Workers working at the Pacific Event Center (Yumbo, near Cali, Valle region), where COP16 will be held. [+] October 10, 2024, Del Cauca Department, Colombia. The 2024 United Nations Conference of the Parties to the Convention on Biological Diversity (COP16) will be held in Cali, Colombia from October 21 to November 1, 2024. (Photo by Joaquin Sarmiento/AFP) (Photo by Joaquin Sarmiento/AFP via Getty Images)
AFP (via Getty Images)
As biodiversity COP16 gets underway this week, the biggest topic on the agenda is how to finance nature’s recovery and recovery. Headlines about amazing efforts to protect and restore nature were a hot topic around New York Climate Week. However, most of these trades are single hero investments. The big question in the coming weeks is how to transform the current $35 billion in funding into $700 billion in mainstream funding for nature. The answer lies primarily in eliminating exciting boredom by standardizing and replicating financial structures that work at the speed and scale needed.
The biodiversity crisis and nature’s role in reducing greenhouse gases and making lives and livelihoods more resilient to the impacts of climate change are increasingly gaining attention. It is equally true that large sums of money are needed to halt the current negative trend. Experts estimate the biodiversity funding gap at $700 billion annually. This includes $200 billion for Global Framework on Biodiversity Goal 19 (Mobilizing finance from all sources) and $500 billion for Goal 18 (Reducing harmful incentives). The latter goal is particularly problematic because of the rise in harmful subsidies.
Climate Week in New York in September brought together NGOs, bankers, investment managers, asset owners and insurance companies to figure out how to solve this puzzle. We started with an example of how insurance can be used to generate cash flow for investments in nature.
One example we presented is from the Philippines. The country boasts a diverse marine ecosystem that is vitally important to coastal communities, providing benefits such as fishing, tourism, cultural and coastal protection. However, the Philippines faces significant vulnerability to climate change, especially typhoons and storm surges. These extreme weather events threaten lives, livelihoods, and ecosystems. We explain how investing in fair insurance solutions has the potential to protect biodiversity, ecosystems and the resilience of coastal communities, ultimately contributing to sustainable development in the region. I did.
But individual transactions alone are not enough. They can have hugely beneficial impacts on nature and local communities, but they often take many years to integrate. Simply put, there is not enough time to solve natural crises one small intervention at a time.
Issues of replicability and standardization therefore come up again and again at a Royal Society conference in London on how ecological risks relate to commercial risks. Here we talked about the need to collaborate early in the development stage of a project. In doing so, the impact on practitioners and the scientific community and the ability to be replicated is built into the project.
One of the big questions is what we realized when we started looking at this issue as part of the A-track consortium, an €11 million project aimed at accelerating government action on business, finance and nature. However, natural finance is largely overlooked. In mainstream finance, it is treated purely as impact investing, rather than in everyday financial terms. This framework prevents the conversation from shifting from thinking about nature financing as a concrete need to considering how to finance the reduction of pressures on nature through mainstream business models. Masu.
There continues to be a misperception that the risks of nature loss extend into the future. This is completely wrong. Natural risks are already well recognized today. And even more interestingly, funding nature protection and restoration is already economically beneficial for businesses.
Consider, for example, a heavy industrial company, such as a cement company, that relies heavily on water. Funding ways to reduce water use and recycle will help reduce the amount of water withdrawn from the ecosystem and reduce costs for the companies concerned. The same goes for food and agricultural companies. Funding activities to improve soil health and support the transition to regenerative agriculture is economically beneficial in increasing crop yields and addressing pressures on nature.
As the International Biodiversity COP begins in Colombia, the conclusion is simple. Conversations and decisions should not only be aimed at strengthening conservation or individual case studies, but also to ensure that private finance can play a full role in reducing pressures on nature as part of everyday operations. It should be the purpose.
