Last October, the Republic of El Salvador announced the world's largest conservation-focused debt-for-nature conversion. The $1 billion deal, which will see around $350 million invested into a conservation and restoration programme in the Río Lempa River, has won the sovereign sustainability bond of the year.

The bespoke structure saw the El Salvadorian government issue $1 billion in new 20-year impact notes, alongside the tender of a portion of its outstanding notes. A loan from JP Morgan was used to purchase the new impact notes through a special purpose vehicle.

The government expects that it will generate around $352 million in lifetime savings.

Two types of credit enhancements were used to lower the coupon on JP Morgan's loan, as well as the coupon on El Salvador's impact notes. In particular, the US International Development Finance Corporation provided political risk insurance which will be triggered if an arbitral tribunal recognises that El Salvador has defaulted on the impact notes.

In this instance, it would also trigger a standby letter of credit from the Development Bank of Latin America and the Caribbean.

White & Case, which advised the deal, labelled this as a "new generation" of debt-for-nature conversions.