Unlocking The Potential Of Nature Finance To Address Climate Change And Biodiversity Loss

Unlocking The Potential Of Nature Finance To Address Climate Change And Biodiversity Loss

By Muhammed Sayed -Climate Finance specialist at Development Bank of Southern Africa

In today's world, the challenges of climate change and biodiversity loss have never been more pressing. These global crises demand innovative solutions and a coordinated effort from the public and private sectors. As we discuss the future of sustainable finance, one of the most compelling topics on the horizon is how to expand nature finance - a pathway that inherently addresses climate finance. The key lies in recognising that nature finance holds the power to deliver a double win by simultaneously mitigating climate change and bolstering Earth's resilience.

Nature finance encompasses a wide spectrum of ecosystems, from forests and peatlands to soils and mangroves. These ecosystems play a crucial role in sequestering vast amounts of carbon dioxide (CO2), contributing significantly to climate change mitigation. Simultaneously, they enhance Earth's resilience by protecting against environmental degradation and the collapse of our biosphere. Preserving and restoring these natural CO2-sinks is not just an environmental imperative; it is a necessity for the survival of our planet. Nature based solutions play a major role in addressing a broad range of societal challenges, from managing water scarcity to reducing disaster risk to poverty alleviation.

However, the question that looms large is the financing required for such an ambitious undertaking. According to the Kunming-Montreal Global Biodiversity Framework, an annual investment of 700 billion USD until 2030 is essential to reverse the trend of biodiversity loss and transition to nature-positive economies and consumption patterns. The World Economic Forum (WEF) estimates that nature-positive policies could attract more than US$10 trillion in new annual business value and create 395 million jobs by 2030. Africa alone needs more than $130bn in nature investing, but currently is receiving only ~3% of global funding. So, where can we find additional sources of funding, particularly from the private sector, and how can we tap into them effectively?

The discussion extends to exploring appropriate financing schemes that align with this purpose. How can we make nature projects financially viable and how do we attract private sector funding? What strategies are best suited to manage nature-related risks to the economy? Here, Development Banks play an important role, but they must develop comprehensive biodiversity strategies to drive these efforts effectively. The addition of outcomes-based funding providers could also be a viable solution to closing this significant financing gap, but this requires viable investment instruments and projects that are auditable and verifiable.

Moreover, the conversation will highlight the role of networks like IDFC (International Development Finance Club) in enhancing nature financing activities within the financial sector. IDFC's involvement, coupled with international cooperation like the Germany-South Africa initiative, showcases how such partnerships can translate into practical actions.

As we delve into these vital questions, we must address the disparity between biodiversity protection and climate measures. Both issues originated from the Rio Summit in 1992, with the Biodiversity Convention even predating the Convention on Climate Change. Yet, they have not progressed at the same pace in terms of implementation and funding. The discussion aims to uncover the reasons behind this discrepancy, such as a lack of metrics, insufficient biodiversity finance quotas in development cooperation, or the need for a more compelling narrative.

Crucially, we must explore how to effectively integrate biodiversity and climate finance to tackle these dual crises. We have seen an influx of climate finance, dwarfing biodiversity finance in comparison. The challenge is to harness this massive pool of climate finance to fund projects and actions that are both nature-positive and achieve a net-zero impact.

The anticipated outcomes of this discussion are manifold. We aim to demonstrate the dual benefits of nature finance, reflecting on the roles of Development Banks and IDFC, while showcasing a variety of nature finance instruments, both in the public and private sectors. The discussion will introduce practical examples of international cooperation and present IDFC's Position Paper on Biodiversity, which calls for mobilising finance for nature-positive projects, allocating a substantial portion of climate finance to biodiversity projects, and leveraging private finance.

Ultimately, our goal is to promote an increase in nature finance for climate, particularly from the Global North, recognising their responsibility for global public goods. We also seek to encourage an expansion of climate finance with positive effects for nature, emphasising Nature-Based Solutions (NbS) as a powerful tool in addressing climate change and biodiversity loss. In this way, we can pave the way for a more sustainable and harmonious future that safeguards our planet for generations to come.