sustainability are closely linked.” Smaller, lower-income countries tend to experience the most severe impacts of climate change, despite contributing very little to the crisis. The Bridgetown Initiative (2022) calls for an urgent transformation of international financial architecture to assist smaller nations in addressing the climate crisis, including debt relief, concessional funding, loss and damage funds, and a greater global emphasis on sustainable development. This amounts to climate justice. DFNSs can be tailored to offer greater concessionality, including (at least partial) debt forgiveness. By restructuring loans with longer tenors, lower interest rates, and reduced capital, creditors can still receive some level of repayment while freeing up resources for countries facing severe climate impacts. For instance, Kenya, flagged for potential default (Collard, 2023c), could use a DFNS to mitigate this risk and redirect funds towards vital sectors like safari tourism protection. With over a third of the $2.2 trillion in developing world commercial debt distressed (West, 2023), DFNSs present a significant opportunity to address both climate challenges and debt sustainability.

(3) Shift from a project-based approach to developing a pipeline of initiatives that incorporate a mix of financial instruments (beyond environmental NGO grants), including loans, equity, and guarantees, to enable a more systemic approach to generating environmental impact at a national level (Karaki, Medinilla & Bilal, 2023). This transition would attract both public and private sector investments, enhancing the scalability of DNFSs by generating returns that can be reinvested in further development projects. This aligns with mobilizing private sector capital (Paris Agreement, Article 2.1c & Article 6.4b, and SDG 13.a) as well as broadly enhancing climate resilience. It supports the creation of self-sustaining financial mechanisms that can unlock additional funding, fostering even more climate and biodiversity outcomes, which are crucial to our long-term survival and flourishing.

4. Conclusion

Both Gabon’s debt-for-nature swap and CAFI represent breakthrough innovations in climate finance that have successfully demonstrated new pathways for mobilizing resources on a large scale. The Gabon swap pioneered the use of capital markets for conservation finance in Africa, generating tangible debt relief. CAFI has delivered impressive results in forest conservation through sophisticated multi-donor coordination and results-based financing. As African governments and international partners develop the next generation of climate finance instruments, these cases provide examples for moving beyond traditional approaches toward institutional innovation that can deliver transformative climate and development outcomes in the region.

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Appendix: Figures 

1. Debt-for-nature swap deal structure

Figure 1 below represents the structure of multilateral debt-for-nature swaps, such as Gabon’s:

Figure 1: Multilateral debt-for-nature swap structure (Source: Karaki, Medinilla, & Bilal, 2023)

2. Benefits of an insurance policy on Gabonese bond performance

Figure 2 below represents the outperformance of Gabon’s blue bond following the August 2023 coup, thanks to DFC political risk insurance:

Figure 2: Outperformance of Gabon’s 2038 blue bond (Source: Jones, 2023)