Climate resilient debt clause or 'debt pause clause'
A pause clause is a provision in sovereign debt contracts that enables the borrower to temporarily stop repaying debt service (interest, principal or both) for a pre-agreed period when a predefined event occurs. These built-in debt deferrals can be designed to be Net Present Value (NPV) neutral and not extend the instrument’s original maturity date. Also known as Climate Resilient Debt Clause or Natural Disaster Clause (Centre for Disaster Protection).
A practical note on Debt Pause Clauses, the first of a series of documents designed to help governments and practitioners understand and compare financial instruments.
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This policy brief examines the first real-world use of debt pause clauses - contractual mechanisms that allow sovereign borrowers to temporarily defer debt payments in the wake of a disaster.
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This report offers an in-depth assessment of pre-arranged financing tools using seven key criteria for ensuring pre-arranged financing reduces the human and financial costs of disasters
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Analysing the level of effort of international development donors to support a shift towards arranging financing for disasters, before shocks happen.
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This insight paper provides an overview of the key features of debt pause clauses, also known as climate resilient debt clauses.
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A measurable indicator used to estimate losses and trigger financial payouts.
Official development assistance (ODA)
Public aid supporting development and welfare in eligible countries, usually on concessional terms.
Risk profile
Underlying risks that an organisation or country is exposed to and the extent to which they are mitigated by pre-arranged finance.
Crisis financing
Funding designed to prevent, prepare for and respond to crises before and after they occur.
Disaster risk finance diagnostic
An analytical assessment of a country’s disaster risk profile.
Crisis risk
The likelihood of harm or loss from crises shaped by hazards, exposure, vulnerability and capacity.
