The ongoing loss of natural spaces, including forests, has become a systemic risk for the global economy, warns a new report from the United Nations Environment Programme (UNEP) and several partners.
Over the past decade, 26 per cent of global tree cover loss was caused by the production of just seven agricultural commodities – cattle, oil palm, soy, cocoa, rubber, coffee and wood fibre – said the State of Financing for Nature report. Barring major changes, the toll on forests and other wild spaces will continue to mount, ultimately imperiling industries that rely on natural resources. The authors of the report urged governments, financial institutions and businesses to place nature at the heart of future economic growth by tripling the financing available for environmentally friendly projects by 2030.
The report’s launch comes on the eve of the United Nations Decade on Ecosystem Restoration, a global effort to revive natural spaces lost to development. Forests have been hit especially hard by human activity. Every year, the world loses 10 million hectares of tree cover, an area the size of the Republic of Korea. Forests provide drinking water to one-third of the world’s largest cities and support more than 65 per cent of amphibian, bird, and mammal species.
The State of Finance for Nature report was produced by UNEP, the World Economic Forum and the Economics of Land Degradation Initiative in collaboration with Vivid Economics. It showcases the investment opportunities that nature can offer and emphasizes its importance to the global economy. By demonstrating the value of nature, the report authors say they hope to show countries it is possible to safeguard the planet while spurring economic growth and sustainable development. The report said that reviewing public subsidies, factoring the costs of ecosystem degradation into products or services and integrating the value of nature into credit risk analysis could lead to greener economies.
Investments in nature-based solutions (NbS) is a key component of transformational change, the report noted. They provide economic, social and environmental stimulus by creating jobs, protecting nature, accelerating decarbonization and improving climate resilience.
There is a lack of data on how much public and private capital is flowing to productive and non-productive activities that constitute NbS. However, governments, financiers, and businesses are becoming increasingly interested in nature-based solutions, the report said. Two-thirds of governments have now committed to restoring or protecting ecosystems in their Nationally Determined Contributions, the commitments at the heart of the Paris climate change agreement. There is also growing interest from companies to commit to “net zero” targets for greenhouse gas emissions.
But much remains to be done to create demand for NbS, to put in place robust environmental and social safeguards, and to address legal hurdles. One lever to generate investment opportunities is to focus on economic stimulus and positive societal outcomes. The more stakeholders pursue these win-win opportunities, the more public and private investments in NbS will rise over time.
Governments must create the enabling environment that allows this to happen, the report said. They can do that by revisiting agricultural policies and tariffs and developing taxonomies to determine what is sustainable and what is not. Companies and financial institutions must also share the risk and commit to increase finance and investment in nature-based solutions in an ambitious way, with clear time-bound targets. A nature finance action track, acting as a shared vision can guide land-use decisions in support of healthy natural systems and sustainable development, the report added.
Several case studies in the State of Finance for Nature illustrate the business and investment case for nature, along a pathway to transition towards a net-zero, nature-positive economy. They range from the Scottish government’s commitment to spend £250 million on peatland restoration over the next 10 years, to Credit Union's Social Performance Management initiative, which provides innovative financing schemes to support integrated landscape projects in Indonesia.
