Identifying the ‘greenium’: How UNDP is contributing to a more efficient cost of capital for developing countries

Global indebtedness has been growing in recent years and has been further exacerbated by the COVID-19 pandemic. Many developing countries are now facing the triple challenge of climate change, unsustainable debt burdens and COVID impacts. According to UNDP analysis: “Most vulnerable countries identified are not on the verge of a default, but rather risk facing a future of high economic and development costs of having to deal with large debt overhangs.

How the vulnerable developing countries will come out of this crisis will depend crucially on liquidity risk in the short term and their ability to undertake quality investments in physical and human capital to boost future growth, as well as external demand for their commodities. For all countries, this will require access to stable and low-cost finance, and for some countries a debt restructuring will have to precede such access.” How to deliver on this means identifying debt solutions that are sustainable and appropriate to their fiscal situation, and tied to sustainability goals.