Biodiversity finance: Investing in nature, humans included

Although some of the most progressive work on nature-based solutions, conservation and ecosystem restoration is small-scale and local, a key question remains: How can this work be financed, and how can funds benefit not only biodiversity but also the communities that protect it?

Experts unpacked these questions during the Biodiversity Finance Digital Forum, which brought together experts from the private sector, NGOs and public agencies. The event was hosted by the Global Landscapes Forum in partnership with the Government of Luxembourg on 29 November 2022 – just days before a major global meeting of the UN’s Convention on Biological Diversity (CBD COP15) began – explored ways to support local action through appropriate financing mechanisms and incentives.

Nature-based solutions – avenues for climate change mitigation that are rooted in ecosystems – are critical not only for stymying the effects of global warming but also for ensuring both long- and short-term benefits for local communities, said Mathilde Bauwin, head of knowledge management at microfinance institution Appui au Développement Autonome (ADA) and moderator of one of the sessions during the event.

Microfinance institutions, impact funds and conservation trust funds can all help catalyze biodiversity finance, speakers said, while avoiding pitfalls of biodiversity funding past. “We know that only 3 percent of climate financial flows have reached small farmers and local stakeholders,” said André Weidenhaupt, director general at the Ministry of Environment, Climate and Sustainable Development of Luxembourg, citing a 2020 report by the International Fund for Agricultural Development (IFAD). He further raised the importance of considering that most biodiversity-rich habitats, which are crucial for our abilities to adapt to climate change, are located in developing countries.

The event was purposefully held on the eve of the aforementioned CBD COP15, to preface the COP – which is the most important conference for international biodiversity policy – with dialogues on its links to finance flows. Hled 5 to 19 December 2022 in Montreal, the COP15 should lead to a new global framework for biodiversity conservation and restoration, which Weidenhaupt stressed “should ensure that biodiversity investments and projects are inclusive and recognize the rights of Indigenous Peoples and local communities.”  

Ensuring investments and projects suit local contexts is essential, echoed Adrian Leitoro, co-founder of Nature and People as One and the drylands-focused recipient of the Global Landscapes Forum’s Restoration Stewards 2022 program. Success, he reiterated, is three-pronged, including benefits for local livelihoods, climate change adaptation and biodiversity conservation.

Bauwin, however, said that small projects supporting nature-based solutions can be overlooked in favor of much larger programs in which donors are dealing with a sizeable budget. Already, total spending on nature-based solutions is estimated at about USD 133 billion per year – but it needs to triple by 2030 in order to meet climate and land neutrality targets, she said.

For some small projects at local levels, the implementor might need as little as USD 500 – a micro-grant – yet might not be able to meet basic reporting and accounting requirements to unlock the financing, said David Meyers, executive director of the Conservation Finance Alliance (CFA).

Microfinance institutions – such as Bauwin’s ADA – have an important role to play by not only providing small amounts of funding for local projects but also by offering technical assistance and training for recipients, said Andrea Rosales, head of communications and capacity-building with Red Centroamericana y del Caribe de Microfinanzas (Redcamif), a microfinance agency with 1.6 million clients. However, many microfinance agencies are themselves so small they don’t yet have this capacity, and that poses a significant challenge, she added.

To help overcome this barrier, said Meyers during a session on biodiversity finance innovations, conservation trust funds can help by channeling funding to smaller non-profit and Indigenous Peoples’ organizations in order to reach people working on the ground, he said.

“It’s important to get money to these groups because they have direct impact on nature and often they are rights holders,”said Meyers.

Conservation trust funds in many cases already know the people and organizations working at the local levels and can therefore better target their funding. As well, they can help with donors’ reporting requirements, he said. Conservation trust funds have also evolved significantly to also take on the role of “convenors” that bring all the parties together – including donors, academia, local communities and NGOs, added Karen Price, executive director of the Malawi Environmental Endowment Trust.

“This is a really important role that allows the process to take place in a participatory way,” to mobilize and disperse resources with transparency, she said.

Conservation trust funds are one of several innovative finance mechanisms supported by the Global Environment Facility (GEF) and are part of a broader range of actions to support green solutions to the world’s biodiversity challenges, said Carlos Manuel Rodriguez, GEF CEO and chairperson.

“Ultimately, there is only one way to stop global biodiversity loss,” said Rodriguez. “We need to ensure that nature is appropriately valued in all economies.”