State of Finance for Nature Report

• 02 Jun 2021

Why in News

The UN report, titled State of Finance for Nature, analyzes the investment flow in nature-based solutions (NbS) and identifies the future investment needed to meet the climate change, biodiversity and land degradation targets (set in three Rio Conventions).

• The report was jointly produced by the United Nations Environment Programme (UNEP), the World Economic Forum and the Economics of Land Degradation.

Key Points

• About the 'Nature-based solutions (NbS)':
  
  • The NbS refers to sustainable management and use of nature to tackle socio-environmental challenges, which range from disaster risk reduction, climate change and biodiversity loss to food and water security as well as human health.
  • NbS creates harmony between people and nature, enables ecological development and represents a holistic, people-centred response to climate change.
    
    • Thus, NbS underpin the Sustainable Development Goals, as they support vital ecosystem services, biodiversity, and access to fresh water, improved livelihoods, healthy diets and food security (organic agriculture) from sustainable food systems.
    • Also, NbS are an essential component of the overall global effort to achieve the goals of the Paris Agreement on Climate Change.

• Key Findings of Report:
  
  • Current Investments:
    
    • Approximately USD 133 billion currently flows into nature-based solutions annually (using 2020 as base year). It comprises about 0.10% of global gross domestic product.
    • The funds flow to protect biodiversity and landscapes, mixed with activities such as sustainable forestry.
    • NbS finance is much smaller in scale than climate finance and relies more heavily on public finance.
  • Public vs Private Funds:
    
    • Public funds make up 86% and private finance 14% of these investments.
    • The public financial services providers included the government, development finance institutions (DFIs), environmental/climate funds.
  • Top Spenders:
    
    • Public sector spending for the same is dominated by the United States and China, followed by Japan, Germany and Australia.
    • Countries such as Brazil, India and Saudi Arabia are likely spending large amounts of money too, but they do not report internationally comparable data.
• Recommendations:
  
  • More Investments:
    
    • Public and private actors will need to scale up their annual investments by at least four times to meet future climate, biodiversity and land degradation targets.
    • Annual investment should reach USD 536 billion by 2050.
  • Enhancing Cash Flows for Investment:
    
    • Reforming taxes, repurposing agricultural policies and trade-related tariffs and harnessing the potential of carbon markets.
  • Smart Investments:
    
    • Restoration of natural vegetation and afforestation are essential to meet international targets.
      
      • The most important component of annual investment needs is the cost of establishing new forests, as it accounts for 80% of total costs.
  • Making Nature-based Solution a part of Government Policies:
    
    • Supporting inclusion of nature-based solutions in current nationally determined contribution revisions, national adaptation plans and domestic sectoral legislation.
    • Aligning private finance with public policy for scaling up capital flows to nature to a level that can meet the targets of the three Rio Conventions.
  • System to Track Finances:
    
    • There is a need for a comprehensive system and framework for labelling, tracking, reporting and verifying the state of finance for NbS.
    • This would improve data comparability and quality as an input to future decision-making.
    • Further, there is a need to increase positive financial flows by de-risking & incentivizing and reducing harmful financial flows.

Source: DTE