Katharina Cavano l Palladium - Feb 11 2022
Latest Report Find $120 Billion Gap for Nature Finance within G20

This year’s State of Finance for Nature in the G20 report calls on G20 countries to scale-up annual nature-based solutions spending by USD 285 billion by 2050. In addition, the report identifies that current G20 investments in nature-based solutions are lacking by USD 120 billion a year.

In May of 2021, the UN published its inaugural State of Finance for Nature report, which called for a significant increase in private sector investment in nature-based solutions. This latest report details G20 spending on investments in nature-based solutions and identifies gaps in order to achieve future biodiversity, land degradation, and climate targets.

Nature-based solutions are assets in which businesses, governments, and citizens can invest in that tackle socio-environmental challenges while providing financial returns. These solutions can help improve society today and are critical for tackling issues like climate change but will require significant funding to do so.

The report adds that the investment case for nature-based solutions could be strengthened through a combination of regulation and economic incentives, but that G20 countries have a responsibility to lead by example to reduce the gap between current nature-based solutions and what’s really needed to address our climate emergency. For Palladium’s Managing Director, Jose Maria Ortiz, proper financing for natural capital and nature-based solutions will be key to creating a viable market for the solutions to thrive.

“At the end of the day, these solutions need financing. You need money to grow the outcomes and then to eventually sell them, just like you would in any other sector.”

Though G20 countries account for 92 percent of global investments in nature-based solutions in 2020, the vast majority of it was focused on domestic government programs despite the fact that nature-based solutions investments in developing countries are far more cost effective.

So, what can G20 countries do?

While the UN recommends that they lead the way in aligning post COVID-19 economic recovery with the Paris Agreement and future agreements on biodiversity, pledge to increase spending on nature-based solutions, and stimulate private finance through incentives, Ortiz notes that it’s time to rethink how governments view nature as an asset.

"At the end of the day, these solutions need financing to grow."

“Until now, the only natural capital that was assigned a value were those related to oil, gas, minerals, timber and agricultural land. Recently, there was a realisation that there was another element of natural capital that wasn't being valued properly; our air, water, forests, and biodiversity,” Ortiz notes.

“There’s been a shift due to the climate emergency and we’re now valuing parts of our natural capital that before we had considered worthless.”

He points to an increase in extreme weather events, from wildfires and tropical storms, as one of the many reasons why people are waking up to the climate emergency. “We need solutions, and the only available solution today is valuing nature.”

That shift is happening, but according to the UN’s report, just not at the pace or scale that’s needed. By 2050, global nature-based solutions spending will need to increase from current levels by around USD 400 billion to a total annual of USD 536 billion to achieve all global sustainability targets. This is more than quadrupling the total global investment into nature-based solutions currently.

The report also found that the places that need the funds the most are non-G20 countries, with estimates of USD 54 billion needed annually in sub-Saharan Africa and USD 45 billion in Latin America. But, bridging the spending gap outside of G20 countries will be far more difficult than within G20 nations.

Non-G20 countries simply may not have enough access to global finance to allow them to make investments in nature-based solutions, especially after COVID-19, says the report.

There’s an opportunity though for G20 countries to meet investment targets in non-G20 countries. “In many instances, G20 countries can improve economic efficiency in nature-based solutions spending by targeting investments in non-G20 countries,'’ noted Nina Bisom, Coordinator of Economics for the Land Degradation Initiative. “For example, the average cost of converting land from other uses to nature-based solutions in G20 countries is USD 2.600/hectare, while the same costs only USD 2,100/hectare for non-G20 regions.”

The report concludes with the oft-repeated ‘build back better’ slogan, encouraging G20 nations to build investment in nature into economic recovery plans and creating more favourable regulatory policies so that economies can more easily transition to net zero. Not all hope is lost, there’s a way forward and the many of the solutions already exist, but it’s on G20 nations to lead the way.

For more information, contact info@thepalladiumgroup.com or visit our Climate page for similar articles.