In January 2023, some of the world's most influential leaders, CEOs and academics are once again congregating in the Alpine resort town of Davos, Switzerland, for the World Economic Forum. Among the issues they are discussing is how to unlock financing to help conserve and protect critical ecosystems, and ward off the looming extinction of one million species.
The discussions come on the heels of last month’s United Nations Biodiversity Conference (COP15) in Montreal, Canada where countries adopted the Kunming-Montreal Global Biodiversity Framework, a landmark agreement to address the dangerous loss of biodiversity and restore ecosystems by 2030 while respecting the rights of indigenous peoples and local communities and ensuring full and effective participation of all stakeholders.
These goals will require major investments. Just how to raise funds for biodiversity protection continues to be a sticking point as the biodiversity framework moves toward implementation.
Currently, US$154 billion a year flows into what are known as nature-based solutions – which harness the power of nature to address major challenges facing society, such as climate change, natural disasters, food and water insecurity. That is less than half of the US$370 billion a year needed by 2025, according to the State of Finance for Nature report released by the UN Environment Programme (UNEP) ahead of COP15.
The COP15 framework calls for mobilizing at least US$200 billion per year from public and private sources for biodiversity-related funding by 2030. Also by 2030, it seeks to raise international financial flows from developed to developing countries to at least US$30 billion per year.
The framework recognizes the need to reform hundreds of billions of dollars worth of subsidies that are harmful for biodiversity and scale up positive incentives for the conservation and sustainable use of nature.
Governments currently provide about 83 per cent of nature-based finance—nowhere near enough to support the transition to green farming and commodity production, making private sector financing all the more critical, say experts.
Innovative financing tools
To close the investment gap in nature-based solutions, financial instruments like green bonds, risk-sharing facilities and concessional finance are becoming increasingly popular.
UNEP is at the forefront of this effort, marshalling financing through innovative tools such as the Land Use Finance Impact Hub, the Positive Impact Indicators Directory and the UNEP Finance Initiative, a network of banks, insurers and investors pushing for more sustainable global economies.
One successful vehicle is the &Green Fund, a partner of UNEP and the Global Environment Facility, which invests in agricultural businesses that conserve forests and protect threatened species. The fund focuses on forests and peatlands in the peril from agricultural expansion and unsustainable practices in the tropical regions of Latin America, Africa and South East Asia.
“Our holistic investment process puts us at the frontier of impact investing, achieving transformation of conventional agricultural production into sustainable practices that can conserve the essential biodiversity of our planet,” said Natalia Pasishnyk, an Investment Advisor to &Green.
&Green focuses on agriculture because food systems are the primary driver of biodiversity loss, as more and more forests, savannah and wetlands are being destroyed to make way for farms.
Agricultural expansion and commodity extraction account for almost 70 per cent of deforestation and habitat loss. This is leading to a perilous decline in biodiversity.
“At the moment, we take biodiversity for granted,” said Ivo Mulder, Head of UNEP’s Climate Finance Unit. Many farmers and commodity producers are interested in making their operations more sustainable. But the transition is costly, and banks are often reticent to lend them money, fearing sustainability is a risky investment, says Mulder. Meanwhile, consumers often balk at the idea of paying substantially more for sustainably produced goods.
“All sides are stuck in a business-as-usual model,” said Mulder.
Investing in inclusive agriculture
Photo Credit: UNEP/Lisa Murray
In 2020, UNEP partnered with the &Green Fund through a Global Environment Facility project to unlock private finance for agricultural projects that aim to untether major commodity supply chains from deforestation in a commercially viable way.
It is financing projects to halt deforestation in Brazil, Colombia and Indonesia. What makes the &Green Fund unique is its capacity to absorb credit risks that would deter most banks and development agencies.
It does this by providing commercial funding not otherwise available on the market, including loans with much longer repayment schedules. In exchange, producers must commit to strong social and environmental covenants that include no deforestation, no peat extraction, as well as the restoration and conservation of forests.
The &Green Fund has so far provided about US$150 million in financing, a number it hopes to raise to US$1 billion by the end of the decade. The fund has helped conserve 1.97 million hectares of tropical forest, sustainably intensify production on 247,000 hectares of agricultural land and create 25,000 jobs.
“Through its work with &Green and similar finance initiatives, UNEP will continue to help Member States innovate on biodiversity and land-use finance by strengthening partnerships with the financial sector, testing new public-private financing instruments and promoting sustainable land use business models,” said Ersin Esen, a task manager at UNEP.
For further information on UNEP’s work in Biodiversity and Land Degradation, contact Ersin Esen: ersin.esen@un.org
To halt and reverse nature loss by 2030, UNEP is working with governments, industry and civil society to meet the targets of the Global Biodiversity Framework adopted in Montreal in December 2022, and to address the five key drivers of biodiversity loss: land and sea use, over exploitation, pollution, climate change and invasive species. Learn more about biodiversity and how to get involved #ForNature. https://www.unep.org/facts-about-nature-crisis
