This month, the United Nations Environment Programme (UNEP) released the second edition of the State of Finance for Nature 2022 report, which quantifies funding available for nature-based solutions, actions that protect and restore ecosystems, tackle biodiversity loss, and mitigate climate change.
And as expected, investments remain woefully unequal to the scale of nature loss.
According to the report, finance going to nature-based solutions is currently US$154 billion per year. But this is less than half of the US$384 billion per year needed by 2025 to stave off the worst effects of biodiversity loss.
Governments currently provide about 83 per cent of nature-based finance. However, it is predicted that this amount is unlikely to increase to the levels needed due to fiscal challenges linked to competing priorities for funding, inflation, debt and poverty facing many countries.
The State of Financing for Nature report comes against the backdrop of what has been described as a crisis of biodiversity. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services has warned of a rapidly deteriorating planet due to human activity, saying “1 million plant and animal species are now threatened with extinction.”
One area where improved financing in nature-based solutions can have a significant impact is the agriculture and commodities sectors. Large scale production of food and non-food commodities often requires the conversion of huge swaths of land from forests to farms, resulting in biodiversity and species habitat loss.
By financing more sustainable farming practices that decouple commodity production and deforestation, biodiversity loss would be greatly reduced. The financial sector can play a critical role in supporting solutions that enable farmers to switch to more sustainable farming practices.
Through dedicated funds and facilities, UNEP is supporting a shift in financial metrics and flows to reduce consumer footprints on forests while supporting partners and Member States in deforestation-prone landscapes to embrace practices with less impact on forests. Here is a closer look at those approaches:
1. The Responsible Commodities Facility
The facility is an initiative to promote the production and trading of responsible soy and corn in Brazil. It does so by creating a financially sustainable vehicle to provide incentives to farmers and help meet the growing international demand for zero-deforestation supply chains.
The facility provides favourable financing terms to incentivize farmers in the Cerrado region of Brazil to transition to deforestation- and conversion-free soy production practices to enhance biodiversity.
The facility has recently attracted over US$11 million in investment from major supermarkets Tesco, Sainsbury’s and Waitrose in the United Kingdom to provide financial incentives for farmers that pledge to produce deforestation- and conversion-free productions.
2. The Restoration Seed Capital Facility
Implemented by UNEP and the Frankfurt School of Finance and Management and supported by Germany and Luxembourg, this is a unique initiative that promotes private investment in forest restoration.
The facility does this by providing early-stage funding and project development finance for forest restoration and sustainable land use projects with the aim of promoting private investment in sustainable land use activities.
The facility supports projects across Central and South America, Southeast Asia and Africa. Through their operations, facility partners aim to restore at least 40,000 hectares of land and protect 500,000 hectareds of endangered ecosystems.
As well as climate and biodiversity benefits, unlocking private finance for landscape restoration can create significant social benefits by creating new jobs, raising incomes and providing training opportunities.
3. AGRI3 Fund
The fund was created by UNEP and Rabobank, together with partners IDH and FMO, the Dutch Entrepreneurial Development Bank, to support the transition to sustainable agriculture.
The AGRI3 Fund aims to mobilize US$1 billion in public and private capital globally to improve sustainable agricultural value chains, avert deforestation and enhance biodiversity by providing commercial banks with loan guarantees. The financial support goes to agricultural projects that actively prevent deforestation, stimulate reforestation, and improve rural livelihoods.
The AGRI3 Fund investment strategy is driven by three key environmental and social impact objectives. First, the protection of existing natural forests and the restoration of natural ecosystems to improve biodiversity. Second, embedding sustainable agricultural practices by deploying sustainable farm management and regenerative agriculture solutions that focus on restoring soil health, reducing carbon emissions, rehabilitating degraded land, enhancing water management, improving soil fertility and strengthening climate resilience.
And third, improved rural livelihoods by increasing incomes, strengthening the skills of farmers and smallholders and enhancing opportunities for women in agriculture and forestry.
About the United Nations Biodiversity Conference (COP15)
From December 7-19 in Montreal, Canada, 196 governments will meet to strike a landmark agreement to guide global actions on biodiversity. The framework will need to lay out an ambitious plan that addresses the key drivers of nature loss and puts us on the path to halt and reverse nature loss by 2030.
