The recent United Nations biodiversity and climate summits ended with major commitments for stemming climate change and stopping the loss of biodiversity, including a landmark agreement to protect 30 percent of Earth’s land and seas by 2030. As nations now turn to implementing these ambitious goals, there’s one persistent sticking point: funding.
Looking ahead to the issues shaping 2023, Conservation News sat down with Conservation International’s Finance Innovation Fellow Adrienne Cleverly and Vice President of Carbon Finance Chris Zink to discuss how to harness both private and public investment to halt climate change and biodiversity loss.
What’s on your radar in 2023?
Adrienne Cleverly: One question that’s looming large is around funding the commitments made at the U.N. biodiversity and climate summits. On the climate front, governments agreed to establish a fund to help developing countries adapt to and prepare for climate disasters. On the biodiversity front, countries reached a major breakthrough to protect 30 percent of the planet by 2030.
Financing is a critical element to achieving both goals. There’s a big pool of money in the world, particularly in the private sector — the question is, how do we create the right tools, incentives and frameworks to channel investments into nature, which, after all, generates huge value for the world’s economies.
A recent U.N. report found that the world will not reach its climate, biodiversity and land degradation goals unless financing more than doubles — from the current $154 billion a year to $384 billion a year by 2025. We need to create new funding sources quickly, as critical tipping points for nature and the climate are looming. Essentially, we’re trying to build the airplane while it’s in the air.
That’s a daunting number, what are the possible sources of finance?
AC: For a long time, funding from governments and philanthropic organizations has been the go-to source. But the funding gap is simply too large for public sources alone to fill. So we need to look to private capital, which at the moment only represents 14 percent of investments into nature-based solutions. This will have to increase exponentially, but it’s tricky because the average investor isn’t used to dealing with conservation projects.
There’s a whole new set of risks to assess. To access private sector funds, we need to develop conservation-focused business models that can generate viable investment opportunities.
Blended finance is one area that we’ll be looking at. In a nutshell, it uses public donor funds to mitigate the risks of investing in projects that private companies might normally shy away from. Alleviating risks for private investors, can in turn help incentivize them to take a leap on a project they may have initially been cautious about. This approach is being used to direct money into renewable energy projects and infrastructure and could also be used to finance nature-based solutions to climate change.
Another way to channel investments for nature is through the voluntary carbon market, what’s happening there?
Chris Zink: The voluntary carbon market is becoming an increasingly important way to finance conservation. Deforestation is driven by financial decisions, which traditionally have made trees more valuable dead than alive. Carbon credits help change that equation by placing a value on the immense role forests play in sequestering planet-warming carbon.
Estimates vary, but by 2030, the carbon market is expected to be worth between $10 billion and $50 billion. High quality credits could help drive immediate climate action, by raising funds to protect forests and the communities that rely on them. A recent survey indicates that business leaders are increasingly turning to carbon credits as a way to mitigate emissions that their companies can’t yet eliminate. They see them as a way to complement, not substitute, long-term decarbonization efforts.
Carbon credits get a lot of attention, what else is on the horizon?
CZ: People are looking for ways to use the carbon market model to tap into additional sources of funding. One idea is to develop biodiversity credits, which would measure the economic benefits nature provides, like pollinating the food we eat or filtering the water we drink. The overall thinking is that measuring and valuing carbon is essential, but we also need to be thinking about protecting nature as a whole — from plants and animals, to entire ecosystems. This idea is gaining traction and there are still lots of questions about methodologies and quantifying impact. Since there isn’t yet a market for biodiversity credits, we're primarily focused on carbon markets at the moment because we can already channel finance to projects using this tool.
Given the urgency, what other tools can be deployed now?
AC: Many of the tools we’re looking at aren’t new, but could play a bigger role going forward. Debt-for-nature swaps is one. Simply put, debt-for-nature swaps enable countries to trade their foreign debt for funds to protect nature. Countries can use the funds for everything from establishing parks or protected areas to researching medicinal uses of tropical forest plants. Conservation International was the first to employ a debt-for-nature swap in a project in Bolivia, helping to protect 1.6 million hectares (4 million acres) of tropical rainforest and 13 endangered species living within that rainforest. Currently, we’re pursuing several other projects.
What makes you hopeful for 2023?
AC: People are getting the message that we need to protect nature to protect people. And interesting collaborations are brewing as many organizations work together to secure the funding needed to do that. Traditionally, banking and investment are cutthroat worlds. But in the conservation space, I’m seeing people come together to create tools, share best practices and collectively develop approaches to these big challenges.
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