A new study has found that a total investment of USD$8.1 trillion is required over the next 30 years to successfully tackle the climate, biodiversity and land degradation crises through nature-based solutions, amounting to $536 billion a year by 2050.
What is Happening?
- The report, called the State of Finance for Nature, found that annual investments in nature-based solutions will have to triple by 2030 and increase four-fold by 2050 from current investment levels of $133 billion (using 2020 as a base year) to mitigate biodiversity loss.
- The report was produced by the World Economic Forum, UN Environment Programme (UNEP), and the Economics of Land Degradation (ELD) Initiative hosted by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in collaboration with Vivid Economics.
- It urges governments, financial institutions and businesses to overcome this investment gap by putting nature at the centre of economic decision-making in the future.
- It adds that structural reforms are needed to close the $4.1 trillion finance gap between now and 2050, by repurposing harmful agricultural and fossil fuel subsidies and by creating economic and regulatory incentives to do so.
- Currently however, nature only accounts for 2.5% of projected economic stimulus spending.
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Justin Adams, Head of the Tropical Forest Alliance at the World Economic Forum, says, “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 – $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. Studies show this is also good for business – some $10 trillion in business opportunity and 395 million new jobs could be created by investing in nature-positive solutions.”
UNEP Executive Director, Inger Andersen adds, “Biodiversity loss is already costing the global economy 10 percent of its output each year. 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. 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.”
- Forest-based solutions alone, including the management, conservation and restoration of forests, will require $203 billion in total annual expenditure globally, according to the report. The report calls for coupling investments in restoration action with financing conservation measures. This could result in forest and agro-forestry (the combination of food production and tree growing) area increases of approximately 300 million hectares by 2050, relative to 2020.
- The annual investment of the private sector in nature-based solutions was $18 billion in 2018. Private finance only accounts for 14%, including capital mobilised through sustainable agricultural and forestry supply chains, private equity investments, biodiversity offsets financed by private sectors, philanthropic capital, private finance leveraged by multilateral organisations and forest and other land use-related carbon markets.
- In climate finance, private sector investment accounts for most capital flows (56% according to the Climate Policy Initiative). The scaling up of private capital for nature-based solutions is one of the central challenges of the next few years with a specific focus on investing in nature to support sustainable economic growth.
- While a number of private sector-led initiatives have already emerged, the report stresses the need for companies and financial institutions to increasingly be part of the solution by sharing the risk and committing to boost finance and investment in nature-based solutions in an ambitious way and with clear, time-bound targets.
- While investments in nature-based solutions cannot be a substitute for deep decarbonisation of all sectors of the economy, they can contribute to the required pace and scale of climate change mitigation and adaptation.