Private sector provides only 14% of funding for nature-based solutions
The world must triple its investments in nature-based solutions by 2030 and quadruple them by 2050 in order to meet the climate change, biodiversity and land degradation targets of the three Rio Conventions, according to a new UN report.
Total investments of USD 8.1 trillion are necessary by mid-century to protect the landscapes and biodiversity that are essential to human life on Earth. This would involve a gradual increase in funding until an annual rate of USD 536 billion is reached by 2050.
Currently, only USD 133 billion flows into nature-based solutions each year, which would create a shortfall of USD 4.1 trillion, the report said.
The State of Finance for Nature analysis was produced by UN Environment (UNEP), the World Economic Forum (WEF) and the Economics of Land Degradation Initiative to quantify existing investment in nature-based solutions and to estimate the funding needed to prevent systemic economic risks from the rapid loss of nature.
The report provides a financial baseline for the UN Decade on Ecosystem Restoration (2021‒2030), scheduled for launch on the upcoming World Environment Day (5 June). It also serves as a curtain-raiser for this year’s summits on climate, biodiversity, land degradation and food systems, while helping monitor progress on the Nationally Determined Contributions of the Paris Agreement.
This inaugural State of Finance for Nature report is the start of an annual process of tracking trends in public and private investment in nature-based solutions,” UNEP executive director Inger Andersen and WEF executive chairman Klaus Schwab wrote. “As such, it provides a measure of how commitments are being translated into action and an accounting for those who fall short.”
Mangroves are a nature-based solution that can protect against coastal erosion and serve as a nursery for local fish populations. Joel Vodell, Unsplash
Three-quarters of the land and two-thirds of the marine environment have been significantly altered by human actions, placing the global economy at risk: More than half of the world’s gross domestic product depends on nature. Nature-based solutions offer a cheaper long-term response to climate change, biodiversity loss, food and water insecurity, disaster risk and human health challenges, according to the report.
Immediate action to improve investment flows could increase forest and agroforestry areas by 300 million hectares by 2050, stabilize biodiversity at current levels by 2050 and reduce carbon emissions from land-use change, gradually becoming net negative by 2035, the report found.
Forest-based solutions alone – including the management, conservation and restoration of forests – will require USD 203 billion in total annual expenditure globally, according to the report. That is equivalent to just over USD 25 per year for every citizen in 2021.
Yet a recent joint study by UNEP and the University of Oxford revealed that only USD 368 billion was directed to green initiatives from a total of USD 14.6 trillion that the world’s 50 largest economies announced in fiscal spending in response to the coronavirus pandemic. This represents a ratio of just 2.5 percent.
A fundamental shift in mindset is required to create an economic system that places financial value in nature and recognizes its role in human prosperity, according to the UNEP report. Nature-based solutions attract far less investment than climate finance, with the private sector providing only 14 percent of the funding for nature, or just USD 18 billion per year. This market imbalance offers an opportunity for private businesses to pursue new sources of revenue, to reap the benefits of increased resilience, to reduce costs, and to enhance reputation and purpose, the report said.
The scaling up of private capital for nature-based solutions is one of the central challenges of the next few years on a path to sustainable economic growth in the 21st century. While such investments cannot be a substitute for deep decarbonization of all sectors of the economy, they can contribute to the required pace and scale of climate change mitigation and adaptation, according to the UNEP report.
Case studies on the benefits of nature-based solutions also featured in the report. Examples included the Scottish Government’s commitment to spend GBP 250 million on peatland restoration over the next 10 years, and the Green Climate Fund’s work in Laos to support the restoration of an urban wetland that provides water flow regulation and flood risk reduction.