Fixing Capital Flows Crucial to Augment Nature Finance
The impact of disclosure requirements will be limited without the right economic incentives to stimulate private sector support ahead of COP16 this October.
The repurposing of existing finance flows and the creation of an enabling environment for private investment are essential to boost efforts to protect biodiversity and address nature-related risks, attendees at the UN Convention on Biological Diversity have said.
Meeting in Nairobi, Kenya, for the Fourth meeting of the Subsidiary Body on Implementation (SBI-4) late last month, delegates called for investments of at least US$200 billion a year and for reform of US$500 billion in harmful subsidies to achieve Goal D of the Global Biodiversity Framework (GBF): to invest and collaborate for nature. The goal also calls for the alignment of financial flows to ensure sufficient means for implementation.
Adopted in December 2022, the GBF sets out four overarching goals and 23 targets, encompassing elements such as nature-related risks, dependencies and impact disclosures.
Storebrand Head of Climate and Environment Emine Isciel, who attended the conference in Kenya on behalf of the Finance for Biodiversity (FfB) Foundation, told ESG Investor that disclosures had been a key topic of discussion among delegates.
“In Europe, we have the Corporate Sustainability Reporting Directive and we know that there are legal requirements related to nature,” she said. “But that is not necessarily happening across every jurisdiction, so it’s definitely a signal to increase transparency on impact and dependencies on nature.”
Isciel also co-chairs the FfB’s public policy advocacy working group and represented finance at SBI-4. Due to start in Cali, Columbia in October, COP16 was meant to be informed by recommendations from the roughly 1,000 delegates who attended SBI-4. But the summit ended without finalised recommendations – including on issues around disclosure and transparency.
“Disclosure is an important step in the right direction, but if we don’t have the right economic incentives and the enabling environment, I don’t think the private sector will be able to deliver on its part,” said Isciel. “At COP16, we encourage delegates – alongside their discussion on how to scale up commitments to biodiversity finance – to also identify and apply strategies to reduce existing harmful flows.”
Missed opportunities
Targets 14, 15, 18 and 19 of the GBF relate directly to the channeling of finance to preserve and protect nature. While Target 15 requires large companies to disclose nature-related risks, dependencies and impacts, Target 19 calls for the mobilisation of US$200 billion per year toward protection of biodiversity.
“Current numbers show we are not yet there, and this was highlighted several times in Nairobi,” said Rodrigo Cassola, Principal Specialist on Nature, Finance and Nature Economy at the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC). “Some parties expressed optimism that the ambition could still be achieved, but many others were not so optimistic. Mobilising resources from all sides will be key, and investors have a relevant role to play in this.”
Fully addressing the biodiversity finance gap will require an estimated US$700 billion per year. The UNEP Finance Initiative (FI) has found that private finance for nature had increased elevenfold in four years, from US$9.4 billion to more than US$102 billion. An additional US$1.45 trillion could be directed towards nature-related investment themes by 2030 if the momentum continues, it added.
“This new data documenting the surge in private nature finance mirrors the uptick we see amongst our membership to learn more about [the subject],” said Eric Usher, Head of UNEP FI. “Banks, insurers, and investors are stepping up to protect our planet. Now, governments must set clear policy frameworks to channel these funds into national biodiversity priorities and towards frontline nature stewards. It’s time to turn this financial momentum into real-world impact.”
But as pointed out by Isciel, finance remains a “sticky issue” at every COP, and the mobilisation of appropriate resources to implement ambitious goals is still a challenge.
“Much of the discussion [at SBI-4] centred around new and additional funding from developed to developing countries,” she said. “Discussions related to what actions are needed to create an enabling environment for private finance were totally absent.”
Isciel described the discussions in Nairobi as “extremely difficult”, noting frustration from delegates over limited progress made on the statement that will now be sent to COP16.
“The aim of the Nairobi meeting was to prepare resolutions and clean up the text as much as possible, but what happened in Kenya was the exact opposite,” she explained. “New options were introduced and we’re sending a version full of bracketed text.”
Repurposing finance
The UNEP-WCMC recently estimated that US$7.4 trillion would need to be invested by 2030 to meet the nine nature-related targets outlined in the UN Sustainable Development Goals. Closing this capital gap would generate the economic equivalent of US$152 trillion, or US$20 for every dollar spent, it added.
The report also flagged that meeting nature-related targets would help avoid 4.5 million premature deaths every year between now and 2030, and save more than 27 million hectares of forest as well as reduce natural-resource extraction by 18 billion tonnes.
“There are enormous returns on investment to be had from a global push for nature conservation and restoration, more efficient use of natural resources, and the reduction of water and air pollution,” said James Vause, Lead Economist at UNEP-WCMC. “In many cases, it’s not new money that’s needed – but rather making better use of existing financial resources, such as those provided for subsidies that are harmful to people and nature.”
But reducing harmful financial flows to close the biodiversity finance gap is a recommendation that was also missing from the text issued by the SBI-4 for COP16, Isciel observed.
“By only looking at public spending, you’re missing the policy coherence and how, for example, harmful subsidies distort investment decisions,” she said, expressing concern about the direction that the discussion took in Nairobi. “Public spending is important, but this funding will continue to be ineffective if existing private financial flows continue to hurt biodiversity.”
Bolstering private funding
The SBI-4 meeting also included discussions on the GBF Fund – including the role of the Global Environment Facility. Created in response to decisions made at COP15 to support the implementation of the GBF, the fund has so far received US$225 million in pledges from six countries: Canada, Germany, Japan, Luxembourg, Spain and the UK.
However, the fund was originally established to receive funds from all sources – including the private sector, which has so far failed to materialise.
“Now that the fund has been capitalised with initial contributions, there is enormous scope for international donors to dig deeper and ensure these obligations are met,” said Cassola. “[It] would demonstrate a tangible commitment from the private and financial sector towards global biodiversity goals.”
Meanwhile, China and the UNEP have also partnered on the Kunming Biodiversity Fund – a facility proposed in 2021 to support conservation efforts in developing countries, launched with more than US$200 million in funding.
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