Large middle-income countries like Brazil and China should top the priority list of biodiversity funding, analysts at BloombergNEF said Wednesday as they laid out options and priorities for the world to scale up nature finance to the required $1 trillion per year by 2030.
Buoyed by the COP15 UN negotiation success and multiple private-sector initiatives to ramp up reporting and target-setting requirements, policymakers and corporations alike are preparing for a future where a vast amount of finance needs to flow from government and company coffers to a wide range of initiatives to stave off the nature loss emergency.
A hefty $1 trillion per year in finance will be needed by 2030, up from some $166 billion currently, various experts have said, but exactly who, how, and where this comes from remaining unclear.
Analysts BloombergNEF on Wednesday released a Biodiversity Finance Factbook, outlining barriers to scaling biodiversity finance as well as a set of priorities on where the money should be spent.
On the “where” bit, the analysts suggested large, middle-income countries like Brazil, China, and Indonesia should be top priority, based on the value of their ecosystem services.
That’s based on a ranking where the threat index of biodiversity in individual countries is weighted 50%, the value of the ecosystem services provided by that biodiversity 30%, and its presence level 20%.
The highest threat levels are often found in the poorest countries, which don’t have the resources to design and maintain adequate regulations protecting wildlife, though in the BloombergNEF analysis they lose out to the sheer importance of ecosystem services like pollination, food from marine fisheries, and native forest timber from large countries.
That does not mean that those poorest nations should or will be foregone, though, the authors stressed, though their future finance is likely to emerge from traditional sources.
“Relatively few of these high-risk areas will attract private investment,” the factbook said.
“Western governments, agencies, NGOs, and philanthropic organisations will be key to protecting biodiversity in countries that are not investment grade.”
Concerns remain, though, as while a number of governments made financial pledges towards biodiversity at the COP15 summit in December, for some – notable Germany, France. Japan, and the US – those would actually mean a decline in their contributions, compared to the 2016-20 period.
The ones that are “investment grade”, though, might see a lot more biodiversity finance come their way from private corporations, including Southeast Asia, China, India, Peru, and Botswana, according to BloombergNEF.
Such private investment could come in a number of forms, including through carbon markets and biodiversity credit and offset markets, the book said.
But given the recent media storm around the credibility of carbon markets, especially REDD+ projects, those markets and their regulators must work to improve credibility, the report said.
It also warned against regulatory overlap as regions with established nature-based carbon markets also begin to explore biodiversity crediting schemes.
“Government programmes like market-based schemes are needed to raise demand. Over the longer term, supply may be the limiting factor due to scaling challenges, measurement, transparency, and monetisation,” said BloombergNEF.
“In addition, investment in biodiversity certificates could cannibalise investment in carbon markets. To be able to monetise the same plot of land for both biodiversity and emission cuts, one likely needs to be a complementary revenue stream … to the other.”
WHAT’S AT STAKE?
BloombergNEF’s analysis was based on a number of previous studies showing that the world will need to put up around $1 trillion a year by 2030 to fend off the biodiversity crisis.
However, that’s just a minor outlay compared to estimated that the global GDP might be slashed by $2.7 trillion by the end of the decade if no investments are made, the analysts said.
The success at COP15 should act as a driver towards reaching those levels.
“The 2022 biodiversity deal won’t be worth the paper it’s written on unless governments, financial institutions, and companies ramp up financing and integrate nature into their plans and policies,” said Victoria Cuming, head of global policy at BloombergNEF and lead author of the factbook.
The book identified six major challenges to scaling finance as required:
- Lack of standardised data, metrics, and frameworks
- Need to integrate biodiversity into decision-making
- Absence of effective policy support
- Dearth of bankable biodiversity projects
- Uncertain environmental integrity of offsets and other mechanisms
- Insufficient industry and local community buy-in
By Stian Reklev – stian@carbon-pulse.com
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