Our economy is highly dependent on the health of nature. The World Economic Forum reports that over half of the world’s GDP is moderately or highly dependent on ecosystem services. But as human activity transgresses the planet’s biodiversity boundaries, our natural world is on the brink of a functional collapse.
In recent research conducted by UNEP FI, it was found that there is a global mismatch between the level of biodiversity richness and governments’ environment-positive expenditure. Those countries with the highest levels of biodiversity are often spending the least on protecting nature – as they often lack the funds, whereas the vast majority of countries with the highest spending on environment, in fact, had a low biodiversity index.
A weighted framework containing 3 criteria to help channel biodiversity restoration and preservation funding priorities to countries that need it most has been developed by BNEF latest Biodiversity Finance Factbook. But how can financial institutions redress this balance and redraw humanity’s broken relationship with nature?
The way forward
We encourage UNEP FI members and other financial institutions to identify where their investments and operations are and whether they occur in areas with high biodiversity richness and low government expenditure on nature. Below are some additional take-aways and recommendations:
- Blended finance, or private finance sources such as biodiversity offsets and credit markets should be considered a key instrument in tandem with government expenditure. Financial institutions can join the Biodiversity Credit Alliance, supported by UNDP, UNEP FI and SIDA, to pioneer the formulation of a credible and scalable biodiversity credit market under global biodiversity credit principles.
- The lack of data on nature-positive expenditure from the private sector highlights the need for to a more robust mechanism for reporting and disclosure. To support the shift of financial flows to nature-positive investments, the UNEP FI-led Taskforce on Nature-related Financial Disclosures (TNFD) pilots saw over 50 financial institutions test the draft versions of the TNFD framework by trying out the integration of nature-related risks and dependencies into their internal risk assessment. Interested financial institutions are encouraged to pilot, test and engage in the development of the TNFD to have their expertise and experiences heard in the development of a disclosure framework for organisations to report and act on evolving nature-related risks.
- Private investors in nature-positive programmes should also consider the different characteristics of financial institutions in different regions and their appetite for long-term investment in biodiversity conservation and restoration. For instance, those from emerging economies may be less inclined to commit and invest in long-term nature-positive activities compared to their counterparts in the global north. Therefore, joining the new UN-convened bank-led working group may help bridge the gap, as the group is expected to help banks around the world align their investment portfolios with the Kunming-Montreal Global Biodiversity Framework (GBF) adopted in December 2022 to close the biodiversity financing gap while upholding the rights of indigenous peoples and local communities.