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A new report has found that investing less than 1% of global GDP in nature-based solutions can help tackle climate change and halt biodiversity loss. At the moment, investments in these solutions total to US$133 billion, which is 0.10% of global GDP. And if governments and people want to meet their climate change targets, a total of US$4.1 trillion is needed to close the financing gap in nature by 2050.
According to the State of Finance for Nature report, a total investment of US$8.1 trillion in nature is needed over the next three decades to address climate change, land degradation crisis and biodiversity loss, increasing four-fold by 2050 from the present investments of US$133 billion (using 2020 as the base year), meaning each year US$536 billion should be invested by 2050.
The report was produced by the World Economic Forum(WEF), U.N. Environment Programme(UNEP), and the Economics of Land Degradation (ELD) Initiative hosted by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in partnership with Vivid Economics.
Funding Nature Solutions
Given that nature accounts for 2.5% of projected economic stimulus spending, the report calls on governments, financial institutions, and businesses to fill this US$4.1 trillion financing gap between now and 2050 by recognizing nature as a solution and ramping up capital flows by putting nature at the centre of the public and private sector decision-making.
Major structural changes are required like shifting detrimental agricultural and fossil fuel subsidies to renewables, providing financial and regulatory incentives to those who are building sustainably, creating revenue flows from ecosystem services, introducing mixed finance models to bring in private capital to execute these solutions, which will also need risk-sharing from private sector entities.
“The State of Finance for Nature report underlines the urgency and the criticality of increasing investment in nature. It highlights how little is invested today – US$133 billion represents only 0.1% of global GDP and a tripling of this feels like a no-brainer given the enhanced resilience this would provide to the global and local economies,” head of the Tropical Forest Alliance at the WEF, Justin Adams said in a statement. “Studies show this is also good for business – some US$10 trillion in business opportunity and 395 million new jobs could be created by investing in nature-positive solutions.”
The reports highlights how little is invested today – US$133 billion represents only 0.1% of global GDP and a tripling of this feels like a no-brainer given the enhanced resilience this would provide to the global and local economiesJustin Adams, head of the Tropical Forest Alliance at the WEF
Forest-based solutions like the maintenance, conservation and restoration of forests need a total of US$203 billion annually, the equivalent of just over US$25 every year for every citizen in 2021. The report highlights the need for both – investments in restoration efforts as well as financing conservation projects that could lead to an increase of approximately 300 million hectares in forest and agro-forestry area by by 2050, relative to 2020.
Executive director of UNEP, Inger Andersen, said that the biodiversity crisis is anyway costing the global economy 10% of its output annually. “If we do not sufficiently finance nature-based solutions, we will impact the capacities of countries to make progress on other vital areas such as education, health and employment. If we do not save nature now, we will not be able to achieve sustainable development.”
In 2018, the private sector invested US$18 billion in nature-based solutions with private financing accounting for just 14% that includes everything from private equity investments, biodiversity offsets, capital mobilized through sustainable agricultural and forestry supply chains and land use-related carbon markets.
Andersen added: “The report is a wake-up call for governments, financial institutions and businesses to invest in nature — including reforestation, regenerative agriculture, and restoration of our Ocean.” She concluded by saying that “countries and leaders of industry will have an opportunity to do so at the upcoming summits related to climate, biodiversity, land degradation and food systems, and in the context of the UN Decade on Ecosystem Restoration (2021-2030).”
Private Sector Funding
According to the Climate Policy Initiative, the private sector investment in climate finance accounts for most capital flows (56%) and scaling up this capital for nature solutions is a challenge that the world needs to focus on to strengthen sustainable economic growth.
Though investing in nature-based solutions doesn’t translate into a deep decarbonization of all sectors, but if investors, developers and consumers help develop a market where these solutions can have new sources of revenue, and commit to increasing finance with clear, time-bound targets, it can help mitigate the effects of climate change.
Lead image – Lake in Alberta, Canada, courtesy of James Wheeler/Pixabay.