Repurpose Negative Finance, Scale Investment in Nature
By Joyce Ojanji
With close to$7 trillion invested globally each year in activities that have a direct negative impact on nature from both public and private sector sources,the financial sector has been called to implement incentives to redirect finance from harmful activities, fostering positive outcomes for nature.
This is according to the latest State of Finance for Nature report released at COP28 by the United Nations Environment Programme (UNEP) and its partner.
The report finds that in 2022, investments in nature-based solutions totaled approximately $200 billion, but finance flows to activities directly harming nature were more than 30 times larger. It exposes a concerning disparity between the volumes of finance to nature-based solutions and nature-negative finance flows, and underscores the urgency to address the interconnected crises of climate change, biodiversity loss, and land degradation.
The findings are based on an analysis of global financial flows, revealing that private nature-negative finance flows amount to US$5 trillion annually, 140 times larger than the US$35 billion of private investments in nature-based solutions.
The five industries channeling most of the negative financial flows – construction, electric utilities, real estate, oil and gas, and food and tobacco – represent 16per cent of overall investment flows in the economybut 43per cent of nature-negative flows associated with the destruction of forests, wetlands, and other natural habitats.
“Nature-based solutions are dramatically underfunded. Annual nature-negative investments are over 30 times larger than financing for nature-based solutions that promote a stable climate, and healthy land and nature. To have any chance of meeting the sustainable development goals, these numbers must be flipped – with true custodians of the land, such as Indigenous Peoples, among the chief beneficiaries,” said Inger Andersen, Executive Director of UNEP.
The report identifies a significant financing gap for nature-based solutions, with only US$200 billion allocated in 2022, led by governments, who contributed 82 per cent (US$165 billion), while private finance remains modest at US$35 billion (18 per cent of total nature-based solutions finance flows).
To meet the Rio Convention targets on limiting climate change to 1.5 degrees Celsius, as well as the Global Biodiversity Framework target to set aside 30 per cent of land and sea by 2030 and achieve land degradation neutrality, finance flows to nature-based solutions must almost triple from current levels (US$200 billion) to reach US$542 billion per year by 2030 and quadruple to US$737 billion by 2050.
It also suggests that simply doubling or tripling investment in nature-based solutions will not be sufficient to reach the three Rio targets unless the almost $7 trillion finance flows to nature-negative practices are dramatically reduced and ideally repurposed in favor of nature.
“The widespread degradation of nature is not only exacerbating the climate crisis but also pushing us towards exceeding planetary boundaries. Investing in nature-based solutions provides a strategic and cost-effective avenue to address the interconnected challenges of climate change, biodiversity loss, and land degradation while at the same time making tangible headway towards the sustainable development goals,” said Jochen Flasbarth, State Secretary in the German Federal Ministry for Economic Cooperation and Development, which funded the report.