$2 Trillion in Sovereign Debt

Big global banks are eying some of the world’s most fragile countries for a new experiment in financial engineering: debt relief in exchange for environmental protections.

Called “debt-for-nature swaps,” they present a tempting solution for the rising number of nations in distress, particularly those with ecosystems to protect. A country gets to avoid default and lower its debt burden, as long as it’s willing to earmark some of the savings to salvage a coral reef, preserve a forest or build a wind farm, for example. Global investors get better returns and enhanced green credentials. Wall Street takes a cut.

As much as $2 trillion of developing country debt may be …