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.
Read more.webp)
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.
Read more
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
Read more
Analysing the level of effort of international development donors to support a shift towards arranging financing for disasters, before shocks happen.
Read more
This insight paper provides an overview of the key features of debt pause clauses, also known as climate resilient debt clauses.
Read moreEx ante
Actions, decisions or financial arrangements made before a disaster or crisis occurs.
Contingent loan (or credit) and grants
A pre approved loan or grant released automatically when agreed crisis conditions or triggers are met.
Vulnerability
Conditions that increase how severely people or communities are affected by hazards.
Contingent liabilities
Possible financial obligations that only become real if specific future events occur.
Resilience
The ability to withstand shocks, adapt, recover and continue functioning over time.
Attachment point
The loss level above which a reinsurer begins paying under a reinsurance agreement.
