Report: total investment of $8.1T in nature required over next 3 decades; tripling current investments needed by 2030
A total investment of $8.1 trillion in nature is required over the next three decades to successfully tackle the climate, biodiversity, and land degradation crises, according to the State of Finance for Nature report released 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.
This amounts to $536 billion a year by 2050. The report finds that annual investments in nature-based solutions (NbS) will have to triple by 2030 and increase four-fold by 2050 from the current investments of $133 billion (using 2020 as base year).
The report uses the global standard developed by the International Union for the Conservation of Nature (IUCN) for nature-based solutions.
NbS are defined as “Actions to protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human well- being and biodiversity benefits”. The goal of nature-based solutions is “to support the achievement of society’s development goals and safeguard human well-being in ways that reflect cultural and societal values and enhance the resilience of ecosystems, their capacity for renewal and the provision of services; nature-based solutions are designed to address major societal challenges, such as food security, climate change, water security, human health, disaster risk, social and economic development”.—“State of Finance for Nature”
The report urges governments, financial institutions and businesses to overcome this investment gap by placing nature at the heart of economic decision-making in the future. It stresses the need to accelerate capital flows rapidly to nature-based solutions by making nature central to public- and private-sector decision-making related to societal challenges, including tackling the climate and biodiversity crises.
The report says that structural transformations are needed to close the US$4.1-trillion finance gap between now and 2050, by “building back more sustainably”, by repurposing agricultural and fossil fuel subsidies and by creating economic and regulatory incentives.
Nature currently only accounts for 2.5% of projected economic stimulus spending. Private capital will also have to be scaled-up to close the investment gap. Developing and scaling-up revenue flows from ecosystem services and using blended finance models as a means to crowd in private capital are among the suite of solutions needed to make this happen, which also requires risk-sharing from private sector entities.
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 report says the annual investment of the private sector in nature-based solutions was $18 billion in 2018. Private finance only accounts for 14%, including capital mobilized through sustainable agricultural and forestry supply chains, private equity investments, biodiversity offsets financed by private sectors, philanthropic capital, private finance leveraged by multilateral organizations 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.
Investors, developers, market infrastructure makers, customers and beneficiaries can play roles in creating a market where nature-based solutions access new sources of revenue, increases resilience of commercial activities, reduces costs or contributes to reputation and purpose, the report says.
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.