Environment Group, in collaboration with Global Factor and supported by the United Nations Development Programme (UNDP), developed Armenia’s first comprehensive concept for implementing a debt-for-climate swap mechanism. This innovative financial tool aims to redirect part of the country’s bilateral debt payments toward priority climate and environmental initiatives, transforming fiscal liabilities into investments that promote sustainable development.

The assignment covered several key components. First, our experts thoroughly analyzed Armenia’s external bilateral debt portfolio, examining its structure, repayment schedules, and the conditions of loans owed to various creditor countries. Based on this analysis, we identified potential creditor partners best suited for engaging in swap negotiations, considering both financial feasibility and the political landscape.

Second, we designed the financial modalities of the mechanism, including the flow of funds, debt conversion ratios, and allocation guidelines. Simultaneously, a comprehensive legal analysis was conducted to assess Armenia’s existing legislation, international agreements, and constitutional requirements, ensuring that the proposed mechanism could be implemented without creating legal inconsistencies.

Third, in cooperation with the Ministry of Finance, the Ministry of Environment, and the Office of the Prime Minister, we developed detailed proposals for institutional arrangements. This included strategies for negotiating with creditor governments, structures for project selection and management, and the creation of transparent monitoring and evaluation systems. Special emphasis was placed on ensuring accountability and oversight, so that every converted dollar is effectively directed toward climate action.

As part of the project, over USD 200 million worth of project proposals were prepared and formally shared with creditor countries. These proposals include large-scale reforestation and afforestation programs, expansion of renewable energy generation and energy efficiency measures, and modernization of climate-resilient water infrastructure. Each intervention was selected to deliver measurable climate benefits while also providing co-benefits for local communities and the national economy.

Beyond the technical and financial aspects, the project also set a regional precedent in climate finance. By positioning Armenia as one of the first countries in the region to adopt a debt-for-climate swap model, Environment Group demonstrated how innovative instruments can mobilize additional resources for climate action. This work not only enhances Armenia’s fiscal resilience but also highlights how international cooperation and smart financial design can generate long-term value for both creditor countries and debtor countries.

Through this initiative, Environment Group has provided Armenia with a clear and actionable roadmap for transforming debt obligations into strategic investments. The project highlights our ability to integrate policy, finance, and technical expertise, reaffirming our role as a trusted partner in delivering solutions that support both economic stability and environmental security.