Katharina Cavano l Palladium - Jun 07 2021
The Time is Now to Invest in Nature-Based Solutions: The State of Finance for Nature 2021 Report

Credit: Vasu Pendyala

According to the UN’s inaugural State of Finance for Nature report, if the world is to meet the climate change, biodiversity, and land degradation targets, it needs to close a USD 4.1 trillion financing gap in nature by 2050. To do so, investments in Nature-based solutions, or the use of nature for tackling issues such as climate change, need to triple by 2030 and increase four-fold by 2050. This acceleration would equate to a cumulative total investment of up to USD 8.1 trillion, and a future annual investment of USD 536 billion.

The report, which tracks global trends in public and private investment in nature-based solutions, with a goal of improving data quality and identifying opportunities for governments, businesses, and financiers to invest in nature, quantifies how serious these entities are about tackling climate crises.

In a joint statement, Inger Andersen, Executive Director, UN Environment Programme, and Klaus Schwab, Founder and Executive Chairman, World Economic Forum call the world to action. “We have entered a critical decade in which it is still possible to avoid runaway climate change and ecological breakdown, but only if commitments are met with action.”

The report found that about USD 133 billion a year currently goes towards nature-based solutions, 86 percent of which is public funds, and the rest made up of private capital. Of the public and government funds spent on nature-based solutions, over a third is invested by national governments into protection of biodiversity and landscapes. The rest, the report found, is spent on forest and peatland restoration, regenerative agriculture, water conservation, and nature pollution control systems.

Despite the growing interest across governments and businesses alike to invest in nature-based solutions, there are critical gaps in knowledge on how much capital is going towards these solutions and identifying where the clear investment opportunities are.

“Nature-based solutions represent a nature-climate-people triple win but are typically constrained by a lack of alignment between private finance and on the ground project developers,” Notes Lucy Garrett, Palladium’s Manager, Nature-Based Solutions. “To overcome this, we need to work with the financial sector to broaden what the investible world looks like, whilst supporting project developers to turn their conservation ambitions into investible business models.”

Building Back Better with Nature and the Private Sector

The report doubled down on the need for governments to include biodiversity and climate measures in pandemic stimulus plans as a means to enhance the resilience of ecosystems, which if continues to go ignored can have devastating repercussions. “The lessons are not being learned. As governments plan their COVID recovery policies stimulus plans, we urge world leaders to ensure that public funding helps meet objectives under the Paris Climate Agreement and serves to halt and reverse the loss of biodiversity.”

"Without adequate transparency and information, much-needed funding for nature-based solutions risks being side-lined or deprioritised.”

A recent study revealed that of the world’s 50 largest economies’ fiscal spending in the wake of COVID-19, just 2.5 per cent were directed towards green initiatives. There is a massive opportunity here, not just for the public sector to bring forward policies and regulations in support of nature-based solutions, but for collaboration with the private sector in investing in such solutions, establishing innovative financial models, and creating a new asset class to attract larger investors.

“New funding models, vehicles and partnerships that can help channel money where its needed are essential. That’s why Palladium is developing models to attract and leverage private finance for climate and nature outcomes. Most recently, we announced a partnership with National Parks UK which will help secure GBP 240 million for nature by 2030,” adds Garrett.

But none of this will work without a cohesive system. The authors of the report note that compiling the data across all sectors proved to be highly challenging, and they call for an agreed-upon system for tracking and reporting the overall state of finance for nature-based solutions.

“We welcome more approaches to tracking and monitoring finance for nature-based solutions. Without adequate transparency and information, much-needed funding for nature-based solutions risks being side-lined or deprioritised,” Garrett warns.

There is hope, and already 66 per cent of governments have committed to restoring or protecting ecosystems in their climate targets. Just this year, Scotland announced a package of funding to accelerate the country’s transition to a net-zero economy as part of a commitment to utilising nature-based solutions to address the climate crisis.

But as the report warns, action must be taken now to halt climate change, and both reverse loss and stabilise biodiversity intactness by 2050, and nature-based solutions will continue to play a key role in the global efforts to address the climate crisis and beyond.

For more information, contact info@thepalladiumgroup.com.