Developing the biodiversity credit markets and reforming subsidies harmful to nature are among the top priorities to bridge the biodiversity finance gap, researchers have said.
That’s according to a study by researchers from UNDP Biodiversity Finance Initiative (Biofin) and Colorado State University, published in the Ecosystem Services journal.
The study identified four main actions that could boost public and private funding towards biodiversity:
- Research on subsidies harmful to nature
- Connecting biodiversity outcomes to financial investments
- Identifying finance mechanisms that co-benefits climate and biodiversity
- Innovating private sector solutions, such as biodiversity credits and offsets
The study highlighted the role of the biodiversity credit market as a new and mushrooming model that could lead to certified biodiversity positive investments. According to the World Economic Forum (WEF), demand for biodiversity credits could go as high as $180 billion annually by 2050.
“Biodiversity credits are benefiting from growing international interest and could be critical in engaging the private sector in financing biodiversity,” the study said.
The private and finance sectors are regarded as key actors. “Private sector finance, led by recent efforts for disclosure frameworks, will be essential to successfully closing the gap by 2030,” the study said.
Frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) can “accelerate private sector nature-related disclosure by providing an approach adaptable to the specific needs of business and encourage early reporting”, it added.
According to the Convention on Biological Diversity (CBD) Secretariat, a $700 billion biodiversity finance gap per year needs to be bridged to meet the Kunming-Montreal Global Biodiversity Framework (GBF) targets.
Multiple mechanisms are available for private and finance sectors to invest in nature and reach the necessary level of financing for biodiversity, such as blended finance to reduce investment risk, green equity, green loans and bonds, and exchange-traded funds, the study said.
Target 19 from the GBF agreement urged to “substantially and progressively increase the level of financial resources from all sources, in an effective, timely, and easily accessible manner, including domestic, international, public, and private resources”.
According to the study, more data and analysis demonstrating stronger links between biodiversity investments and outcomes are needed to boost private pledges.
“The emergence of biodiversity credits is attempting to address this challenge at a site level, and growing public and private sector adoption of results-based budgeting aims to address this need more widely,” the researchers said.
The study also underscored the importance of reforming subsidies that could lead to biodiversity loss by at least US$500 bln annually by 2030, as agreed under the GBF target 18.
Biofin released a report in January setting out guidelines for governments to redesign subsidies harmful to biodiversity. To date, over 25 countries worldwide have adopted them.
“It is well understood that the finance gap, whatever its exact figure, cannot be closed by new funds alone, but equally by reducing the need for resources through improvements in the effectiveness of delivering current budgets and reducing expenditures harmful to biodiversity through regulation, fiscal tools, market-based instruments and other approaches,” the study said.
By Giada Ferraglioni – giada@carbon-pulse.com
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