A transformative shift is needed to integrate biodiversity within financial systems, investment models, and policy-making frameworks to embed nature’s value into economic decision-making.
The importance of biodiversity to the global economy and the fight against climate change is becoming increasingly evident, with more than half of global GDP – 55%, or around $58 trillion – moderately or highly dependent on nature.
This dependence has led to the overexploitation of the natural world and the ecosystem services it provides, increasing the threat of ecosystem collapse and a catastrophic loss of biodiversity, with a quarter of all species under threat.
Climate change is accelerating the biodiversity crisis, and the situation will worsen without immediate action. Biodiversity loss and ecosystem degradation are not just catastrophic; they also pose significant risks to many industries and, by extension, the investors that finance them. Yet, finance continues to flow into nature-negative activities, and there is estimated to be a global biodiversity financing gap of $700 billion a year between now and 2030.
However, the tools we need to finance nature-positive activities are starting to emerge after the signing of the Kunming-Montreal Global Biodiversity Framework (GBF) in 2022. It called for the restoration of 30% of degraded ecosystems globally, the conservation of at least 30% of the planet’s land and marine areas, and the phasing out of $500 billion annually of harmful subsidies and commitments to mobilize $200 billion annually by 2030.
Financial institutions are critical in driving the transition to a nature-positive future. It is in their interests to do so because the risks of failing to make the transition are huge. Conventional funding approaches are insufficient to deal with the crisis, so innovative market-based solutions that align economic incentives with environmental outcomes are needed. These include debt-for-nature swaps, biodiversity bonds, public-private partnerships, and biodiversity credits and offsets.
However, for nature-based finance to reach its full potential, it also needs the support of governments, which can create the enabling frameworks that will allow innovative solutions to flourish. Governments must also work together to tackle a global problem that demands long-term commitments and solutions.
There is much work to be done to bring nature-based finance into the mainstream – and there is no time to waste.
